As filed with the Securities and Exchange Commission
on February 10, 2000
Registration No. 333-89661; 811-09645
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Post-Effective Amendment No. 1 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 2 [X]
(Check appropriate box or boxes)
-----------------------
NATIONS FUNDS TRUST
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 321-7854
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. Carl Frischling, Esq.
Marco E. Adelfio, Esq. Kramer, Levin, Naftalis
Morrison & Foerster LLP & Frankel
2000 Pennsylvania Ave., N.W. 919 3rd Avenue
Suite 5500 New York, New York 10022
Washington, D.C. 20006
|
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant [ ] on (date) pursuant
to Rule 485(b), or to Rule 485(b), or
[ ] 60 days after filing pursuant [ ] on (date) pursuant
to Rule 485(a), or to Rule 485(a).
[X] 75 days after filing pursuant to [ ] on (date) pursuant to
paragraph (a)(2) paragraph(a)(2) of Rule 485
|
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for
a previously filed post-effective amendment.
This Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A (the "Registration Statement") of Nations Funds Trust (the "Trust") is being filed in order to register Primary A and Investor A, B and C shares of a new series, called Nations Marsico 21st Century Fund, to the Trust.
NATIONS FUNDS TRUST
CROSS REFERENCE SHEET
Part A
Item No. Prospectus
--------- ------------
1. Front and Back Cover Pages ................................ Front and Back Cover Pages
2. Risk/Return Summary: Investments, Risks
and Performance............................................. About this Prospectus
3. Risk/Return Summary: Fee Tables.......................... About the Funds; Financial Highlights
4. Investment Objectives, Principal
Investment Strategies, and Related Risks.................... About the Funds; Other Important
Information
5. Management's Discussion of Fund
Performance................................................. About the Funds
6. Management, Organization, and
Capital Structure........................................... What's Inside; About the Funds;
How the Funds Are Managed;
About your Investment
7. Shareholder Information..................................... About the Funds; About your
Investment
8. Distribution Arrangements................................... Information for Investors
9. Financial Highlights Information............................ Financial Highlights; About the Funds
Part B
Item No.
--------
10. Cover Page and Table of Contents............................ Cover Page and Table of Contents
11. Fund History................................................ Introduction
|
12. Description of the Fund and Its
Investments and Risks....................................... Additional Information on Portfolio
Investments
13. Management of the Funds..................................... Trustees And Officers; Investment
Advisory, Administration, Custody Transfer
Agency, Shareholder Servicing and
Distribution Agreements
14. Control Persons and Principal
Holders of Securities....................................... Not Applicable
15. Investment Advisory and Other Services...................... Investment Advisory,
Administration, Custody, Transfer Agency,
Shareholder Servicing And Distribution
Agreements
16. Brokerage Allocation and Other Practices.................... Portfolio Transactions and
Brokerage--General Brokerage Policy
17. Capital Stock and Other
Securities.................................................. Description Of Shares;
Investment Advisory, Administration,
Custody, Transfer Custody, Transfer
Agency, Shareholder Servicing And
Distribution Agreements
18. Purchase, Redemption and Pricing
of Shares................................................... Net Asset Value -- Purchases
And Redemptions; Distributor
19. Taxation of the Fund........................................ Additional Information Concerning
Taxes
20. Underwriters................................................ Investment Advisory,
Administration Custody, Transfer Agency
Shareholder Servicing And Distribution
Agreements; Distributor
21. Calculation of Performance Data............................. Additional Information on
Performance
22. Financial Statements........................................ Independent Accountant and
Reports
|
[GRAPHIC OMITTED]
EQUITY FUND
PROSPECTUS -- INVESTOR A, B AND C SHARES
MARCH 31, 2000
Equity Fund
NATIONS MARSICO 21ST CENTURY FUND
THE SECURITIES AND
EXCHANGE COMMISSION
(SEC) HAS NOT APPROVED OR
DISAPPROVED THESE
SECURITIES OR DETERMINED
IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE
CONTRARY IS A CRIMINAL
OFFENSE.
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
NATIONS FUNDS [LOGO]
[GRAPHIC OMITTED]
TERMS USED IN THIS PROSPECTUS
IN THIS PROSPECTUS, WE, US AND OUR REFER TO THE NATIONS FUNDS FAMILY (NATIONS FUNDS). SOME OTHER IMPORTANT TERMS WE'VE USED MAY BE NEW TO YOU. THESE ARE PRINTED IN ITALICS WHERE THEY FIRST APPEAR IN A SECTION AND ARE DESCRIBED IN TERMS USED IN THIS PROSPECTUS.
[GRAPHIC OMITTED]
YOU'LL FIND TERMS USED IN
THIS PROSPECTUS ON PAGE 35.
YOUR INVESTMENT IN THIS FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED BY BANK OF AMERICA, N. A. (BANK OF AMERICA), THE FEDERAL DEPOSIT INSURANCE CORPORATION (FDIC) OR ANY OTHER GOVERNMENT AGENCY. YOUR INVESTMENT MAY LOSE MONEY.
AFFILIATES OF BANK OF AMERICA ARE PAID FOR THE SERVICES THEY
PROVIDE TO THE FUND.
This booklet, which is called a prospectus, tells you about one of the Nations Funds Equity Funds, Nations Marsico 21st Century Fund. Please read it carefully, because it contains information that's designed to help you make informed investment decisions.
ABOUT THE FUND
Nations Marsico 21st Century Fund invests primarily in equity securities of U.S. companies.
Equity securities have the potential to provide you with higher returns than many other kinds of investments, but they also tend to have the highest risk. There's always a risk that you'll lose money or you may not earn as much as you expect.
IS THIS FUND RIGHT FOR YOU?
When you're choosing a Fund to invest in, you should consider things like your investment goals, how much risk you can accept and how long you're planning to hold your investment.
Nations Marsico 21st Century Fund focuses on long-term growth. It may be suitable for you if:
o you have longer-term investment goals
o it's part of a balanced portfolio
o you want to try to hedge your portfolio against a loss of buying power that inflation can cause over time
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated with equity securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of the Fund's principal investments, strategies and risks in the Fund description that starts on page 4.
FOR MORE INFORMATION
If you have any questions about the Fund, please call us at 1.800.321.7854 or contact your investment professional.
You'll find more information about the Fund in the Statement of Additional Information (SAI). The SAI includes more detailed information about the Fund's investments, policies, performance and management, among other things. Please turn to the back cover to find out how you can get a copy.
[GRAPHIC OMITTED]
BANC OF AMERICA ADVISORS, INC.
BANC OF AMERICA ADVISORS, INC. (BAAI) IS THE INVESTMENT ADVISER TO THE FUND. BAAI IS RESPONSIBLE FOR THE OVERALL MANAGEMENT AND SUPERVISION OF THE INVESTMENT MANAGEMENT OF THE FUND. BAAI AND NATIONS FUNDS HAVE ENGAGED A SUB-ADVISER, WHICH IS RESPONSIBLE FOR THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE FUND.
[GRAPHIC OMITTED]
YOU'LL FIND MORE ABOUT
BAAI AND THE SUB-ADVISER
STARTING ON PAGE 8.
[GRAPHIC OMITTED] About the Fund Equity Fund NATIONS MARSICO 21ST CENTURY FUND 4 Sub-adviser: Marsico Capital Management, LLC ---------------------------------------------- OTHER IMPORTANT INFORMATION 8 ---------------------------------------------- HOW THE FUND IS MANAGED 9 [GRAPHIC OMITTED] About your investment INFORMATION FOR INVESTORS Choosing a share class 11 Buying, selling and exchanging shares 21 How selling and servicing agents are paid 29 Distributions and taxes 31 ---------------------------------------------- TERMS USED IN THIS PROSPECTUS 33 ---------------------------------------------- WHERE TO FIND MORE INFORMATION BACK COVER |
[GRAPHIC OMITTED]
ABOUT THE SUB-ADVISER
MARSICO CAPITAL MANAGEMENT, LLC (MARSICO CAPITAL) IS THIS FUND'S SUB-ADVISER. JAMES A. HILLARY IS THE PORTFOLIO MANAGER AND MAKES THE DAY-TO-DAY INVESTMENT DECISIONS FOR THE FUND.
[GRAPHIC OMITTED]
WHAT IS A MULTI-CAP FUND?
A MULTI-CAP FUND INVESTS IN COMPANIES ACROSS THE CAPITALIZATION SPECTRUM - SMALL, MID AND LARGE COMPANIES. AS A MULTI-CAP FUND, THIS FUND MAY INVEST IN LARGE, ESTABLISHED AND WELL-KNOWN U.S. AND FOREIGN COMPANIES, AS WELL AS SMALL, NEW AND RELATIVELY UNKNOWN COMPANIES THAT ARE BELIEVED TO HAVE THE POTENTIAL TO GROW SIGNIFICANTLY.
Nations Marsico 21st Century Fund
[GRAPHIC OMITTED]
INVESTMENT OBJECTIVE
This Fund seeks long-term growth of capital.
[GRAPHIC OMITTED]
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests primarily in EQUITY SECURITIES of companies of any size. The Fund may invest without limit in FOREIGN SECURITIES.
The Fund also may invest in securities that aren't part of its principal investment strategies, but it won't hold more than 10% of its assets in any one type of these securities. These securities are described in the SAI.
Marsico Capital looks for companies with earnings growth potential that may not be recognized by other investors, focusing on companies that have some of the following characteristics:
o products, markets or technologies in flux that can result in extraordinary growth
o strong brand franchises that can take advantage of a changing global environment
o global reach that allows the company to generate sales and earnings both in the United States and abroad. This can give the company added growth potential and also means the company may be less affected by changes in local markets
o movement with, not against, the major social, economic and cultural shifts taking place in the world
Once an investment opportunity is identified, Marsico Capital uses a disciplined analytical process to assess its potential as an investment. This process includes a "top down" analysis that takes into account economic factors like interest rates, inflation, the regulatory environment, the industry and global competition.
The process also includes a "bottom-up" analysis of a company's financial situation, as well as individual company characteristics like commitment to research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration in the company's financial situation, the security is overvalued, when there is a negative development in the company's competitive, regulatory or economic environment, or for other reasons.
[GRAPHIC OMITTED]
YOU'LL FIND MORE ABOUT OTHER RISKS OF INVESTING IN THIS FUND
STARTING ON PAGE 7 AND IN THE SAI.
[GRAPHIC OMITTED]
RISKS AND OTHER THINGS TO CONSIDER
Nations Marsico 21st Century Fund has the following risks:
o INVESTMENT STRATEGY RISK - There is a risk that the value of the Fund's investments will not rise as high as Marsico Capital expects, or will fall.
o STOCK MARKET RISK - The value of any stocks the Fund holds can be affected by changes in U.S. or foreign economies and financial markets, and the companies that issue the stocks, among other things. Stock prices can rise or fall over short as well as long periods. In general, stock markets tend to move in cycles, with periods of rising prices and periods of falling prices. As of the date of this prospectus, the stock markets, as measured by the S&P 500 and other commonly used indices, were trading at or close to record levels. There can be no guarantee that these levels will continue.
o SMALL COMPANY RISK - Stocks of smaller companies tend to have greater price swings than stocks of larger companies because they trade less frequently and in lower volumes. These securities may have a higher potential for gains but also carry higher risk.
o FOREIGN INVESTMENT RISK - Because the Fund may invest without limitation in foreign securities, it can be affected by the risks of foreign investing. Foreign investments may be riskier than U.S. investments because of political and economic conditions, changes in currency exchange rates, the implementation of the Euro, foreign controls on investment, difficulties selling some securities and lack of or limited financial information. Withholding taxes also may apply to some foreign investments.
o CHANGING TO A FEEDER FUND - Unlike traditional mutual funds, which invest in individual securities, a "feeder fund" invests all of its assets in another fund, called a "master portfolio." Other feeder funds generally also invest in a master portfolio. The master portfolio invests in individual securities and has the same investment objective, investment strategies and principal investment risks as the feeder funds. This structure can help reduce a feeder fund's expenses because its assets are combined with those of other feeder funds. If a master portfolio doesn't attract other feeder funds, however, a feeder fund's expenses could be higher than those of a traditional mutual fund.
This Fund may become a feeder fund if the Board of Trustees decides this would be in the best interests of shareholders. Management currently intends to propose that the Fund change to a feeder fund within the next year, but only if other feeder funds are likely to also invest in the master portfolio. We don't require shareholder approval to make the change, but we'll notify you if it happens.
Other mutual funds and eligible investors can buy shares in a master portfolio. All investors in a master portfolio would invest under the same terms and conditions as the Fund and pay a proportionate share of the master portfolio's expenses. Other feeder funds that invest in a master portfolio may have different share prices and returns than the Fund because different feeder funds typically have varying sales
charges, and ongoing administrative and other expenses.
The Fund could withdraw its entire investment from a master portfolio if it believes it's in the best interests of the Fund to do so (for example if a master portfolio changed its investment objective). It is unlikely that this would happen, but if it did, the Fund's portfolio could be less diversified and therefore less liquid, and expenses could increase. The Fund might also have to pay brokerage, tax or other charges.
[GRAPHIC OMITTED]
A LOOK AT THE FUND'S PERFORMANCE
Because the Fund commenced operations on March , 2000 and has not been in operation for a full calendar year, no risk/return bar chart or table is included in the prospectus.
[GRAPHIC OMITTED]
THERE ARE TWO KINDS OF FEES -- SALES CHARGES YOU PAY DIRECTLY, AND ANNUAL
FUND OPERATING EXPENSES THAT ARE DEDUCTED FROM A FUND'S ASSETS.
[GRAPHIC OMITTED]
WHAT IT COSTS TO INVEST IN THE FUND
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
SHAREHOLDER FEES Investor A Investor B Investor C
(Fees paid directly from your investment) Shares Shares Shares
Maximum sales charge (load)
imposed on purchases, as a %
of offering price 5.75% none none
Maximum deferred sales charge,
as a % of net asset value none(1) 5.00%(2) 1.00%(3)
Redemption fee, as a %
of the amount sold none none none
ANNUAL FUND OPERATING EXPENSES
(Expenses that are deducted from the Fund's assets)
Management fees 0.75% 0.75% 0.75%
Distribution (12b-1) and shareholder
servicing fees 0.25% 1.00% 1.00%
Other expenses(4) 0.45% 0.45% 0.45%
----- -------- --------
Total annual Fund operating expenses 1.45% 2.20% 2.20%
===== ======== ========
|
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them.
(2)This charge decreases over time. Please see page for details.
(3)This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see page for details.
(4)Other expenses are based on estimates for the current fiscal year.
[GRAPHIC OMITTED]
THIS IS AN EXAMPLE ONLY. YOUR ACTUAL COSTS COULD BE HIGHER OR LOWER, DEPENDING ON THE AMOUNT YOU INVEST, AND ON THE FUND'S
ACTUAL EXPENSES AND PERFORMANCE.
EXAMPLE
This example is intended to help you compare the cost of investing in this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A, Investor B or Investor C Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table above
Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 year 3 years
Investor A Shares $714 $1,008
Investor B Shares $712 $1,155
Investor C Shares $321 $ 781
|
If you bought Investor B or Investor C Shares, you would pay the following expenses if you didn't sell your shares:
1 year 3 years
Investor B Shares $223 $688
Investor C Shares $223 $688
|
[GRAPHIC OMITTED]
Other important information
You'll find specific information about the Fund's principal investments, strategies and risks in the description starting on page 4. The following are some other risks and information you should consider before you invest:
o CHANGING INVESTMENT OBJECTIVES AND POLICIES - The investment objective and certain investment policies of the Fund can be changed without shareholder approval. Other investment policies may be changed only with shareholder approval.
o HOLDING OTHER KINDS OF INVESTMENTS - The Fund may hold investments that aren't part of its principal investment strategies. Please refer to the SAI for more information. The portfolio manager can also choose not to invest in specific securities described in this prospectus and in the SAI.
o INVESTING DEFENSIVELY - The Fund may temporarily hold investments that are not part of its investment objective or its principal investment strategies to try to protect it during a market or economic downturn or because of political or other conditions. A Fund may not achieve its investment objective while it is investing defensively.
o PORTFOLIO TURNOVER - The Fund that replaces -- or turns over -- more than 100% of its investments in a year is considered to trade frequently. Frequent trading can result in larger distributions of short-term CAPITAL GAINS to shareholders. These gains are taxable at higher rates than long-term capital gains. Frequent trading can also mean higher brokerage and other transaction costs, which could reduce the Fund's returns. The Fund generally buys securities for capital appreciation, investment income, or both, and doesn't engage in short-term trading. The annual portfolio turnover rate for Nations Marsico 21st Century Fund is expected to be no more than %.
o YEAR 2000 READINESS - The Fund's primary service providers have confirmed that they have not experienced any notable year 2000 issues. There is no guarantee, however, that their computer systems will not encounter any year 2000 issues as the year progresses. If a year 2000 issue does arise, there could be a negative effect on portfolio operations. The Fund's performance could also be affected if securities it holds decrease in value because of year 2000 issues.
[GRAPHIC OMITTED]
How the Fund is managed
[GRAPHIC OMITTED]
BANC OF AMERICA ADVISORS, INC.
ONE BANK OF AMERICA PLAZA
CHARLOTTE, NORTH CAROLINA 28255
INVESTMENT ADVISER
BAAI is the investment adviser to over 60 mutual fund portfolios in the Nations Funds family, including the Fixed Income Fund described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of Bank of America, which is owned by Bank of America Corporation. The Fund pays BAAI an annual fee for its investment advisory services. The fee is calculated daily based on the average net assets of the Fund and is paid monthly. BAAI uses part of this money to pay investment sub-advisers for the services it provides to the Fund.
The following chart shows the maximum advisory fee BAAI can receive:
ANNUAL INVESTMENT ADVISORY FEE, AS A % OF AVERAGE DAILY NET ASSETS
Maximum
advisory
fee
Nations Marsico 21st Century Fund 0.75%
|
INVESTMENT SUB-ADVISER
Nations Funds and BAAI have engaged an investment sub-adviser to provide day-to-day portfolio management for the Fund. This sub-adviser functions under the supervision of BAAI and the Boards of Trustees of Nations Funds.
[GRAPHIC OMITTED]
MARSICO CAPITAL
MANAGEMENT, LLC
1200 17TH STREET
SUITE 1300
DENVER, COLORADO 80202
MARSICO CAPITAL MANAGEMENT, LLC
Marsico Capital is a full service investment advisory firm founded by Thomas F. Marsico in September 1997. It is a registered investment adviser, specializing in large capitalization stocks, and currently has $6.5 billion in assets under management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of America Corporation, indirectly owns 50% of the equity of Marsico Capital.
Marsico Capital is the investment sub-adviser to Nations Marsico 21st Century Fund.
JAMES A. HILLARY is the portfolio manager of Nations Marsico 21st Century Fund. Mr. Hillary has eleven years of experience as a securities analyst and portfolio manager and is a founding member of Marsico Capital Management. Prior to joining Marsico Capital in 1997, Mr. Hillary was a portfolio manager at W.H. Reaves, a New Jersey-based money management firm. He holds a bachelor's degree from Rutgers University and a law degree from Fordham University. Mr. Hillary is also a certified public accountant.
[GRAPHIC OMITTED]
STEPHENS INC.
111 CENTER STREET
LITTLE ROCK, ARKANSAS 72201
OTHER SERVICE PROVIDERS
The Fund is distributed and co-administered by Stephens Inc., a registered broker/dealer. Stephens may pay commissions, distribution (12b-1) and shareholder servicing fees, and/or other compensation to companies for selling shares and providing services to investors.
BAAI is also co-administrator of the Fund, and assists in overseeing the administrative operations of the Fund. The Fund pays BAAI and Stephens a combined fee of 0.23% for their services, plus certain out-of-pocket expenses. The fee is calculated as an annual percentage of the average daily net assets of the Fund, and is paid monthly.
[GRAPHIC OMITTED]
PFPC INC.
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
PFPC Inc. (PFPC) is the transfer agent for the Fund's shares. Its responsibilities include processing purchases, sales and exchanges, calculating and paying distributions, keeping shareholder records, preparing account statements and providing customer service.
[GRAPHIC OMITTED]
WE'VE USED THE TERM, INVESTMENT PROFESSIONAL, TO REFER TO THE PERSON WHO HAS ASSISTED YOU WITH BUYING NATIONS FUNDS. SELLING AGENT OR SERVICING AGENT (SOMETIMES REFERRED TO AS A SELLING AGENT) MEANS THE COMPANY THAT EMPLOYS YOUR INVESTMENT PROFESSIONAL. SELLING AND SERVICING AGENTS INCLUDE BANKS, BROKERAGE FIRMS, MUTUAL FUND DEALERS AND OTHER FINANCIAL INSTITUTIONS, INCLUDING AFFILIATES OF BANK OF AMERICA.
[GRAPHIC OMITTED]
FOR MORE INFORMATION ABOUT HOW TO CHOOSE A SHARE CLASS, CONTACT
YOUR INVESTMENT PROFESSIONAL OR CALL US AT 1.800.321.7854.
[GRAPHIC OMITTED]
BEFORE YOU INVEST, PLEASE NOTE THAT OVER TIME, DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES WILL INCREASE THE COST OF YOUR INVESTMENT, AND MAY COST YOU MORE THAN ANY SALES CHARGES YOU MAY PAY. FOR MORE INFORMATION, SEE HOW SELLING AND SERVICING AGENTS ARE PAID.
[GRAPHIC OMITTED]
Choosing a share class
Before you can invest in the Fund, you'll need to choose a share class. There are three classes of shares for the Fund offered by this prospectus.
Each class has its own sales charges and fees. The table below compares the charges and fees of the share classes.
Investor A Investor B Investor C
Shares Shares Shares
Maximum amount no limit $250,000 no limit
you can buy
Maximum front-end 5.75% none none
sales charge
Maximum deferred none(1) 5.00%(2) 1.00%(3)
sales charge
Redemption fee none(4) none none
Maximum annual 0.25% distribution 0.75% distribution 0.75% distribution
distribution (12b-1)/service (12b-1) fee (12b-1) fee
and shareholder fee 0.25% service fee 0.25% service fee
servicing fees
Conversion feature none yes none
|
(1)A 1.00% maximum deferred sales charge applies to investors who buy $1 million or more of Investor A Shares and sell them within eighteen months of buying them.
(2)This charge decreases over time. Please see page for details.
(3)This charge applies to investors who buy Investor C Shares and sell them within one year of buying them. Please see page for details.
(4)A 1.00% redemption fee applies to investors who bought $1 million or more of Investor A Shares of certain Funds between July 31, 1997 and November 15, 1998 and sell them within 18 months of buying them. The fee is paid to the Fund. Please see page for details.
The share class you choose will depend on how much you're investing, how long you're planning to stay invested, and how you prefer to pay the sales charge.
The total cost of your investment over the time you expect to hold your shares will be affected by the distribution (12b-1) and shareholder servicing fees, as well as by the amount of any front-end sales charge or contingent deferred sales charge (CDSC) that applies, and when you're required to pay the charge. You should think about these things carefully before you invest.
Investor A Shares have a front-end sales charge, which is deducted when you buy your shares. This means that a smaller amount is invested in the Fund, unless you qualify for a waiver or reduction of the sales charge. However, Investor A Shares have lower ongoing distribution (12b-1) and/or shareholder servicing fees than Investor B and Investor C Shares. This means that Investor A Shares can be expected to pay relatively higher dividends per share.
Investor B Shares have limits on how much you can invest. When you buy Investor B or Investor C Shares, the full amount is invested in the Fund. However, you may pay a CDSC when you sell your shares. Over time, Investor B and Investor C Shares can incur distribution (12b-1) and shareholder servicing fees that are equal to or more than the front-end sales charge, and the distribution (12b-1) and shareholder servicing fees you would pay for Investor A Shares. Although the full amount of your purchase is invested in the Fund, any positive investment return on this money may be partially or fully offset by the expected higher annual expenses of Investor B and Investor C Shares. You should also consider the conversion feature for Investor B Shares, which is described in ABOUT INVESTOR B SHARES.
[GRAPHIC OMITTED]
THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED BY
THE FUND EVERY BUSINESS DAY.
[GRAPHIC OMITTED]
ABOUT INVESTOR A SHARES
There is no limit to the amount you can invest in Investor A Shares. You generally will pay a front-end sales charge when you buy your shares, or in some cases, a CDSC when you sell your shares.
FRONT-END SALES CHARGE
You'll pay a front-end sales charge when you buy Investor A Shares, unless:
o you qualify for a waiver of the sales charge. You can find out if you qualify for a waiver in the section, WHEN YOU MIGHT NOT HAVE TO PAY A SALES CHARGE
o you're reinvesting distributions
The sales charge you'll pay depends on the amount you're investing -- the larger the investment, the smaller the sales charge.
Nations Marsico 21st Century Fund
Amount retained
Amount you bought Sales charge Sales charge by selling agents
as a % of the as a % of the as a % of the
offering price net asset value offering price
per share per share per share
$ 0-$49,999 5.75% 6.10% 5.00%
$ 50,000-$99,999 4.50% 4.71% 3.75%
$ 100,000-$249,999 3.50% 3.63% 2.75%
$ 250,000-$499,999 2.50% 2.56% 2.00%
$ 500,000-$999,999 2.00% 2.04% 1.75%
$1,000,000 or more 0.00% 0.00% 1.00%(1)
|
(1)1.00% on the first $3,000,000, 0.50% on the next $47,000,000, 0.25% on amounts over $50,000,000. Stephens pays the amount retained by selling agents on investments of $1,000,000 or more, but may be reimbursed when a CDSC is deducted if the shares are sold within eighteen months from the time they were bought. Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more information.
CONTINGENT DEFERRED SALES CHARGE
If you own or buy $1,000,000 or more of Investor A Shares, there are two situations when you'll pay a CDSC:
o If you bought your shares before August 1, 1999, and you sell them:
o during the first year you own them, you'll pay a CDSC of 1.00%
o during the second year you own them, you'll pay a CDSC of 0.50%
o If you buy your shares on or after August 1, 1999 and sell them within 18 months of buying them, you'll pay a CDSC of 1.00%.
The CDSC is calculated from the day your purchase is accepted (the TRADE DATE). We deduct the CDSC from the market value or purchase price of the shares, whichever is lower.
You won't pay a CDSC on any increase in net asset value since you bought your shares, or on any shares you receive from reinvested distributions. We'll sell any shares that aren't subject to the CDSC first. We'll then sell shares that result in the lowest CDSC.
REDEMPTION FEE
There are two situations when we'll charge a 1% redemption fee on the sale of Investor A Shares:
o if you bought $1,000,000 or more Investor A Shares between July 31,
1997 and November 15, 1998 and sell them within 18 months of buying
them
o if an employee benefit plan made its initial investment in Investor A
Shares between July 31, 1997 and November 15, 1998 and sold those
shares within 18 months of buying them because the plan sold all of
its Nations Funds holdings
The fee is deducted from the amount sold and is paid to the Fund. The Fund can reduce or cancel the fee at any time.
[GRAPHIC OMITTED]
ABOUT INVESTOR B SHARES
You can buy up to $250,000 of Investor B Shares at a time. You don't pay a sales charge when you buy Investor B Shares, but you may have to pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC when you sell your Investor B Shares, unless:
o you bought the shares on or after January 1, 1996 and before August 1, 1997
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to qualify for a waiver on page 19
The CDSC you pay depends on the Fund you bought, when you bought your shares, how much you bought in some cases, and how long you held them.
Nations Marsico 21st Century Fund
If you sell your shares
during the following year: You'll pay a CDSC of:
---------------------------------- ----------------------------------------------------------------------
Shares
you
bought Shares
Shares on or after you
you bought Shares you bought between 1/1/1996 bought
after 8/1/1997 and 11/15/1998 and before before
11/15/1998 in the following amounts: 8/1/1997 1/1/1996
------------ ------------------------------------------- ------------ ---------
$ 0- $250,000- $500,000-
$249,999 $499,999 $999,999
the first year you own them 5.0% 5.0% 3.0% 2.0% none 5.0%
the second year you own them 4.0% 4.0% 2.0% 1.0% none 4.0%
the third year you own them 3.0% 3.0% 1.0% none none 3.0%
the fourth year you own them 3.0% 3.0% none none none 2.0%
the fifth year you own them 2.0% 2.0% none none none 2.0%
the sixth year you own them 1.0% 1.0% none none none 1.0%
after six years of owning them none none none none none none
|
The CDSC is calculated from the trade date of your purchase. We deduct the CDSC from the market value or purchase price of the shares, whichever is lower. We'll sell any shares that aren't subject to the CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor B Shares.
Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
ABOUT THE CONVERSION FEATURE
Investor B Shares generally convert automatically to Investor A Shares according to the following schedule:
Nations Marsico 21st Century Fund
Will convert to Investor A Shares
Investor B Shares you bought after you've owned them for
after November 15, 1998 eight years
between August 1, 1997
and November 15, 1998
$ 0-$249,000 nine years
$ 250,000-$499,999 six years
$ 500,000-$999,999 five years
before August 1, 1997 nine years
|
The conversion feature allows you to benefit from the lower operating costs of Investor A Shares, which can help increase total returns.
Here's how the conversion works:
o We won't convert your shares if you tell your investment
professional, selling agent or the transfer agent within 90 days
before the conversion date that you don't want your shares to be
converted. Remember, it's in your best interest to convert your
shares because Investor A Shares have lower expenses.
o Shares are converted at the end of the month in which they become
eligible for conversion. Any shares you received from reinvested
distributions on these shares will convert to Investor A Shares at
the same time.
o You'll receive the same dollar value of Investor A Shares as the
Investor B Shares that were converted. No sales charge or other
charges apply.
o Investor B Shares that you received from an exchange of Investor B
Shares of another Nations Fund will convert based on the day you
bought the original shares. Your conversion date may be later if you
exchanged to or from a Nations Funds Money Market Fund.
o Conversions are free from federal tax.
[GRAPHIC OMITTED]
ABOUT INVESTOR C SHARES
There is no limit to the amount you can invest in Investor C Shares. You don't pay a sales charge when you buy Investor C Shares, but you may pay a CDSC when you sell them.
CONTINGENT DEFERRED SALES CHARGE
You'll pay a CDSC of 1.00% when you sell Investor C Shares within one year of buying them, unless:
o you received the shares from reinvested distributions
o you qualify for a waiver of the CDSC. You can find out how to qualify for a waiver on page 19
The CDSC is calculated from the trade date of your purchase. We deduct the CDSC from the market value or purchase price of the shares, whichever is lower. We'll sell any shares that aren't subject to the CDSC first. We'll then sell shares that result in the lowest CDSC.
Your selling agent receives compensation when you buy Investor C Shares.
Please see HOW SELLING AND SERVICING AGENTS ARE PAID for more
information.
[GRAPHIC OMITTED]
PLEASE CONTACT YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION
ABOUT REDUCTIONS AND WAIVERS OF SALES CHARGES.
YOU SHOULD TELL YOUR INVESTMENT PROFESSIONAL THAT YOU MAY QUALIFY
FOR A REDUCTION OR A WAIVER BEFORE BUYING SHARES.
WE CAN CHANGE OR CANCEL THESE TERMS AT ANY TIME. ANY CHANGE OR
CANCELLATION APPLIES ONLY TO FUTURE PURCHASES.
WHEN YOU MIGHT NOT HAVE TO PAY A SALES CHARGE
FRONT-END SALES CHARGES
(Investor A Shares)
There are three ways you can lower the front-end sales charge you pay on Investor A Shares:
o COMBINE PURCHASES YOU'VE ALREADY MADE Rights of accumulation allow you to combine the value of Investor A, Investor B and Investor C Shares you already own with Investor A Shares you're buying in order to calculate the sales charge. The sales charge is based on the total value of the shares you already own, or the original purchase cost, whichever is higher, plus the value of the shares you're buying. Index Funds and Money Market Funds, except Investor B and Investor C Shares of Nations Reserves Money Market Funds, don't qualify for rights of accumulation.
o COMBINE PURCHASES YOU PLAN TO MAKE By signing a letter of intent, you can combine the value of shares you already own with the value of shares you plan to buy over a 13-month period to calculate the sales charge.
o You can choose to start the 13-month period up to 90 days before you sign the letter of intent.
o Each purchase you make will receive the sales charge that applies to the total amount you plan to buy.
o If you don't buy as much as you planned within the period, you must pay the difference between the charges you've paid and the charges that actually apply to the shares you've bought.
o Your first purchase must be at least 5% of the minimum amount for the sales charge level that applies to the total amount you plan to buy.
o If the purchase you've made later qualifies for a reduced sales charge through the 90-day backdating provisions, we'll make an adjustment for the lower charge when the letter of intent expires. Any adjustment will be used to buy additional shares at the reduced sales charge.
o COMBINE PURCHASES WITH FAMILY MEMBERS You can receive a quantity discount by combining purchases of Investor A Shares that you, your spouse and children under age 21 make on the same day. Some distributions or payments from the dissolution of certain qualified plans also qualify for the quantity discount. Index Funds and Money Market Funds, except Investor B and Investor C Shares of Nations Reserves Money Market Funds, don't qualify.
The following investors can buy Investor A Shares without paying a front-end sales charge:
o full-time employees and retired employees of Bank of America Corporation (and its predecessors), its affiliates and subsidiaries and the immediate families of these people
o banks, trust companies and thrift institutions, acting as fiduciaries
o individuals receiving a distribution from a Bank of America trust or other fiduciary account may use the proceeds of that distribution to buy Investor A Shares without paying a front-end sales charge as long as the proceeds are invested in the Funds within 90 days
o Nations Funds' Trustees, Directors and employees of its investment sub-advisers
o registered broker/dealers that have entered into a Nations Funds dealer agreement with Stephens may buy Investor A Shares without paying a front-end sales charge for their investment account only
o registered personnel and employees of these broker/dealers and their family members may buy Investor A Shares without paying a front-end sales charge according to the internal policies and procedures of the employing broker/dealer as long as these purchases are made for their own investment purposes
o employees or partners of any service provider to the Fund
o investors who buy through accounts established with certain fee-based investment advisers or financial planners, including Nations Funds Personal Investment Planner accounts, wrap fee accounts and other managed agency/asset allocation accounts
o shareholders of certain Funds that reorganized into the Nations Funds who were entitled to buy shares at net asset value
The following plans can buy Investor A Shares without paying a front-end sales charge:
o pension, profit-sharing or other employee benefit plans established under Section 401 or Section 457 of the Internal Revenue Code of 1986, as amended (the tax code)
o employee benefit plans created according to Section 403(b) of the
tax code and sponsored by a non-profit organization qualified under
Section 501(c)(3) of the tax code. To qualify for the waiver, the
plan must:
o have at least $500,000 invested in Investor A Shares of Nations Funds (except Money Market Funds), or
o sign a letter of intent to buy at least $500,000 of Investor A Shares of Nations Funds (except Money Market Funds), or
o be an employer-sponsored plan with at least 100 eligible participants, or
o be a participant in an alliance program that has signed an agreement with the Fund or a selling agent
In addition, you can buy Investor A Shares without paying a sales charge if you buy the shares with proceeds from the redemption of shares of a nonaffiliated mutual fund as long as the redemption of the nonaffiliated fund shares occurred within 45 days prior to the purchase of the Investor A Shares. We must receive a copy of the confirmation of the redemption transaction in order for you to avoid paying the sales charge.
Stephens may pay selling agents up to 1.00% of the net asset value of Investor A Shares bought without a sales charge. Stephens may be reimbursed through any CDSC that applies.
CONTINGENT DEFERRED SALES CHARGES
(Investor A, Investor B and Investor C Shares)
You won't pay a CDSC on the following transactions:
o shares sold following the death or disability (as defined in the tax code) of a shareholder, including a registered joint owner
o the following retirement plan distributions:
o lump-sum or other distributions from a qualified corporate or self-employed retirement plan following the retirement (or following attainment of age 59 1/2 in the case of a "key employee" of a "top heavy" plan)
o distributions from an IRA or Custodial Account under Section 403(b)(7) of the tax code, following attainment of age 59 1/2
o a tax-free return of an excess contribution to an IRA
o distributions from a qualified retirement plan that aren't subject to the 10% additional federal withdrawal tax under Section 72(t)(2) of the tax code
o payments made to pay medical expenses which exceed 7.5% of income, and distributions made to pay for insurance by an individual who has separated from employment and who has received unemployment compensation under a federal or state program for at least 12 weeks
o shares sold under our right to liquidate a shareholder's account, including instances where the aggregate net asset value of Investor A, Investor B or Investor C Shares held in the account is less than the minimum account size
o withdrawals made under the Automatic Withdrawal Plan described in BUYING, SELLING AND EXCHANGING SHARES, if the total withdrawals of Investor A, Investor B or Investor C Shares made in a year are less than 12% of the total value of those shares in your account. A CDSC may only apply to Investor A Shares if you bought more than $1,000,000
We'll also waive the CDSC on the sale of Investor A or Investor C Shares bought before September 30, 1994 by current or retired employees of Bank of America and its affiliates, or by current or former trustees or directors of the Nations Funds or other management companies managed by Bank of America.
You won't pay a CDSC on the sale of Investor B or Investor C Shares if you reinvest any of the proceeds in the same Fund within 120 days of the sale. This is called the reinstatement privilege. You can invest up to the amount of the sale proceeds. We'll credit your account with any CDSC paid when you sold the shares. The reinstatement privilege does not apply to any shares you bought through a previous reinstatement. First Data, Stephens or their agents must receive your written request within 120 days after you sell your shares.
[GRAPHIC OMITTED]
Buying, selling and exchanging shares
[GRAPHIC OMITTED]
WHEN YOU SELL SHARES OF A MUTUAL, FUND, THE FUND IS EFFECTIVELY
"BUYING" THEM BACK FROM YOU. THIS IS CALLED A REDEMPTION.
You can invest in the Fund through your selling agent or directly from Nations Funds.
We encourage you to consult with an investment professional who can open an account for you with a selling agent and help you with your investment decisions. Once you have an account, you can buy, sell and exchange shares by contacting your investment professional or selling agent. They will look after any paperwork that's needed to complete a transaction and send your order to us.
You should also ask your selling agent about its limits, fees and policies for buying, selling and exchanging shares, which may be different from those described here, and about its related programs or services.
The table on the next page summarizes some key information about buying, selling and exchanging shares. You'll find sales charges and other fees that apply to these transactions in CHOOSING A SHARE CLASS.
The Fund also offers other classes of shares, with different features and expense levels, which you may be eligible to buy. Please contact your investment professional, or call us at 1.800.321.7854 if you have any questions or you need help placing an order.
Ways to
buy, sell or
exchange
------------------
Buying shares In a lump sum
Using our
-------------------
Systematic
Investment Plan
------------------
Selling shares In a lump sum
Using our
-------------------
Automatic
Withdrawal Plan
------------------
Exchanging shares In a lump sum
Using our
Automatic
Exchange Feature
How much you can buy,
sell or exchange Other things to know
---------------------------------------- -----------------------------------------------------
Buying shares minimum initial investment: There is no limit to the amount you can invest in
o $1,000 for regular accounts Investor A and C Shares. You can invest up to
o $500 for traditional and Roth IRA $250,000 in Investor B Shares at a time.
accounts
o $250 for certain fee-based accounts
o no minimum for certain retirement
plan accounts like 401(k) plans and
SEP accounts, but other restrictions
apply
minimum additional investment:
o $100 for all accounts
minimum initial investment: You can buy shares monthly, twice a month or
o $100 quarterly, using automatic transfers from your
minimum additional investment: bank account.
o $50
--------------------------------------- ---------------------------------------------------
Selling shares o you can sell up to $50,000 of your We'll deduct any CDSC from the amount you're
shares by telephone, otherwise selling and send you or your selling agent the
there are no limits to the amount balance, usually within three business days of
you can sell receiving your order.
o other restrictions may apply to If you paid for your shares with a check that
withdrawals from retirement plan wasn't certified, we'll hold the sale proceeds
accounts when you sell those shares for at least 15 days
after the trade date of the purchase, or until the
check has cleared.
o minimum $25 per withdrawal Your account balance must be at least $10,000
to set up the plan. You can make withdrawals monthly,
twice a month or quarterly. We'll send your money by
check or deposit it directly to your bank account.
No CDSC is deducted if you withdraw 12% or less of
the value of your shares in a class.
-------------------------------------- -----------------------------------------------------
Exchanging shares o minimum $1,000 per exchange You can exchange your Investor A Shares for
Investor A Shares of any other Nations Fund,
except Index Funds. You won't pay a front-end
sales charge, CDSC or redemption fee on the
shares you're exchanging.
You can exchange your Investor B Shares for:
o Investor B Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Investor C Shares of Nations Funds Money
Market Funds (before October 1, 1999)
o Investor B Shares of Nations Reserves Money
Market Funds (on or after October 1, 1999)
You won't pay a CDSC on the shares you're
exchanging.
You can exchange your Investor C Shares for:
o Investor C Shares of any other Nations Fund,
except Nations Funds Money Market Funds
o Daily Shares of Nations Funds Money Market
Funds (before October 1, 1999)
o Investor C Shares of Nations Reserves
Money Market Funds (on or after October 1, 1999)
If you received Investor C Shares of a Fund from an
exchange of Investor A Shares of a Managed Index
Fund, you can also exchange these A Shares of an
Index Fund. You won't pay a CDSC on
the shares you're exchanging.
-------------------------------------- -----------------------------------------------------
o minimum $25 per exchange This feature is not available for Investor B
Shares. You must already have an investment in
the Funds you want to exchange. You can make
exchanges monthly or quarterly.
|
[GRAPHIC OMITTED]
A BUSINESS DAY IS ANY DAY THAT THE NEW YORK STOCK EXCHANGE (NYSE) IS OPEN. A BUSINESS DAY ENDS AT THE CLOSE OF REGULAR TRADING ON THE NYSE, USUALLY AT 4:00 P.M. EASTERN TIME. IF THE NYSE CLOSES EARLY, THE BUSINESS DAY ENDS AS OF THE TIME THE NYSE CLOSES.
THE NYSE IS CLOSED ON WEEKENDS AND ON THE FOLLOWING NATIONAL HOLIDAYS: NEW YEAR'S DAY, MARTIN LUTHER KING, JR. DAY, PRESIDENTS' DAY, GOOD FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY, THANKSGIVING DAY AND CHRISTMAS DAY.
HOW SHARES ARE PRICED
All transactions are based on the price of the Fund's shares -- or its net asset value per share. We calculate net asset value per share for each class of the Fund at the end of each business day. First, we calculate the net asset value for each class of the Fund by determining the value of the Fund's assets in the class and then subtracting its liabilities. Next, we divide this amount by the number of shares that investors are holding in the class.
VALUING SECURITIES IN THE FUND
The value of the Fund's assets is based on the total market value of all of the securities it holds. The prices reported on stock exchanges and securities markets around the world are usually used to value securities in the Fund. If prices aren't readily available, we'll base the price of a security on its fair market value. We use the amortized cost method, which approximates market value, to value short-term investments maturing in 60 days or less.
HOW ORDERS ARE PROCESSED
Orders to buy, sell or exchange shares are processed on business days. Orders received by Stephens, PFPC or their agents before the end of a business day (usually 4:00 p.m. Eastern time, unless the NYSE closes early) will receive that day's net asset value per share. Orders received after the end of a business day will receive the next business day's net asset value per share. The business day that applies to your order is also called the TRADE DATE. We may refuse any order to buy or exchange shares. If this happens, we'll return any money we've received to your selling agent.
TELEPHONE ORDERS
You can place orders to buy, sell or exchange by telephone if you complete the telephone authorization section of our account application and send it to us.
Here's how telephone orders work:
o If you sign up for telephone orders after you open your account, you must have your signature guaranteed.
o Telephone orders may not be as secure as written orders. You may be responsible for any loss resulting from a telephone order.
o We'll take reasonable steps to confirm that telephone instructions are genuine. For example, we require proof of your identification before we will act on instructions received by telephone and may record telephone conversations. If we and our service providers don't take these steps, we may be liable for any losses from unauthorized or fraudulent instructions.
o Telephone orders may be difficult to complete during periods of significant economic or market change.
[GRAPHIC OMITTED]
THE OFFERING PRICE PER SHARE IS THE NET ASSET VALUE PER SHARE PLUS
ANY SALES CHARGE THAT APPLIES.
THE NET ASSET VALUE PER SHARE IS THE PRICE OF A SHARE CALCULATED BY
THE FUND EVERY BUSINESS DAY.
[GRAPHIC OMITTED]
BUYING SHARES
Here are some general rules for buying shares:
o You buy Investor A Shares at the offering price per share. You buy Investor B and Investor C Shares at net asset value per share.
o If we don't receive your money within three business days of receiving your order, we'll refuse the order.
o Selling agents are responsible for sending orders to us and ensuring we receive your money on time.
o Shares you buy are recorded on the books of the Fund. We don't issue certificates unless you ask for them in writing, and we don't issue certificates for fractions of shares.
MINIMUM INITIAL INVESTMENT
The minimum initial amount you can buy is usually $1,000.
If you're buying shares through one of the following accounts or plans, the minimum initial amount you can buy is:
o $500 for traditional and Roth individual retirement accounts (IRAs)
o $250 for accounts set up with some fee-based investment advisers or financial planners, including wrap fee accounts and other managed accounts
o $100 using our Systematic Investment Plan
o There is no minimum for 401(k) plans, simplified employee pension plans (SEPs), salary reduction-simplified employee pension plans (SAR-SEPs), Savings Incentives Match Plans for Employees (SIMPLE IRAs), salary reduction IRAs (SAR-IRAs) or other similar kinds of accounts. However, if the value of your account falls below $1,000 for 401(k) plans or $500 for the other plans within one year after you open your account, we may sell your shares. We'll give you 60 days notice in writing if we're going to do this
MINIMUM ADDITIONAL INVESTMENT
You can make additional purchases of $100, or $50 if you use our Systematic Investment Plan.
[GRAPHIC OMITTED]
FOR MORE INFORMATION
ABOUT TELEPHONE ORDERS,
SEE PAGE 23.
SYSTEMATIC INVESTMENT PLAN
You can make regular purchases of $50 or more using automatic transfers from your bank account to the Funds you choose. You can contact your investment professional or us to set up the plan.
Here's how the plan works:
o You can buy shares twice a month, monthly or quarterly.
o You can choose to have us transfer your money on or about the 15th or the last day of the month.
o Some exceptions may apply to employees of Bank of America and its affiliates, and to plans set up before August 1, 1997. For details, please contact your investment professional.
[GRAPHIC OMITTED]
SELLING SHARES
Here are some general rules for selling shares:
o We'll deduct any CDSC from the amount you're selling and send you the balance.
o If you're selling your shares through a selling agent, we'll normally send the sale proceeds by federal funds wire within three business days after Stephens, PFPC or their agents receive your order. Your selling agent is responsible for depositing the sale proceeds to your account on time.
o If you're selling your shares directly through us, we'll normally send the sale proceeds by mail or wire them to your bank account within three business days after the Fund receives your order.
o You can sell up to $50,000 of shares by telephone if you qualify for telephone orders.
o If you paid for your shares with a check that wasn't certified, we'll hold the sale proceeds when you sell those shares for at least 15 days after the trade date of the purchase, or until the check has cleared.
o If you hold any shares in certificate form, you must sign the certificates (or send a signed stock power with them) and send them to PFPC. Your signature must be guaranteed unless you've made other arrangements with us. We may ask for any other information we need to prove that the order is properly authorized.
o Under certain circumstances allowed under the Investment Company Act of 1940 (1940 Act), we can pay you in securities or other property when you sell your shares.
o We can delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more information about these restrictions, please contact your retirement plan administrator.
We may sell your shares:
o if the value of your account falls below $500. We'll give you 60 days notice in writing if we're going to do this
o if your selling agent tells us to sell your shares under arrangements made between the selling agent and its customers
o under certain other circumstances allowed under the 1940 Act
AUTOMATIC WITHDRAWAL PLAN
The Automatic Withdrawal Plan lets you withdraw $25 or more every month, every quarter or every year. You can contact your investment professional or us to set up the plan.
Here's how the plan works:
o Your account balance must be at least $10,000 to set up the plan.
o If you set up the plan after you've opened your account, your signature must be guaranteed.
o You can choose to have us transfer your money on or about the 15th or the 25th of the month.
o You won't pay a CDSC on Investor A, Investor B or Investor C Shares if you withdraw 12% or less of the value of those shares in a year. Otherwise, we'll deduct any CDSC from the withdrawals.
o We'll send you a check or deposit the money directly to your bank account.
o You can cancel the plan by giving your selling agent or us 30 days notice in writing.
It's important to remember that if you withdraw more than your investment in the Fund is earning, you'll eventually use up your original investment.
[GRAPHIC OMITTED]
YOU SHOULD MAKE SURE YOU UNDERSTAND THE INVESTMENT OBJECTIVES AND POLICIES OF THE FUND YOU'RE EXCHANGING INTO. PLEASE READ ITS PROSPECTUS CAREFULLY.
[GRAPHIC OMITTED]
EXCHANGING SHARES
You can sell shares of the Fund to buy shares of another Nations Fund. This is called an exchange. You might want to do this if your investment goals or tolerance for risk changes.
Here's how exchanges work:
o You must exchange at least $1,000, or $25 if you use our Automatic Exchange Feature.
o The rules for buying shares of a Fund, including any minimum investment requirements, apply to exchanges into that Fund.
o You may only make an exchange into a Fund that is legally sold in your state of residence.
o You generally may only make an exchange into a Fund that is accepting investments.
o We may limit the number of exchanges you can make within a specified period of time.
o We may change or cancel your right to make an exchange by giving the amount of notice required by regulatory authorities (generally 60 days for a material change or cancellation).
o You cannot exchange any shares you own in certificate form until First Data has received the certificate and deposited the shares to your account.
EXCHANGING INVESTOR A SHARES
You can exchange Investor A Shares of a Fund for Investor A Shares of any other Nations Fund, except Index Funds.
Here are some rules for exchanging Investor A Shares:
o You won't pay a front-end sales charge on the shares of the Fund you're exchanging.
o You won't pay a CDSC on the shares you're exchanging. Any CDSC will be deducted later on when you sell the shares you received from the exchange. The CDSC at that time will be based on the period from when you bought the original shares until when you sold the shares you received from the exchange.
o You won't pay a redemption fee on the shares you're exchanging. Any redemption fee will be deducted later on when you sell the shares you received from the exchange. Any redemption fee will be paid to the original Fund.
A CDSC may apply to the shares you receive from the exchange, and to any Investor B Shares you receive from an exchange of these shares. The CDSC will be based on the period from when you bought your original Investor B Shares until you sell the shares you received from the exchange.
EXCHANGING INVESTOR B SHARES
You can exchange Investor B Shares of a Fund for:
o Investor B Shares of any other Nations Fund, except Nations Funds Money Market Funds
o Investor C Shares of Nations Funds Money Market Funds (before October 1, 1999)
o Investor B Shares of Nations Reserves Money Market Funds (on or after October 1, 1999)
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be deducted later on when you sell the shares you received from the exchange. The CDSC will be based on the period from when you bought the original shares until you sold the shares you received from the exchange.
If you received Investor C Shares of a Nations Funds Money Market Fund from an exchange of Investor B Shares of a Fund before October 1, 1999, a CDSC may apply when you sell your Investor C Shares. The CDSC will be based on the period from when you bought the original shares until you exchanged them.
EXCHANGING INVESTOR C SHARES
You can exchange Investor C Shares of a Fund for:
o Investor C Shares of any other Nations Fund, except Nations Funds Money Market Funds
o Daily Shares of Nations Funds Money Market Funds (before October 1, 1999)
o Investor C Shares of Nations Reserves Money Market Funds (on or after October 1, 1999)
If you received Investor C Shares of a Fund from an exchange of Investor A Shares of a Managed Index Fund, you can also exchange these shares for Investor A Shares of an Index Fund.
You won't pay a CDSC on the shares you're exchanging. Any CDSC will be deducted later on when you sell the shares you received from the exchange. The CDSC will be based on the period from when you bought the original shares until you sold the shares you received from the exchange.
If you received Daily Shares of a Nations Funds Money Market Fund through an exchange of Investor C Shares of a Fund before October 1, 1999, a CDSC may apply when you sell your Daily Shares. The CDSC will be based on the period from when you bought the original shares until you exchanged them.
AUTOMATIC EXCHANGE FEATURE
The Automatic Exchange Feature lets you exchange $25 or more of Investor A or Investor C Shares every month or every quarter. You can contact your investment professional or us to set up the plan.
Here's how automatic exchanges work:
o Send your request to PFPC in writing or call 1.800.321.7854.
o You must already have an investment in the Funds you want to exchange.
o You can choose to have us transfer your money on or about the 15th or the last day of the month.
o The rules for making exchanges apply to automatic exchanges.
[GRAPHIC OMITTED]
How selling and servicing agents are paid
Selling and servicing agents usually receive compensation based on your investment in the Fund. The kind and amount of the compensation depends on the share class you invest in. Selling agents typically pay a portion of the compensation they receive to their investment professionals.
COMMISSIONS
Your selling agent may receive an up-front commission (reallowance) when you buy shares of a Fund. The amount of this commission depends on which share class you choose:
o up to 4.25% of the offering price per share of Investor A Shares. The commission is paid from the sales charge we deduct when you buy your shares
o up to 4.00% of the net asset value per share of Investor B Shares. The commission is not deducted from your purchase -- we pay your selling agent directly
o up to 1.00% of the net asset value per share of Investor C Shares. The commission is not deducted from your purchase -- we pay your selling agent directly
If you buy Investor B or Investor C Shares you will be subject to higher distribution (12b-1) and shareholder servicing fees and may be subject to a CDSC when you sell your shares.
[GRAPHIC OMITTED]
THE FINANCIAL INSTITUTION OR INTERMEDIARY THAT BUYS SHARES FOR YOU
IS ALSO SOMETIMES REFERRED TO AS A SELLING AGENT.
THE DISTRIBUTION FEE IS OFTEN REFERRED TO AS A "12B-1" FEE BECAUSE IT'S PAID THROUGH A PLAN APPROVED UNDER RULE 12B-1 UNDER THE 1940 ACT.
YOUR SELLING AGENT MAY CHARGE OTHER FEES FOR SERVICES PROVIDED TO
YOUR ACCOUNT.
DISTRIBUTION (12B-1) AND SHAREHOLDER SERVICING FEES Stephens and selling and servicing agents may be compensated for selling shares and providing services to investors under distribution and shareholder servicing plans.
The amount of the fee depends on the class of shares you own:
Maximum annual distribution (12b-1)
and shareholder servicing fees
(as an annual % of average daily net assets)
Investor A Shares 0.25% combined distribution (12b-1) and shareholder servicing fee
Investor B Shares 0.75% distribution (12b-1) fee , 0.25% shareholder servicing fee
Investor C Shares 0.75% distribution (12b-1) fee, 0.25% shareholder servicing fee
|
Fees are calculated daily and deducted monthly. Because these fees are paid out of the Fund's assets on an ongoing basis, they will increase the cost of your investment over time, and may cost you more than any sales charges you may pay.
The Fund pays these fees to Stephens and to eligible selling and servicing agents for as long as the plans continue. We may reduce or discontinue payments at any time.
OTHER COMPENSATION
Selling and servicing agents may also receive:
o a bonus, incentive or other compensation relating to the sale, promotion and marketing of the Fund
o additional amounts on all sales of shares:
o up to 1.00% of the offering price per share of Investor A Shares
o up to 1.00% of the net asset value per share of Investor B Shares
o up to 1.00% of the net asset value per share of Investor C Shares
o non-cash compensation like trips to sales seminars or vacation destinations, tickets to sporting events, theater or other entertainment, opportunities to participate in golf or other outings and gift certificates for meals or merchandise
This compensation, which is not paid by the Fund, is discretionary and may be available only to selected selling and servicing agents. For example, Stephens sometimes sponsors promotions involving Banc of America Investment Services, Inc., an affiliate of BAAI, and certain other selling or servicing agents. Selected selling and servicing agents also may receive compensation for opening a minimum number of accounts.
BAAI also may pay amounts from its own assets to Stephens or to selling or servicing agents for related services they provide.
[GRAPHIC OMITTED]
Distributions and taxes
[GRAPHIC OMITTED]
THE POWER OF COMPOUNDING
REINVESTING YOUR DISTRIBUTIONS BUYS YOU MORE SHARES OF THE FUND --
WHICH LETS YOU TAKE ADVANTAGE OF THE POTENTIAL FOR COMPOUND GROWTH.
PUTTING THE MONEY YOU EARN BACK INTO YOUR INVESTMENT MEANS IT, IN TURN, MAY EARN EVEN MORE MONEY. OVER TIME, THE POWER OF COMPOUNDING HAS THE POTENTIAL TO SIGNIFICANTLY INCREASE THE VALUE OF YOUR INVESTMENT. THERE IS NO ASSURANCE, HOWEVER, THAT YOU'LL EARN MORE MONEY IF YOU REINVEST YOUR DISTRIBUTIONS.
ABOUT DISTRIBUTIONS
A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid on COMMON STOCKS.
o A fund can also have CAPITAL GAIN if the value of its investments increases. If a fund sells an investment at a gain, the gain is realized. If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net investment income and realized capital gain to its shareholders. The Fund intends to pay out a sufficient amount of its income and capital gain to its shareholders so the Fund won't have to pay any income tax. When the Fund makes this kind of a payment, it's split equally among all shares, and is called a distribution.
The Fund distributes any net realized capital gain at least once a year. The Fund declares distributions of net investment income daily and pays them monthly.
A distribution is paid based on the number of shares you hold on the record date, which is usually the day the distribution is declared (daily dividend Funds) or the day before the distribution is declared (all other Funds). Shares are eligible to receive distributions from the SETTLEMENT DATE (daily dividend Funds) or the TRADE DATE (all other Funds) of the purchase up to and including the day before the shares are sold.
Different share classes of the Fund usually pay different distribution amounts, because each class has different expenses. Each time a distribution is made, the net asset value per share of the share class is reduced by the amount of the distribution.
We'll automatically reinvest distributions in additional shares of the Fund unless you tell us you want to receive your distributions in cash. You can do this by writing to us at the address on the back cover, or by calling us at 1.800.321.7854.
We generally pay cash distributions within five business days after the end of the month, quarter or year in which the distribution was made. If you sell all of your shares, we'll pay any distribution that applies to those shares in cash within five business days after the sale was made.
If you buy shares of the Fund shortly before it makes a distribution, you will, in effect, receive part of your purchase back in the distribution, which is subject to tax. Similarly, if you buy shares of a Fund that holds securities with unrealized capital gain, you will, in effect, receive part of your purchase back if and when the Fund sells those securities and distributes the gain. This distribution is also subject to tax. Some Funds have built up, or have the potential to build up, high levels of unrealized capital gain.
[GRAPHIC OMITTED]
THIS INFORMATION IS A SUMMARY OF HOW FEDERAL INCOME TAXES MAY AFFECT YOUR INVESTMENT IN THE FUND. IT IS NOT INTENDED AS A SUBSTITUTE FOR CAREFUL TAX PLANNING. YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISOR ABOUT YOUR SITUATION, INCLUDING ANY FOREIGN, STATE AND LOCAL TAXES THAT MAY APPLY.
[GRAPHIC OMITTED]
FOR MORE INFORMATION ABOUT
TAXES, PLEASE SEE THE SAI.
HOW TAXES AFFECT YOUR INVESTMENT
Distributions that come from a Fund's net investment income, net foreign currency gain and any excess of net short-term capital gain over net long-term capital loss generally are taxable to you as ordinary income.
Distributions that come from a Fund's net capital gain (generally the excess of net long-term capital gain over net short-term capital loss), generally are taxable to you as net capital gain. Corporate shareholders won't be able to deduct any distributions from a Fund when determining their taxable income.
In general, all distributions are taxable to you when paid, whether they are paid in cash or automatically reinvested in additional shares of the Fund. However, any distributions declared in October, November or December of one year and distributed in January of the following year will be taxable as if they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in distributions during the year and their federal tax status. Foreign, state and local taxes may also apply to these distributions.
WITHHOLDING TAX
We're required by federal law to withhold tax of 31% on any distributions and redemption proceeds paid to you (including amounts deemed to be paid for "in kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on your account is incorrect according to its records
o the IRS informs us that you're otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may receive a refund from the IRS if the withholding tax results in an overpayment of taxes.
We're also normally required by federal law to withhold tax on distributions paid to foreign shareholders.
TAXATION OF REDEMPTIONS AND EXCHANGES
Your redemptions (including redemptions "in kind") and exchanges of Fund shares will usually result in a taxable capital gain or loss, depending on the amount you receive for your shares (or are deemed to receive in the case of exchanges) and the amount you paid (or are deemed to have paid) for them.
[GRAPHIC OMITTED]
Terms used in this prospectus
BANK OBLIGATION - a money market instrument issued by a bank, including certificates of deposit, time deposits and bankers' acceptances.
CAPITAL GAIN OR LOSS - the difference between the purchase price of a security and its selling price. You realize a capital gain when you sell a security for more than you paid for it. You realize a capital loss when you sell a security for less than you paid for it.
CASH EQUIVALENTS - short-term, interest-bearing instruments, including obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities, bank obligations, asset-backed securities, foreign government securities and commercial paper issued by U.S. and foreign issuers which, at the time of investment, is rated at least Prime-2 by Moody's Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
COMMERCIAL PAPER - a money market instrument issued by a large company.
COMMON STOCK - a security that represents part equity ownership in a company. Common stock typically allows you to vote at shareholder meetings and to share in the company's profits by receiving dividends.
CONVERTIBLE DEBT - a debt security that can be exchanged for common stock (or another type of security) on a specified basis and date.
CONVERTIBLE SECURITY - a security that can be exchanged for common stock (or another type of security) at a specified rate. Convertible securities include convertible debt, rights and warrants.
CORPORATE OBLIGATION - a money market instrument issued by a corporation or commercial bank.
DEPOSITARY RECEIPTS - evidence of the deposit of a security with a custodian bank. American Depositary Receipts (ADRs), for example, are certificates traded in U.S. markets representing an interest of a foreign company. They were created to make it possible for foreign issuers to meet U.S. security registration requirements. Other examples include ADSs, GDRs and EDRs.
DIVIDEND YIELD - rate of return of dividends paid on a common or preferred stock. It equals the amount of the annual dividend on a stock expressed as a percentage of the stock's current market value.
EQUITY SECURITY - an investment that gives you an equity ownership right in a company. Equity securities (or "equities") include common and preferred stock, rights and warrants.
FIRST-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that is an eligible investment for money market funds and has the highest short-term rating from a nationally recognized statistical rating organization (NRSRO), or if unrated, is determined by the fund's portfolio management team to be of comparable quality, or is a money market fund issued by a registered investment company, or is a government security.
FIXED INCOME SECURITY - an intermediate to long-term debt security that matures in more than one year.
FOREIGN SECURITY - a debt or equity security issued by a foreign company or government.
FUNDAMENTAL ANALYSIS - a method of securities analysis that tries to evaluate the intrinsic, or "true," value of a particular stock. It includes a study of the overall economy, industry conditions and the financial condition and management of a company.
FUTURES CONTRACT - a contract to buy or sell an asset or an index of securities at a specified price on a specified future date. The price is set through a futures exchange.
LIQUIDITY - a measurement of how easily a security can be bought or sold at a price that is close to its market value.
MONEY MARKET INSTRUMENT - a short-term debt security that matures in 13 months or less. Money market instruments include U.S. Treasury obligations, U.S. government obligations, certificates of deposit, bankers' acceptances, commercial paper, repurchase agreements and certain municipal securities.
OVER-THE-COUNTER MARKET - a market where dealers trade securities through a telephone or computer network rather than through a public stock exchange.
PARTICIPATION - a pass-through certificate representing a share in a pool of debt obligations or other instruments.
PASS-THROUGH CERTIFICATE - securitized mortgages or other debt securities with interest and principal paid by a servicing intermediary shortly after interest payments are received from borrowers.
PREFERRED STOCK - a type of equity security that gives you a limited ownership right in a company, with certain preferences or priority over common stock. Preferred stock generally pays a fixed annual dividend. If the company goes bankrupt, preferred shareholders generally receive their share of the company's remaining assets before common shareholders and after bondholders and other creditors.
PRICE-TO-EARNINGS RATIO (P/E RATIO) - the current price of a share divided by its actual or estimated earnings per share. The P/E ratio is one measure of the value of a company.
QUANTITATIVE ANALYSIS - an analysis of financial information about a company or security to identify securities that have the potential for growth or are otherwise suitable for a fund to buy.
RIGHT - a temporary privilege allowing investors who already own a common stock to buy additional shares directly from the company at a specified price or formula.
SECOND-TIER SECURITY - under Rule 2a-7 under the 1940 Act, a debt security that is an eligible investment for money market funds, but is not a first-tier security.
Senior security - a debt security that allows holders to receive their share of a company's remaining assets in a bankruptcy before other bondholders, creditors, and common and preferred shareholders.
TRADE DATE - the effective date of a purchase, sale or exchange transaction, or other instructions sent to us. The trade date is determined by the day and time we receive the order or instructions in a form that's acceptable to us.
U.S. GOVERNMENT OBLIGATIONS - a wide range of debt securities issued or guaranteed by the U.S. government or its agencies, authorities or instrumentalities.
WARRANT - a certificate that gives you the right to buy common shares at a specified price within a specified period of time.
U.S. TREASURY OBLIGATION - a debt security issued by the U.S. Treasury.
[outside back cover]
[GRAPHIC OMITTED]
Where to find more information
You'll find more information about the Equity Fund in the following documents:
[GRAPHIC OMITTED]
ANNUAL AND SEMI-ANNUAL REPORTS
The annual and semi-annual reports contain information about Fund investments and performance, the financial statements and the auditor's reports. The annual report also includes a discussion about the market conditions and investment strategies that had a significant effect on the Fund's performance during the period covered.
[GRAPHIC OMITTED]
STATEMENT OF ADDITIONAL INFORMATION
The SAI contains additional information about the Fund and its policies. The SAI is legally part of this prospectus (it's incorporated by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other information about the Fund and make shareholder inquiries by contacting Nations Funds:
By telephone: 1.800.321.7854
By mail:
NATIONS FUNDS
C/O STEPHENS INC.
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
On the Internet: WWW.NATIONS-FUNDS.COM
If you prefer, you can write the SEC's Public Reference Room and ask them to mail you copies of these documents. They'll charge you a fee for this service. You can also download them from the SEC's website or visit the Public Reference Section and copy the documents while you're there. Please call the SEC for more information.
PUBLIC REFERENCE SECTION OF THE SEC
WASHINGTON, DC 20549-6009
1.800.SEC.0330
WWW.SEC.GOV
SEC file number:
[GRAPHIC OMITTED]
Nations Funds Trust, 811-09645
NF-[ ]-4/00
[GRAPHIC OMITTED]
Equity Fund
Prospectus -- Primary A Shares
March 31, 2000
|
Equity Fund
Nations Marsico 21st Century Fund
The Securities and
Exchange Commission
(SEC) has not approved or
disapproved these
securities or determined
if this prospectus is
truthful or complete.
Any representation to the
contrary is a criminal offense.
NOT FDIC
INSURED
MAY LOSE VALUE
NO BANK GUARANTEE
NATIONS FUNDS [LOGO]
[GRAPHIC OMITTED]
Terms used in this prospectus
In this prospectus, we, us and our refer to the Nations Funds Family (Nations Funds). Some other important terms we've used may be new to you. These are printed in italics where they first appear in a section and are described in Terms used in this prospectus.
[GRAPHIC OMITTED]
You'll find Terms used in this prospectus on page 15.
Your investment in this Fund is not a bank deposit and is not insured or guaranteed by Bank of America, N. A. (Bank of America), the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Your investment may lose money.
Affiliates of Bank of America are paid for the services they provide to the Fund.
This booklet, which is called a prospectus, tells you about one of the Nations Equity Funds, Nations Marsico 21st Century Fund. Please read it carefully, because it contains information that's designed to help you make informed investment decisions.
About the Fund
Nations Marsico 21st Century Fund invests primarily in equity securities of
U.S. companies.
Equity securities have the potential to provide you with higher returns than many other kinds of investments, but they also tend to have the highest risk. There's always a risk that you'll lose money or you may not earn as much as you expect.
Is this Fund right for you?
When you're choosing a Fund to invest in, you should consider things like your
investment goals, how much risk you can accept and how long you're planning to
hold your investment.
Nations Marsico 21st Century Fund focuses on long-term growth. It may be suitable for you if:
o you have longer-term investment goals
o it's part of a balanced portfolio
o you want to try to hedge your portfolio against a loss of buying power that inflation can cause over time
It may not be suitable for you if:
o you're not prepared to accept or are unable to bear the risks associated with equity securities
o you have short-term investment goals
o you're looking for a regular stream of income
You'll find a discussion of the Fund's principal investments, strategies and risks in the Fund description that starts on page 4.
For more information
If you have any questions about the Fund, please call us at 1.800.765.2668 or
contact your investment professional.
You'll find more information about the Fund in the Statement of Additional Information (SAI). The SAI includes more detailed information about the Fund's investments, policies, performance and management, among other things. Please turn to the back cover to find out how you can get a copy.
[GRAPHIC OMITTED]
Banc of America Advisors, Inc.
Banc of America Advisors, Inc. (BAAI) is the investment adviser to the Fund. BAAI is responsible for the overall management and supervision of the investment management of the Fund. BAAI and Nations Funds have engaged a sub-adviser, which is responsible for the day-to-day investment decisions for the Fund.
[GRAPHIC OMITTED]
You'll find more about BAAI and the sub-adviser starting on page 8.
[GRAPHIC OMITTED]
About the Fund
Equity Fund
Nations Marsico 21st Century Fund 4
Sub-adviser: Marsico Capital Management, LLC
----------------------------------------------
Other important information 7
---------------------------------------------- --
How the Fund is managed 8
[GRAPHIC OMITTED]
About your investment
Information for investors
Buying, selling and exchanging shares 10
Distributions and taxes 13
---------------------------------------------- --
Terms used in this prospectus 15
---------------------------------------------- --
Where to find more information back cover
|
[GRAPHIC OMITTED]
About the sub-adviser
Marsico Capital Management, LLC (Marsico Capital) is this Fund's sub-adviser. James A. Hillary is the portfolio manager and makes the day-to-day investment decisions for the Fund.
[GRAPHIC OMITTED]
What is a multi-cap fund?
A multi-cap fund invests in companies across the capitalization spectrum - small, mid and large companies. As a multi-cap fund, this Fund may invest in large, established and well-known U.S. and foreign companies, as well as small, new and relatively unknown companies that are believed to have the potential to grow significantly.
Nations Marsico 21st Century Fund
[GRAPHIC OMITTED]
Investment objective
This Fund seeks long-term growth of capital.
[GRAPHIC OMITTED]
Principal investment strategies
The Fund invests primarily in equity securities of companies of any size. The Fund may invest without limit in foreign securities.
The Fund also may invest in securities that aren't part of its principal investment strategies, but it won't hold more than 10% of its assets in any one type of these securities. These securities are described in the SAI.
Marsico Capital looks for companies with earnings growth potential that may not be recognized by other investors, focusing on companies that have some of the following characteristics:
o products, markets or technologies in flux that can result in extraordinary growth
o strong brand franchises that can take advantage of a changing global environment
o global reach that allows the company to generate sales and earnings both in the United States and abroad. This can give the company added growth potential and also means the company may be less affected by changes in local markets
o movement with, not against, the major social, economic and cultural shifts taking place in the world
Once an investment opportunity is identified, Marsico Capital uses a disciplined analytical process to assess its potential as an investment. This process includes a "top down" analysis that takes into account economic factors like interest rates, inflation, the regulatory environment, the industry and global competition.
The process also includes a "bottom-up" analysis of a company's financial situation, as well as individual company characteristics like commitment to research, market franchise and quality of management.
Marsico Capital may sell a security when it believes there is a deterioration in the company's financial situation, the security is overvalued, when there is a negative development in the company's competitive, regulatory or economic environment, or for other reasons.
[GRAPHIC OMITTED]
Risks and other things to consider
Nations Marsico 21st Century Fund has the following risks:
o Investment strategy risk - There is a risk that the value of the
Fund's investments will not rise as high as Marsico Capital expects,
or will fall.
o Stock market risk - The value of any stocks the Fund holds can be
affected by changes in U.S. or foreign economies and financial
markets, and the companies that issue the stocks, among other things.
Stock prices can rise or fall over short as well as long periods. In
general, stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices. As of the date of this
prospectus, the stock markets, as measured by the S&P 500 and
other commonly used indices, were trading at or close to record
levels. There can be no guarantee that these levels will continue.
o Small company risk - Stocks of smaller companies tend to have greater
price swings than stocks of larger companies because they trade less
frequently and in lower volumes. These securities may have a higher
potential for gains but also carry higher risk.
o Foreign investment risk - Because the Fund may invest without
limitation in foreign securities, it can be affected by the risks of
foreign investing. Foreign investments may be riskier than U.S.
investments because of political and economic conditions, changes in
currency exchange rates, the implementation of the Euro, foreign
controls on investment, difficulties selling some securities and lack
of or limited financial information. Withholding taxes also may apply
to some foreign investments.
o Changing to a feeder fund - Unlike traditional mutual funds, which
invest in individual securities, a "feeder fund" invests all of its
assets in another fund, called a "master portfolio." Other feeder
funds generally also invest in a master portfolio. The master
portfolio invests in individual securities and has the same
investment objective, investment strategies and principal investment
risks as the feeder funds. This structure can help reduce a feeder
fund's expenses because its assets are combined with those of other
feeder funds. If a master portfolio doesn't attract other feeder
funds, however, a feeder fund's expenses could be higher than those
of a traditional mutual fund.
This Fund may become a feeder fund if the Board of Trustees decides this would be in the best interests of shareholders. Management currently intends to propose that the Fund change to a feeder fund within the next year, but only if other feeder funds are likely to also invest in the master portfolio. We don't require shareholder approval to make the change, but we'll notify you if it happens.
Other mutual funds and eligible investors can buy shares in a master portfolio. All investors in a master portfolio would invest under the same terms and conditions as the Fund and pay a proportionate share of the master portfolio's expenses. Other feeder funds that invest in a master portfolio may have different share prices and returns than the Fund because different feeder funds typically have varying sales charges, and ongoing administrative and other expenses.
The Fund could withdraw its entire investment from a master portfolio if it believes it's in the best interests of the Fund to do so (for example, if a master portfolio changed its investment objective). It is unlikely that this would happen, but if it did, the Fund's portfolio could be less diversified and therefore less liquid, and expenses could increase. The Fund might also have to pay brokerage, tax or other charges.
[GRAPHIC OMITTED]
A look at the Fund's performance
Because the Fund commenced operations on March , 2000 and has not been in operation for a full calendar year, no risk/return bar chart or table is included in this prospectus.
[GRAPHIC OMITTED]
There are two kinds of fees -- sales charges you pay directly, and annual fund operating expenses that are deducted from a fund's assets.
Total net expenses are actual expenses paid by the Fund after waivers and/or reimbursements.
[GRAPHIC OMITTED]
What it costs to invest in the Fund
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.
Shareholder fees Primary A
(Fees paid directly from your investment) Shares
Maximum sales charge (load) imposed on purchases none
Maximum deferred sales charge (load) none
Annual Fund operating expenses
(Expenses that are deducted from the Fund's assets)
Management fees 0.75%
----
Other expenses(1) 0.45%
----
Total annual Fund operating expenses 1.20%
====
|
(1) Other expenses are based on estimates for the current fiscal year.
[GRAPHIC OMITTED]
This is an example only. Your actual costs could be higher or lower, depending on the amount you invest, and on the Fund's actual expenses and performance.
Example
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time periods indicated and then sell all of your shares at the end of those periods
o you reinvest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the table above
Although your actual costs may be higher or lower, based on these assumptions, your costs would be:
1 year 3 years
Primary A Shares $122 $381
|
[GRAPHIC OMITTED]
Other important information
You'll find specific information about the Fund's principal investments, strategies and risks in the description starting on page 4. The following are some other risks and information you should consider before you invest:
o Changing investment objectives and policies - The investment objective and certain investment policies of the Fund can be changed without shareholder approval. Other investment policies may be changed only with shareholder approval.
o Holding other kinds of investments - The Fund may hold investments that aren't part of its principal investment strategies. Please refer to the SAI for more information. The portfolio manager can also choose not to invest in specific securities described in this prospectus and in the SAI.
o Investing defensively - The Fund may temporarily hold investments that are not part of its investment objective or its principal investment strategies to try to protect it during a market or economic downturn or because of political or other conditions. A Fund may not achieve its investment objective while it is investing defensively.
o Portfolio turnover - The Fund that replaces -- or turns over -- more than 100% of its investments in a year is considered to trade frequently. Frequent trading can result in larger distributions of short-term capital gains to shareholders. These gains are taxable at higher rates than long-term capital gains. Frequent trading can also mean higher brokerage and other transaction costs, which could reduce the Fund's returns. The Fund generally buys securities for capital appreciation, investment income, or both, and doesn't engage in short-term trading. The annual portfolio turnover rate for Nations Marsico 21st Century Fund is expected to be no more than %.
o Year 2000 readiness - The Fund's primary service providers have confirmed that they have not experienced any notable year 2000 issues. There is no guarantee, however, that their computer systems will not encounter any year 2000 issues as the year progresses. If a year 2000 issue does arise, there could be a negative effect on portfolio operations. The Fund's performance could also be affected if securities it holds decrease in value because of year 2000 issues.
[GRAPHIC OMITTED]
How the Fund is managed
[GRAPHIC OMITTED]
Banc of America Advisors, Inc.
One Bank of America Plaza
Charlotte, North Carolina 28255
Investment adviser
BAAI is the investment adviser to over 60 mutual fund portfolios in the Nations
Funds family, including the Fund described in this prospectus.
BAAI is a registered investment adviser. It's a wholly-owned subsidiary of Bank of America, which is owned by Bank of America Corporation. The Fund pays BAAI an annual fee for its investment advisory services. The fee is calculated daily based on the average net assets of the Fund and is paid monthly. BAAI uses part of this money to pay investment sub-advisers for the services it provides to the Fund.
The following chart shows the maximum advisory fee BAAI can receive:
Annual investment advisory fee, as a % of average daily net assets
Maximum
advisory
fee
Nations Marsico 21st Century Fund 0.75%
|
Investment sub-adviser
Nations Funds and BAAI have engaged investment a sub-adviser to provide
day-to-day portfolio management for the Fund. This sub-adviser functions under
the supervision of BAAI and the Boards of Trustees of Nations Funds.
[GRAPHIC OMITTED]
Marsico Capital
Management, LLC
1200 17th Street
Suite 1300
Denver, Colorado 80202
Marsico Capital Management, LLC
Marsico Capital is a full service investment advisory firm founded by Thomas F.
Marsico in September 1997. It is a registered investment adviser, specializing
in large capitalization stocks, and currently has $6.5 billion in assets under
management.
Marsico Management Holdings, LLC, a wholly-owned subsidiary of Bank of America Corporation, indirectly owns 50% of the equity of Marsico Capital.
Marsico Capital is the investment sub-adviser to Nations Marsico 21st Century Fund.
James A. Hillary is the portfolio manager of Nations Marsico 21st Century Fund. Mr. Hillary has eleven years of experience as a securities analyst and portfolio manager and is a founding member of Marsico Capital Management. Prior to joining Marsico Capital in 1997, Mr. Hillary was a portfolio manager at W.H. Reaves, a New Jersey-based money management firm. He holds a bachelor's degree from Rutgers University and a law degree from Fordham University. Mr. Hillary is also a certified public accountant.
[GRAPHIC OMITTED]
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Other service providers
The Fund is distributed and co-administered by Stephens Inc., a registered
broker/dealer.
BAAI is also co-administrator of the Fund, and assists in overseeing the administrative operations of the Fund. The Fund pays BAAI and Stephens a combined fee of 0.23% for their services, plus certain out-of-pocket expenses. The fee is calculated as an annual percentage of the average daily net assets of the Fund and is paid monthly.
[GRAPHIC OMITTED]
PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
PFPC Inc. (PFPC) is the transfer agent for the Fund's shares. Its responsibilities include processing purchases, sales and exchanges, calculating and paying distributions, keeping shareholder records, preparing account statements and providing customer service.
When you sell shares of a mutual fund, the fund is effectively "buying" them back from you. This is called a redemption.
[GRAPHIC OMITTED]
A business day is any day that the New York Stock Exchange (NYSE) is open. A business day ends at the close of regular trading on the NYSE, usually at 4:00 p.m. Eastern time. If the NYSE closes early, the business day ends as of the time the NYSE closes.
The NYSE is closed on weekends and on the following national holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
[GRAPHIC OMITTED]
Buying, selling and exchanging shares
This prospectus offers Primary A Shares of the Fund. Here are some general rules about this class of shares:
o Primary A Shares are available to certain financial institutions and intermediaries for their own accounts, and for certain client accounts for which they act as a fiduciary, agent or custodian. These include:
o Bank of America and certain of its affiliates
o certain other financial institutions and intermediaries, including financial planners and investment advisers
o institutional investors
o charitable foundations
o endowments
o other Funds in Nations Funds Family
o The minimum initial investment is $250,000. Financial institutions or intermediaries can total the investments they make on behalf of their clients to meet the minimum initial investment amount.
o There is no minimum amount for additional investments.
o There are no sales charges for buying, selling or exchanging these shares.
You'll find more information about buying, selling and exchanging Primary A Shares on the pages that follow. You should also ask your financial institution or intermediary about its limits, fees and policies for buying, selling and exchanging shares, which may be different from those described here, and about its related programs or services.
The Fund also offers other classes of shares, with different features and expense levels, which you may be eligible to buy. Please contact your investment professional, or call us at 1.800.765.2668 if you have any questions or you need help placing an order.
How shares are priced
All transactions are based on the price of the Fund's shares -- or its net
asset value per share. We calculate net asset value per share for each class of
the Fund at the end of each business day. First, we calculate the net asset
value for each class of the Fund by determining the value of the Fund's assets
in the class and then subtracting its liabilities. Next, we divide this amount
by the number of shares that investors are holding in the class.
Valuing securities in the Fund
The value of the Fund's assets is based on the total market value of all of the
securities it holds. The prices reported on stock exchanges and securities
markets around the world are usually used to value securities in the Fund. If
prices aren't readily available, we'll base the price of a security on its fair
market value. We use the amortized cost method, which approximates market
value, to value short-term investments maturing in 60 days or less.
International markets may be open on days when U.S. markets are closed. The
value of foreign securities owned by the Fund could change on days when Fund
shares may not be bought or sold.
How orders are processed
Orders to buy, sell or exchange shares are processed on business days. Orders
received by Stephens, PFPC or their agents before the end of a business day
(usually 4:00 p.m. Eastern time, unless the NYSE closes early) will receive
that day's net asset value per share. Orders received after the end of a
business day will receive the next business day's net asset value per share.
The business day that applies to your order is also called the trade date. We
may refuse any order to buy or exchange shares. If this happens, we'll return
any money we've received.
[GRAPHIC OMITTED]
Buying shares
Here are some general rules for buying shares:
o Investors buy Primary A Shares at net asset value per share.
o If we don't receive payment within three business days of receiving an order, we'll refuse the order. We'll return any payment received for orders that we refuse.
o Financial institutions and intermediaries are responsible for sending us orders for their clients and for ensuring that we receive payment on time.
o Shares purchased are recorded on the books of the Fund. We don't issue certificates.
o Financial institutions and intermediaries are responsible for recording the beneficial ownership of the shares of their clients, and for reporting this ownership on account statements they send to their clients.
[GRAPHIC OMITTED]
Selling shares
Here are some general rules for selling shares:
o We normally send the sale proceeds by federal funds wire within three business days after Stephens, PFPC or their agents receive the order.
o If shares were paid for with a check that wasn't certified, we'll hold the sale proceeds when those shares are sold for at least 15 days after the trade date of the purchase, or until the check has cleared.
o Financial institutions and intermediaries are responsible for sending us orders for their clients and for depositing the sale proceeds to their accounts on time.
o Under certain circumstances allowed under the Investment Company Act of 1940 (1940 Act), we can pay investors in securities or other property when they sell shares.
o We can delay payment of the sale proceeds for up to seven days.
o Other restrictions may apply to retirement plan accounts. For more information about these restrictions, please contact your retirement plan administrator.
We may sell shares:
o if the value of an investor's account falls below $500. We'll provide 60 days notice in writing if we're going to do this
o if a financial institution or intermediary tells us to sell the shares for a client under arrangements it has made with its clients
o under certain other circumstances allowed under the 1940 Act
[GRAPHIC OMITTED]
You should make sure you understand the investment objectives and policies of the Fund you're exchanging into. Please read its prospectus carefully.
[GRAPHIC OMITTED]
Exchanging shares
Investors can sell shares of the Fund to buy shares of another Nations Fund. This is called an exchange, and may be appropriate if investment goals or tolerance for risk change.
Here's how exchanges work:
o Investors can exchange Primary A Shares of a Fund for Primary A Shares of any other Nations Fund. In some cases, the only Money Market Fund option is Trust Class Shares of Nations Reserves Money Market Funds.
o The rules for buying shares of a Fund, including any minimum investment requirements, apply to exchanges into that Fund.
o Exchanges can only be made into a Fund that is legally sold in the investor's state of residence.
o Exchanges can generally only be made into a Fund that is accepting investments.
o We may limit the number of exchanges that can be made within a specified period of time.
o We may change or cancel the right to make an exchange by giving the amount of notice required by regulatory authorities (generally 60 days for a material change or cancellation).
[GRAPHIC OMITTED]
Distributions and taxes
[GRAPHIC OMITTED]
The power of compounding
Reinvesting your distributions buys you more shares of the Fund -- which lets you take advantage of the potential for compound growth.
Putting the money you earn back into your investment means it, in turn, may earn even more money. Over time, the power of compounding has the potential to significantly increase the value of your investment. There is no assurance, however, that you'll earn more money if you reinvest your distributions.
About distributions A mutual fund can make money two ways:
o It can earn income. Examples are interest paid on bonds and dividends paid on common stocks.
o A fund can also have capital gain if the value of its investments increases. If a fund sells an investment at a gain, the gain is realized. If a fund continues to hold the investment, any gain is unrealized.
A mutual fund is not subject to income tax as long as it distributes its net investment income and realized capital gain to its shareholders. The Fund intends to pay out a sufficient amount of its income and capital gain to its shareholders so the Fund won't have to pay any income tax. When the Fund makes this kind of a payment, it's split equally among all shares, and is called a distribution.
The Fund distributes any net realized capital gain at least once a year. The frequency of distributions of net investment income varies by Fund:
Frequency of
Fund income distributions
Nations Marsico 21st Century Fund quarterly
|
A distribution is paid based on the number of shares you hold on the record date, which is usually the day before the distribution is declared. Shares of the Fixed Income Fund are eligible to receive distributions from the trade date of the purchase up to and including the day before the shares are sold.
Different share classes of the Fund usually pay different distribution amounts, because each class has different expenses. Each time a distribution is made, the net asset value per share of the share class is reduced by the amount of the distribution.
We'll automatically reinvest distributions in additional shares of the Fund unless you tell us you want to receive your distributions in cash. You can do this by writing to us at the address on the back cover, or by calling us at 1.800.765.2668.
We generally pay cash distributions within five business days after the end of the month, quarter or year in which the distribution was made. If you sell all of your shares, we'll pay any distribution that applies to those shares in cash within five business days after the sale was made.
If you buy shares of the Fund shortly before it makes a distribution, you will, in effect, receive part of your purchase back in the distribution, which is subject to tax. Similarly, if you buy shares of a Fund that holds securities with unrealized capital gain, you will, in effect, receive part of your purchase back if and when the Fund sells those securities and realizes and distributes the gain. This distribution is also subject to tax. Some Funds have built up, or have the potential to build up, high levels of unrealized capital gain.
[GRAPHIC OMITTED]
This information is a summary of how federal income taxes may affect your investment in the Fund. It is not intended as a substitute for careful tax planning. You should consult with your own tax advisor about your situation, including any foreign, state and local taxes that may apply.
[GRAPHIC OMITTED]
For more information about taxes, please see the SAI.
How taxes affect your investment
Distributions that come from net investment income, net foreign currency gain
and any excess of net short-term capital gain over net long-term capital loss,
generally are taxable to you as ordinary income.
Distributions that come from net capital gain (generally the excess of net long-term capital gain over net short-term capital loss) generally are taxable to you as net capital gain.
In general, all distributions are taxable to you when paid, whether they are paid in cash or automatically reinvested in additional shares of the Fund. However, any distributions declared in October, November or December of one year and distributed in January of the following year will be taxable as if they had been paid to you on December 31 of the first year.
We'll send you a notice every year that tells you how much you've received in distributions during the year and their federal tax status. Foreign, state and local taxes may also apply to these distributions.
Withholding tax
We're required by federal law to withhold tax of 31% on any distributions and
redemption proceeds paid to you (including amounts deemed to be paid for "in
kind" redemptions and exchanges) if:
o you haven't given us a correct Taxpayer Identification Number (TIN) and haven't certified that the TIN is correct and withholding doesn't apply
o the Internal Revenue Service (IRS) has notified us that the TIN listed on your account is incorrect according to its records
o the IRS informs us that you are otherwise subject to backup withholding
The IRS may also impose penalties against you if you don't give us a correct
TIN.
Amounts we withhold are applied to your federal income tax liability. You may receive a refund from the IRS if the withholding tax results in an overpayment of taxes.
We're also normally required by federal law to withhold tax on distributions paid to foreign shareholders.
Taxation of redemptions and exchanges
Your redemptions (including redemptions "in kind") and exchanges of Fund shares
will usually result in a taxable capital gain or loss to you, depending on the
amount you receive for your shares (or are deemed to receive in the case of
exchanges) and the amount you paid (or are deemed to have paid) for them.
[GRAPHIC OMITTED]
Terms used in this prospectus
Bank obligation - a money market instrument issued by a bank, including certificates of deposit, time deposits and bankers' acceptances.
Capital gain or loss - the difference between the purchase price of a security and its selling price. You realize a capital gain when you sell a security for more than you paid for it. You realize a capital loss when you sell a security for less than you paid for it.
Cash equivalents - short-term, interest-bearing instruments, including obligations issued or guaranteed by the U.S. government, its agencies and instrumentalities, bank obligations, asset-backed securities, foreign government securities and commercial paper issued by U.S. and foreign issuers which, at the time of investment, is rated at least Prime-2 by Moody's Investor Services, Inc. (Moody's), A-2 by S&P, or F-1 by Fitch IBCA (Fitch).
Commercial paper - a money market instrument issued by a large company.
Common stock - a security that represents part equity ownership in a company. Common stock typically allows you to vote at shareholder meetings and to share in the company's profits by receiving dividends.
Convertible debt - a debt security that can be exchanged for common stock (or another type of security) on a specified basis and date.
Convertible security - a security that can be exchanged for common stock (or another type of security) at a specified rate. Convertible securities include convertible debt, rights and warrants.
Corporate obligation - a money market instrument issued by a corporation or commercial bank.
Depositary receipts - evidence of the deposit of a security with a custodian bank. American Depositary Receipts (ADRs), for example, are certificates traded in U.S. markets representing an interest of a foreign company. They were created to make it possible for foreign issuers to meet U.S. security registration requirements. Other examples include ADSs, GDRs and EDRs.
Dividend yield - rate of return of dividends paid on a common or preferred stock. It equals the amount of the annual dividend on a stock expressed as a percentage of the stock's current market value.
Equity security - an investment that gives you an equity ownership right in a company. Equity securities (or "equities") include common and preferred stock, rights and warrants.
First-tier security - under Rule 2a-7 under the 1940 Act, a debt security that is an eligible investment for money market funds and has the highest short-term rating from a nationally recognized statistical rating organization (NRSRO), or if unrated, is determined by the fund's portfolio management team to be of comparable quality, or is a money market fund issued by a registered investment company, or is a government security.
Fixed income security - an intermediate to long-term debt security that matures in more than one year.
Foreign security - a debt or equity security issued by a foreign company or government.
Fundamental analysis - a method of securities analysis that tries to evaluate the intrinsic, or "true," value of a particular stock. It includes a study of the overall economy, industry conditions and the financial condition and management of a company.
Futures contract - a contract to buy or sell an asset or an index of securities at a specified price on a specified future date. The price is set through a futures exchange.
Liquidity - a measurement of how easily a security can be bought or sold at a price that is close to its market value.
Money market instrument - a short-term debt security that is considered to mature in 13 months or less. Money market instruments include U.S. Treasury obligations, U.S. government obligations, certificates of deposit, bankers' acceptances, commercial paper, repurchase agreements and certain municipal securities.
Over-the-counter market - a market where dealers trade securities through a telephone or computer network rather than through a public stock exchange.
Participation - a pass-through certificate representing a share in a pool of debt obligations or other instruments.
Pass-through certificate - securitized mortgages or other debt securities with interest and principal paid by a servicing intermediary shortly after interest payments are received from borrowers.
Preferred stock - a type of equity security that gives you a limited ownership right in a company, with certain preferences or priority over common stock. Preferred stock generally pays a fixed annual dividend. If the company goes bankrupt, preferred shareholders generally receive their share of the company's remaining assets before common shareholders and after bondholders and other creditors.
Price-to-earnings ratio (P/E ratio) - the current price of a share divided by its actual or estimated earnings per share. The P/E ratio is one measure of the value of a company.
Quantitative analysis - an analysis of financial information about a company or security to identify securities that have the potential for growth or are otherwise suitable for a fund to buy.
Right - a temporary privilege allowing investors who already own a common stock to buy additional shares directly from the company at a specified price or formula.
Second-tier security - under Rule 2a-7 under the 1940 Act, a debt security that is an eligible investment for money market funds, but is not a first-tier security.
Senior security - a debt security that allows holders to receive their share of a company's remaining assets in a bankruptcy before other bondholders, creditors, and common and preferred shareholders.
Trade date - the effective date of a purchase, sale or exchange transaction, or other instructions sent to us. The trade date is determined by the day and time we receive the order or instructions in a form that's acceptable to us.
U.S. government obligations - a wide range of debt securities issued or guaranteed by the U.S. government or its agencies, authorities or instrumentalities.
U.S. Treasury obligation - a debt security issued by the U.S. Treasury.
Warrant - a certificate that gives you the right to buy common shares at a specified price within a specified period of time.
(1) S&P has not reviewed any stock included in the S&P 500 for its investment merit. S&P determines and calculates its index independently of the Fund and is not a sponsor or affiliate of the Fund. S&P gives no information and make no statements about the suitability of investing in the Fund or the ability of its index to track stock market performance. S&P makes no guarantee about the index, any data included in it and the suitability of the indexes or their data for any purpose. "Standard and Poor's," "S&P 500" are trademarks of the McGraw-Hill Companies, Inc.
[GRAPHIC OMITTED]
Where to find more information
You'll find more information about the Equity Fund in the following documents:
[GRAPHIC OMITTED]
Annual and semi-annual reports
The annual and semi-annual reports contain information about Fund investments and performance, the financial statements and the auditor's reports. The annual report also includes a discussion about the market conditions and investment strategies that had a significant effect on the Fund's performance during the period covered.
[GRAPHIC OMITTED]
Statement of Additional Information
The SAI contains additional information about the Fund and its policies. The SAI is legally part of this prospectus (it's incorporated by reference). A copy has been filed with the SEC.
You can obtain a free copy of these documents, request other information about the Fund and make shareholder inquiries by contacting Nations Funds:
By telephone: 1.800.765.2668
By mail:
Nations Funds
c/o Stephens Inc.
One Bank of America Plaza
33rd Floor
Charlotte, NC 28255
On the Internet: www.nations-funds.com
If you prefer, you can write the SEC's Public Reference Room and ask them to mail you copies of these documents. They'll charge you a fee for this service. You can also download them from the SEC's website or visit the Public Reference Section and copy the documents while you're there. Please call the SEC for more information.
Public Reference Section of the SEC
Washington, DC 20549-6009
1.800.SEC.0330
www.sec.gov
SEC file number:
NATIONS FUNDS [LOGO]
Nations Funds Trust, 811-09645
NF-[ ]-4/00
NATIONS FUNDS TRUST
STATEMENT OF ADDITIONAL INFORMATION
Nations Marsico 21st Century Fund
PRIMARY A, INVESTOR A, INVESTOR B AND INVESTOR C SHARES
March ___, 2000
This Statement of Additional Information ("SAI") provides supplementary information pertaining to the classes of shares representing interests in Nations Marsico 21st Century Fund. This SAI is not a prospectus, and should be read only in conjunction with the current prospectuses for the Fund related to the class of shares in which one is interested, dated March ___, 2000 (each a "prospectus"). All terms used in this SAI that are defined in the prospectuses will have the same meanings assigned in the prospectuses. Copies of the prospectuses may be obtained without charge by writing Nations Funds Trust, c/o Stephens Inc., One Bank of America Plaza, 33rd Floor, Charlotte, North Carolina 28255, or by calling Nations Funds Trust at (800) 321-7854.
TABLE OF CONTENTS
Page
----
HISTORY OF NATIONS FUNDS TRUST................................................. 1
DESCRIPTION OF THE TRUST AND THE INVESTMENTS AND RISKS
OF THE FUND ................................................................... 1
General................................................................. 1
Investment Limitations ................................................. 2
The Fund's Fundamental Policy Restrictions.............................. 2
The Fund's Non-Fundamental Policy Restrictions.......................... 2
Permissible Fund Investments............................................ 3
Asset-Backed Securities................................................. 4
Borrowings.............................................................. 4
Commercial Instruments.................................................. 4
Combined Transactions................................................... 5
Convertible Securities.................................................. 5
Corporate Debt Securities............................................... 6
Custodial Receipts...................................................... 6
Currency Swaps.......................................................... 7
Delayed Delivery Transactions........................................... 7
Dollar Roll Transactions ............................................... 7
Equity Swap Contracts .................................................. 8
Foreign Currency Transactions .......................................... 8
Futures, Options and Other Derivative Instruments.......................10
Guaranteed Investment Contracts.........................................23
Interest Rate Transactions .............................................24
Lower Rated (or High Yield) Debt Securities.............................25
Options on Currencies...................................................26
Other Investment Companies..............................................26
Participation Interests and Company Receipts............................26
Real Estate Investment Trusts...........................................26
Repurchase Agreements ..................................................27
Reverse Repurchase Agreements ..........................................27
Securities Lending......................................................27
Short Sales.............................................................27
Special Situations......................................................28
Standard & Poor's Depositary Receipts...................................28
Stripped Securities.....................................................28
U.S. and Foreign Bank Obligations.......................................29
U.S. Government Obligations.............................................29
Use of Segregated and Other Special Accounts............................30
Variable and Floating Rate Instruments .................................30
Warrants................................................................31
When-Issued Purchases and Forward Commitments .........................31
Portfolio Turnover......................................................31
Investment Risks and Considerations.....................................32
MANAGEMENT OF THE TRUST........................................................32
Nations Funds Retirement Plan...........................................36
Nations Funds Deferred Compensation Plan................................36
Shareholder and Trustee Liability.......................................37
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, OTHER SERVICE PROVIDERS, SHAREHOLDER SERVICING AND
i
|
DISTRIBUTION AGREEMENTS .......................................................37
Investment Adviser and Sub-Advisers.....................................37
Co-Administrators and Sub-Administrator.................................38
Distribution Plans and Shareholder Servicing Arrangements for
Primary A Shares....................................................39
Investor A Shares ..................................................39
Investor B Shares...................................................39
Investor C Shares...................................................40
Information Applicable to Investor A, Investor B, Investor C Plans..41
Expenses............................................................41
Transfer Agents and Custodians..........................................42
Distributor.............................................................43
Independent Accountants and Reports.....................................44
Counsel.................................................................44
FUND TRANSACTIONS AND BROKERAGE................................................44
General Brokerage Policy................................................44
Section 28(e) Standards.................................................46
DESCRIPTION OF SHARES..........................................................47
Description of Shares of the Trust......................................47
Net Asset Value Determination...........................................48
ADDITIONAL INFORMATION CONCERNING TAXES........................................48
General.................................................................49
Excise Tax .............................................................49
Foreign Taxes ..........................................................49
Capital Gain Distributions..............................................49
Disposition of Fund Shares..............................................49
Federal Income Tax Rates................................................50
Corporate Shareholders..................................................50
Foreign Shareholders....................................................50
Backup Withholding......................................................50
Other Matters...........................................................50
ADDITIONAL INFORMATION ON PERFORMANCE..........................................51
Yield Calculations......................................................53
Total Return Calculations...............................................54
MISCELLANEOUS .................................................................55
Certain Significant Shareholders........................................55
SCHEDULE A - Description of Ratings...........................................A-1
|
HISTORY OF NATIONS FUNDS TRUST
Nations Funds Trust (the "Trust") is an open-end registered investment company in the Nations Funds family of mutual funds (the "Nations Funds Family"), which in addition to the Trust, consists of Nations Fund Trust, Nations Fund, Inc., Nations Reserves, Nations LifeGoal Funds, Inc., Nations Annuity Trust and Nations Master Investment Trust. The Nations Funds Family currently has more than 70 distinct investment portfolios and total assets in excess of $70 billion.
The Trust was organized as a Delaware business trust on October 22, 1999. It has a fiscal year end of March 31st.
DESCRIPTION OF THE TRUST AND
THE INVESTMENTS AND RISKS OF THE FUND
GENERAL.
The Trust currently consists of four different investment portfolios:
Nations High Yield Bond Fund, Nations Kansas Municipal Income Fund, Nations
MidCap Index Fund and Nations Marsico 21st Century Fund. This SAI pertains to
the:
o Primary A, Investor A, Investor B and Investor C Shares of Nations Marsico 21st Century Fund (the "Fund").
Each share of the Trust is without par value, represents an equal proportionate interest in the related fund with other shares of the same class, and is entitled to such dividends and distributions out of the income earned on the assets belonging to such fund as are declared in the discretion of the Trust's Board of Trustees. The Trust's Declaration of Trust authorizes the Board of Trustees to classify or reclassify any class of shares into one or more series of shares.
Shareholders are entitled to one vote for each full share held and a proportionate fractional vote for each fractional share held. Shareholders of each series of the Trust will vote in the aggregate and not by fund, and shareholders of each series will vote in the aggregate and not by class except as otherwise expressly required by law or when the Board of Trustees determines that the matter to be voted on affects only the interests of shareholders of a particular fund or class. See the discussion on Investment Limitations and Description of Shares for examples of when the Investment Company Act of 1940 (the "1940 Act") requires voting by fund.
As of the date of the SAI set forth on the cover page, Bank of America, N.A. ("Bank of America") and its affiliates possessed or shared power to dispose or vote with respect to more than 25% of the outstanding shares of the Trust and therefore could be considered to be a controlling person of the Trust for purposes of the 1940 Act. For more detailed information concerning the percentage of each class or series of shares over which Bank of America and its affiliates possessed or shared power to dispose or vote as of a certain date, see the discussion on Certain Record Holders.
The Trust does not presently intend to hold annual meetings except as required by the 1940 Act.
Banc of America Advisors, Inc. ("BAAI") is the investment adviser to the Fund. Marsico Capital Management, LLC ("Marsico Capital") is the investment sub-adviser to the Fund. As used herein the term "Adviser" shall mean BAAI and/or Marsico Capital as the context may require.
This SAI is intended to furnish prospective investors with additional information concerning the Trust and the Fund. Some of the information required to be in this SAI is also included in the Fund's current prospectuses. Additionally, the prospectuses and this SAI omit certain information contained in the registration statement filed with the SEC. Copies of the registration statement, including items omitted from the prospectuses and this SAI, may be obtained from the SEC on its website (www.sec.gov) or by visiting the public reading room of the SEC as is discussed in the prospectuses. No investment in the Fund's shares should be made without first reading the related prospectuses.
INVESTMENT LIMITATIONS
Information concerning the Fund's investment objective is set forth in each of the prospectuses. There can be no assurance that the Fund will achieve its investment objective. The features of the Fund's principal investment strategies and the principal risks associated with those investment strategies also are discussed in the prospectuses.
The fundamental and non-fundamental investment restrictions applicable to the Fund's investment programs are set forth below. The investment limitations that are matters of fundamental policy may not be changed without the affirmative vote of the Fund's shareholders. The investment limitations that are matters of non-fundamental policy may be changed without the affirmative vote of the Fund's shareholders.
In addition to the policies outlined below, the Fund is seeking or has obtained permission from the SEC to borrow money from or lend money to other funds of the Trust, and to other investment companies that permit such transactions, and for which BAAI serves as investment adviser.
The Fund's Fundamental Policy Restrictions
The Fund may not:
1. Underwrite any issue of securities within the meaning of the 1933 Act except when it might technically be deemed to be an underwriter either (a) in connection with the disposition of a portfolio security, or (b) in connection with the purchase of securities directly from the issuer thereof in accordance with its investment objective. This restriction shall not limit the Fund's ability to invest in securities issued by other registered investment companies.
2. Purchase or sell real estate, except the Fund may purchase securities of issuers which deal or invest in real estate and may purchase securities which are secured by real estate or interests in real estate.
3. Purchase or sell commodities, except that the Fund may to the extent consistent with its investment objective, invest in securities of companies that purchase or sell commodities or which invest in such programs, and purchase and sell options, forward contracts, futures contracts, and options on futures contracts. This limitation does not apply to foreign currency transactions including without limitation forward currency contracts.
4. Purchase any securities which would cause 25% or more of the value of its total assets at the time of purchase to be invested in the securities of one or more issuers conducting their principal business activities in the same industry, provided that: (a) there is no limitation with respect to obligations issued or guaranteed by the U.S. Government, any state or territory of the United States, or any of their agencies, instrumentalities or political subdivisions, and (b) notwithstanding this limitation or any other fundamental investment limitation, assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Fund.
5. Make loans, except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Fund.
6. Borrow money or issue senior securities except to the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Fund.
7. Purchase securities (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities) of any one issuer if, as a result, more than 5% of its total assets will be invested in the securities of such issuer or it would own more than 10% of the voting securities of such issuer, except that (a) up to 25% of its total assets may be invested without regard to these limitations and (b) the Fund's assets may be invested in the securities of one or more management investment companies to the extent permitted by the 1940 Act, the rules and regulations thereunder and any exemptive relief obtained by the Fund.
The Fund's Non-Fundamental Policy Restrictions
The Fund may:
1. Invest in shares of other open-end management investment companies, subject to the limitations of the 1940 Act, the rules thereunder, and any orders obtained thereunder now or in the future. Funds in a master/feeder structure generally invest in the securities of one or more open-end management investment companies pursuant to various provisions of the 1940 Act.
2. Not invest or hold more than 15% of the Fund's net assets in illiquid securities. For this purpose, illiquid securities include, among others, (a) securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale, (b) fixed time deposits that are subject to withdrawal penalties and that have maturities of more than seven days, and (c) repurchase agreements not terminable within seven days.
3. Invest in futures or options contracts regulated by the CFTC for
(i) bona fide hedging purposes within the meaning of the rules of
the CFTC and (ii) for other purposes if, as a result, no more than
5% of the Fund's net assets would be invested in initial margin and
premiums (excluding amounts "in-the-money") required to establish
the contracts.
The Fund (i) will not hedge more than 50% of its total assets by selling futures contracts, buying put options, and writing call options (so called "short positions"), (ii) will not buy futures contracts or write put options whose underlying value exceeds 25% of the Fund's total assets, and (iii) will not buy call options with a value exceeding 5% of the Fund's total assets.
4. Lend securities from its portfolio to brokers, dealers and financial institutions, in amounts not to exceed (in the aggregate) one-third of the Fund's total assets. Any such loans of portfolio securities will be fully collateralized based on values that are marked to market daily.
5. Not make investments for the purpose of exercising control of management. (Investments by the Fund in entities created under the laws of foreign countries solely to facilitate investment in securities in that country will not be deemed the making of investments for the purpose of exercising control.)
6. Not sell securities short, unless it owns or has the right to obtain securities equivalent in kind and amount to the securities sold short (short sales "against the box"), and provided that transactions in futures contracts and options are not deemed to constitute selling securities short.
For purposes of the foregoing limitations, any limitation that involves a maximum percentage shall not be considered violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition or encumbrance of securities or assets of, or borrowings on behalf of, the Fund.
PERMISSIBLE FUND INVESTMENTS
In addition to the principal investment strategies for the Fund, which are outlined in its prospectuses, the Fund also may invest in other types of securities in percentages of less than 10% of its total assets (unless otherwise indicated, E.G., the Fund may invest in money market instruments without limit during temporary defensive periods). These types of securities are listed below for the Fund and then are described in more detail after this sub-section.
In addition to the types of securities described in their Prospectuses, the Fund may invest in: preferred stock, warrants, convertible securities and debt securities; zero coupon, pay-in-kind and step coupon securities, and may invest without limit in indexed/structured securities. The Fund also may invest its assets in high-yield/high-risk securities, such as lower-grade debt securities, high-grade commercial paper, certificates of deposit, and repurchase agreements, and may invest in short-term debt securities as a means of receiving a return on idle cash.
The Fund may hold cash or cash equivalents and invest without limit in U.S. Government Obligations and short-term debt securities or money market instruments when the Adviser: (i) believes that the market conditions are not favorable for profitable investing, (ii) is unable to locate favorable investment opportunities, or (iii) determines that a temporary defensive position is advisable or necessary to meet anticipated redemption request. In other words, the Fund does not always stay fully invested in stocks and bonds. The Fund also may use options, futures, forward currency contracts and other types of derivatives for hedging purposes or for non-hedging purposes such as seeking to enhance return. The Fund also may purchase securities on a when-issued, delayed delivery or forward commitment basis.
In addition, the Fund also may invest in certain specified derivative securities including: exchange-traded options; over-the-counter options executed with primary dealers, including long calls and puts and covered calls to enhance return; and U.S. and foreign exchange-traded financial futures approved by the Commodity Futures Trading Commission ("CFTC") and options thereon for market exposure risk management. The Fund may lend its portfolio securities to qualified institutional investors and may invest in repurchase agreements, restricted, private placement and other illiquid securities. The Fund also may invest in real estate investment trust securities. The Fund may invest in securities issued by other investment companies, consistent with the Fund's investment objective and policies and repurchase agreements. The Fund also may invest in forward foreign exchange contracts, and instruments issued by trusts or certain partnerships including pass-through certificates representing participations in, or debt instruments backed by, the securities and other assets owned by such issuers.
Additional information on the particular types of securities in which the Fund may invest in is set forth below.
ASSET-BACKED SECURITIES
IN GENERAL. The Fund may purchase asset-backed securities arise through the grouping by governmental, government-related, and private organizations of loans, receivables, or other assets originated by various lenders. Asset-backed securities consist of both mortgage- and non-mortgage-backed securities. Interests in pools of these assets may differ from other forms of debt securities, which normally provide for periodic payment of interest in fixed amounts with principal paid at maturity or specified call dates. Conversely, asset-backed securities provide periodic payments which may consist of both interest and principal payments.
The life of an asset-backed security varies depending upon the rate of the prepayment of the underlying debt instruments. The rate of such prepayments will be a function of current market interest rates, and other economic and demographic factors. For example, falling interest rates generally result in an increase in the rate of prepayments of mortgage loans while rising interest rates generally decrease the rate of prepayments. An acceleration in prepayments in response to sharply falling interest rates will shorten the security's average maturity and limit the potential appreciation in the security's value relative to a conventional debt security. Consequently, asset-backed securities may not be as effective in locking in high, long-term yields. Conversely, in periods of sharply rising rates, prepayments are generally slow, increasing the security's average life and its potential for price depreciation.
BORROWINGS
The registered investment companies in the Nations Funds family participate in an uncommitted line of credit provided by The Bank of New York under a line of credit agreement (the "Agreement"). Advances under the Agreement are taken primarily for temporary or emergency purposes, including the meeting of redemption requests that otherwise might require the untimely disposition of securities. Interest on borrowings is payable at the federal funds rate plus .50% on an annualized basis. The Agreement requires, among other things, that each participating series maintain a ratio of no less than 4 to 1 net assets (not including funds borrowed pursuant to the Agreement) to the aggregate amount of indebtedness pursuant to the Agreement. Specific borrowings by the Fund under the Agreement over the last fiscal year, if any, can by found in the Fund's Annual Reports for the year ended March 31, 1999.
COMMERCIAL INSTRUMENTS
The Fund may purchase commercial instruments. Commercial instruments consist of short-term U.S. dollar-denominated obligations issued by domestic corporations or issued in the U.S. by foreign corporations and foreign commercial banks. The Prime Fund will limit purchases of commercial instruments to instruments which: (a) if rated by at least two NRSROs are rated in the highest rating category for short-term debt obligations given by such organizations, or if only rated by one such organization, are rated in the highest rating category for short-term debt obligations given by such organization; or (b) if not rated, are (i) comparable in priority and security to a class of short-term instruments of the same issuer that has such rating(s), or (ii) of comparable quality to such instruments as determined by the Board on the advice of the Adviser.
Investments by the Fund in commercial paper will consist of issues rated in a manner consistent with the Fund's investment policies and objectives. In addition, the Fund may acquire unrated commercial paper and corporate bonds that are determined by the Adviser at the time of purchase to be of comparable quality to rated instruments that may be acquired by the Fund as previously described.
Variable-rate master demand notes are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate. Variable-rate instruments acquired by the Fund will be rated at a level consistent with the Fund's investment objective and policies of high quality as determined by a major rating agency or, if not rated, will be of comparable quality as determined by the Adviser. See also the discussion of variable- and floating-rate instruments in this SAI.
Variable- and floating-rate instruments are unsecured instruments that permit the indebtedness thereunder to vary. While there may be no active secondary market with respect to a particular variable or floating rate instrument purchased by the Fund, the Fund may, from time to time as specified in the instrument, demand payment of the principal or may resell the instrument to a third party. The absence of an active secondary market, however, could make it difficult for the Fund to dispose of an instrument if the issuer defaulted on its payment obligation or during periods when the Fund is not entitled to exercise its demand rights, and the Fund could, for these or other reasons, suffer a loss. The Fund may invest in variable and floating rate instruments only when the Adviser deems the investment to involve minimal credit risk. If such instruments are not rated, the Adviser will consider the earning power, cash flows, and other liquidity ratios of the issuers of such instruments and will continuously monitor their financial status to meet payment on demand. In determining average weighted portfolio maturity, an instrument will be deemed to have a maturity equal to the longer of the period remaining to the next interest rate adjustment or the demand notice period specified in the instrument.
The Fund also may purchase short-term participation interests in loans extended by banks to companies, provided that both such banks and such companies meet the quality standards set forth above. In purchasing a loan participation or assignment, the Fund acquires some or all of the interest of a bank or other lending institution in a loan to a corporate borrower. Many such loans are secured and most impose restrictive covenants which must be met by the borrower and which are generally more stringent than the covenants available in publicly traded debt securities. However, interests in some loans may not be secured, and the Fund will be exposed to a risk of loss if the borrower defaults. Loan participations also may be purchased by the Fund when the borrowing company is already in default. In purchasing a loan participation, the Fund may have less protection under the federal securities laws than it has in purchasing traditional types of securities. The Fund's ability to assert its rights against the borrower will also depend on the particular terms of the loan agreement among the parties.
COMBINED TRANSACTIONS
The Fund may enter into multiple transactions, including multiple options transactions, multiple futures transactions, multiple forward foreign currency exchange contracts and any combination of futures, options and forward foreign currency exchange contracts ("component" transactions), instead of a single transaction, as part of a single hedging strategy when, in the opinion of the Adviser, it is in the best interest of the Fund to do so and where underlying hedging strategies are permitted by the Fund's investment policies. A combined transaction, while part of a single hedging strategy, may contain elements of risk that are present in each of its component transactions.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities, such as bonds, notes, debentures, preferred stocks and other securities that may be converted into common stock. All convertible securities purchased by the Fund will be rated in the top two categories by an NRSRO or, if unrated, determined by the Adviser to be of comparable quality. Investments in convertible securities can provide income through interest and dividend payments, as well as, an opportunity for capital appreciation by virtue of their conversion or exchange features.
The convertible securities in which the Fund may invest include fixed-income and zero coupon debt securities, and preferred stock that may be converted or exchanged at a stated or determinable exchange ratio into underlying shares of common stock. The exchange ratio for any particular convertible security may be adjusted from time to time due to stock splits, dividends, spin-offs, other corporate distributions or scheduled changes in the exchange ratio. Convertible debt securities and convertible preferred stocks, until converted, have general characteristics similar to both debt and equity securities. Although to a lesser extent than with debt securities, generally, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion exchange feature, the market value of convertible securities typically changes as the market value of the underlying common stock changes, and, therefore, also tends to follow movements in the general market for equity securities. A unique feature of convertible securities is that as the market price of the underlying common stock declines, convertible securities tend to trade increasingly on a yield basis, and so may not experience market value declines to the same extent as the underlying common stock. When the market price of the underlying common stock increases, the price of a convertible security tends to rise as a reflection of the value of the underlying common stock, although typically not as much as the price of the underlying common stock. While no securities investments are without risk, investments in convertible securities generally entail less risk than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which provide for a stream of income or, in the case of zero coupon securities, accretion of income with generally higher yields than common stocks. Of course, like all debt securities, there can be no assurance of income or principal payments because the issuers of the convertible securities may default on their obligations. Convertible securities generally offer lower yields than non-convertible securities of similar quality because of their conversion exchange features. Convertible securities generally are subordinated to other similar debt securities but not to non-convertible securities of the same issuer. Convertible bonds, as corporate debt obligations, are senior in right of payment to all equity securities, and convertible preferred stock is senior to common stock, of the same issuer. However, convertible bonds and convertible preferred stock typically have lower coupon rates than similar non-convertible securities. Convertible securities may be issued as fixed income obligations that pay current income or as zero coupon notes and bonds, including Liquid Yield Option Notes ("LYONs"). Zero coupon securities pay no cash income and are sold at substantial discounts from their value at maturity. When held to maturity, their entire income, which consists of accretion of discount, comes from the difference between the issue price and their value at maturity. Zero coupon convertible securities offer the opportunity for capital appreciation because increases (or decreases) in the market value of such securities closely follow the movements in the market value of the underlying common stock. Zero coupon convertible securities generally are expected to be less volatile than the underlying common stocks because they usually are issued with short maturities (15 years or less) and are issued with options and/or redemption features exercisable by the holder of the obligation entitling the holder to redeem the obligation and receive a defined cash payment.
CORPORATE DEBT SECURITIES
The Fund may invest in corporate debt securities of domestic issuers of all types and maturities, such as bonds, debentures, notes and commercial paper. Corporate debt securities may involve equity features, such as conversion or exchange rights or warrants for the acquisition of stock of the same or a different issuer, participation based on revenue, sales or profit, or the purchase of common stock or warrants in a unit transaction (where corporate debt obligations and common stock are offered as a unit). The Fund may also invest in corporate debt securities of foreign issuers.
The corporate debt securities in which the Fund will invest may be rated investment grade by at least one NRSRO (E.G., BBB or above by S&P or Baa or above by Moody's), or below investment grade (e.g. below BBB by S&P or below Baa by Moody's). A description of these ratings is attached as Schedule A to this Statement of Additional Information.
CUSTODIAL RECEIPTS
The Fund may also acquire custodial receipts that evidence ownership of future interest payments, principal payments or both on certain U.S. Government notes or bonds. Such notes and bonds are held in custody by a bank on behalf of the owners. These custodial receipts are known by various names, including "Treasury Receipts," "Treasury Investors Growth Receipts" and "Certificates of Accrual on Treasury Securities." Although custodial receipts are not considered U.S. Government securities, they are indirectly issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities. Custodial receipts will be treated as illiquid securities.
CURRENCY SWAPS
The Fund also may enter into currency swaps for hedging purposes and to seek to increase total return. In as much as swaps are entered into for good faith hedging purposes or are offset by a segregated account as described below, the Fund and the Adviser believe that swaps do not constitute senior securities as defined in the 1940 Act and, accordingly, will not treat them as being subject to the Fund's borrowing restrictions. The net amount of the excess, if any, of the Fund's obligations over its entitlement with respect to each currency swap will be accrued on a daily basis and an amount of cash or liquid high grade debt securities (I.E., securities rated in one of the top three ratings categories by an NRSRO, or, if unrated, deemed by the Adviser to be of comparable credit quality) having an aggregate net asset value at least equal to such accrued excess will be maintained in a segregated account by the Fund's custodian. The Fund will not enter into any currency swap unless the credit quality of the unsecured senior debt or the claims-paying ability of the other party thereto is considered to be investment grade by the Adviser.
DELAYED DELIVERY TRANSACTIONS
In a delayed delivery transaction, the Fund relies on the other party to complete the transaction. If the transaction is not completed, the Fund may miss a price or yield considered to be advantageous. In delayed delivery transactions, delivery of the securities occurs beyond normal settlement periods, but the Fund would not pay for such securities or start earning interest on them until they are delivered. However, when the Fund purchases securities on such a delayed delivery basis, it immediately assumes the risk of ownership, including the risk of price fluctuation. Failure by a counterparty to deliver a security purchased on a delayed delivery basis may result in a loss or missed opportunity to make an alternative investment. Depending upon market conditions, the Fund's delayed delivery purchase commitments could cause its net asset value to be more volatile, because such securities may increase the amount by which the Fund's total assets, including the value of when-issued and delayed delivery securities held by the Fund, exceed its net assets.
DOLLAR ROLL TRANSACTIONS
The Fund may enter into "dollar roll" transactions, which consist of the sale by the Fund to a bank or broker/dealer (the "counterparty") of GNMA certificates or other mortgage-backed securities together with a commitment to purchase from the counterparty similar, but not identical, securities at a future date, at the same price. The counterparty receives all principal and interest payments, including prepayments, made on the security while it is the holder. The Fund receives a fee from the counterparty as consideration for entering into the commitment to purchase. Dollar rolls may be renewed over a period of several months with a different repurchase price and a cash settlement made at each renewal without physical delivery of securities. Moreover, the transaction may be preceded by a firm commitment agreement pursuant to which the Fund agrees to buy a security on a future date. If the broker/dealer to whom the Fund sells the security becomes insolvent, the Fund's right to purchase or repurchase the security may be restricted; the value of the security may change adversely over the term of the dollar roll; the security that the Fund is required to repurchase may be worth less than the security that the Fund originally held, and the return earned by the Fund with the proceeds of a dollar roll may not exceed transaction costs.
The entry into dollar rolls involves potential risks of loss that are different from those related to the securities underlying the transactions. For example, if the counterparty becomes insolvent, the Fund's right to purchase from the counterparty might be restricted. Additionally, the value of such securities may change adversely before the Fund is able to purchase them. Similarly, the Fund may be required to purchase securities in connection with a dollar roll at a higher price than may otherwise be available on the open market. Since, as noted above, the counterparty is required to deliver a similar, but not identical security to the Fund, the security that the Fund is required to buy under the dollar roll may be worth less than an identical security. Finally, there can be no assurance that the Fund's use of the cash that it receives from a dollar roll will provide a return that exceeds borrowing costs.
EQUITY SWAP CONTRACTS
The Fund may from time to time enter into equity swap contracts. The counterparty to an equity swap contract will typically be a bank, investment banking firm or broker/dealer. For example, the counterparty will generally agree to pay the Fund the amount, if any, by which the notional amount of the Equity Swap Contract would have increased in value had it been invested in the stocks comprising the S&P 500 Index in proportion to the composition of the Index, plus the dividends that would have been received on those stocks. The Fund will agree to pay to the counterparty a floating rate of interest (typically the London Inter Bank Offered Rate) on the notional amount of the Equity Swap Contract plus the amount, if any, by which that notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to the Fund on any Equity Swap Contract should be the gain or loss on the notional amount plus dividends on the stocks comprising the S&P 500 Index less the interest paid by the Fund on the notional amount. The Fund will only enter into Equity Swap Contracts on a net basis, I.E., the two parties' obligations are netted out, with the Fund paying or receiving, as the case may be, only the net amount of any payments. Payments under the Equity Swap Contracts may be made at the conclusion of the contract or periodically during its term.
If there is a default by the counterparty to an Equity Swap Contract, the Fund will be limited to contractual remedies pursuant to the agreements related to the transaction. There is no assurance that Equity Swap Contract counterparties will be able to meet their obligations pursuant to Equity Swap Contracts or that, in the event of default, the Fund will succeed in pursuing contractual remedies. The Fund thus assumes the risk that it may be delayed in or prevented from obtaining payments owed to it pursuant to Equity Swap Contracts. The Fund will closely monitor the credit of Equity Swap Contract counterparties in order to minimize this risk.
The Fund may from time to time enter into the opposite side of Equity Swap Contracts (I.E., where the Fund is obligated to pay the increase (net of interest) or receive the decrease (plus interest) on the contract to reduce the amount of the Fund's equity market exposure consistent with the Fund's objective. These positions are sometimes referred to as Reverse Equity Swap Contracts.
Equity Swap Contracts will not be used to leverage the Fund. The Fund will not enter into any Equity Swap Contract or Reverse Equity Swap Contract unless, at the time of entering into such transaction, the unsecured senior debt of the counterparty is rated at least A by Moody's or S&P. Since the SEC considers Equity Swap Contracts and Reverse Equity Swap Contracts to be illiquid securities, the Fund will not invest in Equity Swap Contracts or Reverse Equity Swap Contracts if the total value of such investments together with that of all other illiquid securities which the Fund owns would exceed any limitation imposed by the SEC Staff.
The Adviser does not believe that the Fund's obligations under Equity Swap Contracts or Reverse Equity Swap Contracts are senior securities and, accordingly, the Fund will not treat them as being subject to its borrowing restrictions. However, the net amount of the excess, if any, of the Fund's obligations over its respective entitlements with respect to each Equity Swap Contract and each Reverse Equity Swap Contract will be accrued on a daily basis and an amount of cash, U.S. Government securities or other liquid high quality debt securities having an aggregate market value at least equal to the accrued excess will be maintained in a segregated account by the Fund's custodian.
FOREIGN CURRENCY TRANSACTIONS
The Fund may invest in foreign currency transactions. Foreign securities involve currency risks. The U.S. dollar value of a foreign security tends to decrease when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and tends to increase when the value of the U.S. dollar falls against such currency. The Fund may purchase or sell forward foreign currency exchange contracts ("forward contracts") to attempt to minimize the risk to the Fund from adverse changes in the relationship between the U.S. dollar and foreign currencies. The Fund may also purchase and sell foreign currency futures contracts and related options (see "Purchase and Sale of Currency Futures Contracts and Related Options"). A forward contract is an obligation to purchase or sell a specific currency for an agreed price at a future date that is individually negotiated and privately traded by currency traders and their customers.
Forward foreign currency exchange contracts establish an exchange rate at a future date. These contracts are transferable in the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. A forward foreign currency exchange contract generally has no deposit requirement, and is traded at a net price without commission. The Fund will direct its custodian to segregate high grade liquid assets in an amount at least equal to its obligations under each forward foreign currency exchange contract. Neither spot transactions nor forward foreign currency exchange contracts eliminate fluctuations in the prices of the Fund's portfolio securities or in foreign exchange rates, or prevent loss if the prices of these securities should decline.
The Fund may enter into a forward contract, for example, when it enters into a contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of the security (a "transaction hedge"). In addition, when the Adviser believes that a foreign currency may suffer a substantial decline against the U.S. dollar, it may enter into a forward sale contract to sell an amount of that foreign currency approximating the value of some or all of the Fund's securities denominated in such foreign currency, or when the Adviser believes that the U.S. dollar may suffer a substantial decline against the foreign currency, it may enter into a forward purchase contract to buy that foreign currency for a fixed dollar amount (a "position hedge").
The Fund may, however, enter into a forward contract to sell a different foreign currency for a fixed U.S. dollar amount where the Adviser believes that the U.S. dollar value of the currency to be sold pursuant to the forward contract will fall whenever there is a decline in the U.S. dollar value of the currency in which the fund securities are denominated (a "cross-hedge").
Foreign currency hedging transactions are an attempt to protect the Fund against changes in foreign currency exchange rates between the trade and settlement dates of specific securities transactions or changes in foreign currency exchange rates that would adversely affect a portfolio position or an anticipated portfolio position. Although these transactions tend to minimize the risk of loss due to a decline in the value of the hedged currency, at the same time they tend to limit any potential gain that might be realized should the value of the hedged currency increase. The precise matching of the forward contract amount and the value of the securities involved will not generally be possible because the future value of these securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date the forward contract is entered into and date it matures.
The Fund's custodian will segregate cash, U.S. Government securities or other high-quality debt securities having a value equal to the aggregate amount of the Fund's commitments under forward contracts entered into with respect to position hedges and cross-hedges. If the value of the segregated securities declines, additional cash or securities will be segregated on a daily basis so that the value of the segregated securities will equal the amount of the Fund's commitments with respect to such contracts. As an alternative to segregating all or part of such securities, the Fund may purchase a call option permitting the Fund to purchase the amount of foreign currency being hedged by a forward sale contract at a price no higher than the forward contract price or the Fund may purchase a put option permitting the Fund to sell the amount of foreign currency subject to a forward purchase contract at a price as high or higher than the forward contract price.
The Fund is dollar-denominated and therefore consideration is given to hedging part or all of the portfolio back to U.S. dollars from international currencies. All decisions to hedge are based upon an analysis of the relative value of the U.S. dollar on an international purchasing power parity basis (purchasing power parity is a method for determining the relative purchasing power of different currencies by comparing the amount of each currency required to purchase a typical bundle of goods and services to domestic markets) and an estimation of short-term interest rate differentials (which affect both the direction of currency movements and also the cost of hedging).
For more information about the risks associated with foreign investments see "Investment Risks."
FUTURES, OPTIONS AND OTHER DERIVATIVE INSTRUMENTS
FUTURES CONTRACTS IN GENERAL. A futures contract is an agreement between two parties for the future delivery of fixed income securities or equity securities or for the payment or acceptance of a cash settlement in the case of futures contracts on an index of fixed income or equity securities. A "sale" of a futures contract means the contractual obligation to deliver the securities at a specified price on a specified date, or to make the cash settlement called for by the contract. Futures contracts have been designed by exchanges which have been designated "contract markets" by the CFTC and must be executed through a brokerage firm, known as a futures commission merchant, which is a member of the relevant contract market. Futures contracts trade on these markets, and the exchanges, through their clearing organizations, guarantee that the contracts will be performed as between the clearing members of the exchange. Presently, futures contracts are based on such debt securities as long-term U.S. Treasury Bonds, Treasury Notes, GNMA modified pass-through mortgage-backed securities, three-month U.S. Treasury Bills, bank certificates of deposit, and on indices of municipal, corporate and government bonds.
While futures contracts based on securities do provide for the delivery and acceptance of securities, such deliveries and acceptances are seldom made. Generally, a futures contract is terminated by entering into an offsetting transaction. The Fund will incur brokerage fees when it purchases and sells futures contracts. At the time such a purchase or sale is made, the Fund must provide cash or money market securities as a deposit known as "margin." The initial deposit required will vary, but may be as low as 2% or less of a contract's face value. Daily thereafter, the futures contract is valued through a process known as "marking to market," and the Fund that engages in futures transactions may receive or be required to pay "variation margin" as the futures contract becomes more or less valuable. At the time of delivery of securities pursuant to a futures contract based on securities, adjustments are made to recognize differences in value arising from the delivery of securities with a different interest rate than the specific security that provides the standard for the contract. In some (but not many) cases, securities called for by a futures contract may not have been issued when the contract was written.
Futures contracts on indices of securities are settled through the making and acceptance of cash settlements based on changes in value of the underlying rate or index between the time the contract is entered into and the time it is liquidated.
FUTURES CONTRACTS ON FIXED INCOME SECURITIES AND RELATED INDICES. As noted in its respective prospectuses, the Fund may enter into transactions in futures contracts for the purpose of hedging a relevant portion of their portfolios. The Fund may enter into transactions in futures contracts that are based on U.S. Government obligations, including any index of government obligations that may be available for trading. Such transactions will be entered into where movements in the value of the securities or index underlying a futures contract can be expected to correlate closely with movements in the value of securities held in the Fund. For example, the Fund may sell futures contracts in anticipation of a general rise in the level of interest rates, which would result in a decline in the value of its fixed income securities. If the expected rise in interest rates occurs, the Fund may realize gains on its futures position, which should offset all or part of the decline in value of fixed income fund securities. The Fund could protect against such decline by selling fixed income securities, but such a strategy would involve higher transaction costs than the sale of futures contracts and, if interest rates again declined, the Fund would be unable to take advantage of the resulting market advance without purchases of additional securities.
The purpose of the purchase or sale of a futures contract on government securities and indices of government securities, in the case of the Fund, which hold or intend to acquire long-term debt securities, is to protect the Fund from fluctuations in interest rates without actually buying or selling long-term debt securities. For example, if long-term bonds are held by the Fund, and interest rates were expected to increase, the Fund might enter into futures contracts for the sale of debt securities. Such a sale would have much the same effect as selling an equivalent value of the long-term bonds held by the Fund. If interest rates did increase, the value of the debt securities in the Fund would decline, but the value of the futures contracts to the Fund would increase at approximately the same rate thereby keeping the net asset value of the Fund from declining as much as it otherwise would have. When the Fund is not fully invested and a decline in interest rates is anticipated, which would increase the cost of fixed income securities that the Fund intends to acquire, it may purchase futures contracts. In the event that the projected decline in interest rates occurs, the increased cost of the securities acquired by the Fund should be offset, in whole or part, by gains on the futures contracts by entering into offsetting transactions on the contract market on which the initial purchase was effected. In a substantial majority of transactions involving futures contracts on fixed income securities, the Fund will purchase the securities upon termination of the long futures positions, but under unusual market conditions, a long futures position may be terminated without a corresponding purchase of securities.
Similarly, when it is expected that interest rates may decline, futures contracts on fixed income securities and indices of government securities may be purchased for the purpose of hedging against anticipated purchases of long-term bonds at higher prices. Since the fluctuations in the value of such futures contracts should be similar to that of long-term bonds, the Fund could take advantage of the anticipated rise in the value of long-term bonds without actually buying them until the market had stabilized. At that time, the futures contracts could be liquidated and the Fund's cash reserves could then be used to buy long-term bonds in the cash market. Similar results could be accomplished by selling bonds with long maturities and investing in bonds with short maturities when interest rates are expected to increase. However, since the futures market is more liquid than the cash market, the use of these futures contracts as an investment technique allows the Fund to act in anticipation of such an interest rate decline without having to sell its portfolio securities. To the extent the Fund enters into futures contracts for this purpose, the segregated assets maintained by the Fund will consist of cash, cash equivalents or high quality debt securities of the Fund in an amount equal to the difference between the fluctuating market value of such futures contract and the aggregate value of the initial deposit and variation margin payments made by the Fund with respect to such futures contracts.
STOCK INDEX FUTURES CONTRACTS. The Fund may sell stock index futures contracts in order to offset a decrease in market value of its securities that might otherwise result from a market decline. The Fund may do so either to hedge the value of its portfolio as a whole, or to protect against declines, occurring prior to sales of securities, in the value of securities to be sold. Conversely, the Fund may purchase stock index futures contracts in order to protect against anticipated increases in the cost of securities to be acquired.
In addition, the Fund may utilize stock index futures contracts in anticipation of changes in the composition of its portfolio. For example, in the event that the Fund expects to narrow the range of industry groups represented in its portfolio, it may, prior to making purchases of the actual securities, establish a long futures position based on a more restricted index, such as an index comprised of securities of a particular industry group. As such securities are acquired, the Fund's futures positions would be closed out. The Fund may also sell futures contracts in connection with this strategy, in order to protect against the possibility that the value of the securities to be sold as part of the restructuring of its portfolio will decline prior to the time of sale.
OPTIONS ON FUTURES CONTRACTS. An option on a futures contract gives the purchaser (the "holder") the right, but not the obligation, to purchase a position in the underlying futures contract (I.E., a purchase of such futures contract) in the case of an option to purchase (a "call" option), or a "short" position in the underlying futures contract (I.E., a sale of such futures contract) in the case of an option to sell (a "put" option), at a fixed price (the "strike price") up to a stated expiration date. The holder pays a non-refundable purchase price for the option, known as the "premium." The maximum amount of risk the purchase of the option assumes is equal to the premium plus related transaction costs, although this entire amount may be lost. Upon exercise of the option by the holder, the exchange clearing corporation establishes a corresponding long position in the case of a put option. In the event that an option is exercised, the parties will be subject to all the risks associated with the trading of futures contracts, such as payment of variation margin deposits. In addition, the writer of an option on a futures contract, unlike the holder, is subject to initial and variation margin requirements on the option position.
OPTIONS ON FUTURES CONTRACTS ON FIXED INCOME SECURITIES AND RELATED INDICES. The Fund may purchase put options on futures contracts in which the Fund is permitted to invest for the purpose of hedging a relevant portion of their portfolios against an anticipated decline in the values of portfolio securities resulting from increases in interest rates, and may purchase call options on such futures contracts as a hedge against an interest rate decline when they are not fully invested. The Fund would write options on these futures contracts primarily for the purpose of terminating existing positions.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS, OPTIONS ON STOCK INDICES AND OPTIONS ON EQUITY SECURITIES. The Fund may purchase put options on stock index futures contracts, stock indices or equity securities for the purpose of hedging the relevant portion of their portfolio securities against an anticipated market-wide decline or against declines in the values of individual portfolio securities, and they may purchase call options on such futures contracts as a hedge against a market advance when they are not fully invested. The Fund would write options on such futures contracts primarily for the purpose of terminating existing positions. In general, options on stock indices will be employed in lieu of options on stock index futures contracts only where they present an opportunity to hedge at lower cost. With respect to options on equity securities, the Fund may, under certain circumstances, purchase a combination of call options on such securities and U.S. Treasury bills. The Adviser believes that such a combination may more closely parallel movements in the value of the security underlying the call option than would the option itself.
Further, while the Fund generally would not write options on individual portfolio securities, it may do so under limited circumstances known as "targeted sales" and "targeted buys," which involve the writing of call or put options in an attempt to purchase or sell portfolio securities at specific desired prices. The Fund would receive a fee, or a "premium," for the writing of the option. For example, where the Fund seeks to sell portfolio securities at a "targeted" price, it may write a call option at that price. In the event that the market rises above the exercise price, it would receive its "targeted" price, upon the exercise of the option, as well as the premium income. Also, where it seeks to buy portfolio securities at a "targeted" price, it may write a put option at that price for which it will receive the premium income. In the event that the market declines below the exercise price, the Fund would pay its "targeted" price upon the exercise of the option. In the event that the market does not move in the direction or to the extent anticipated, however, the targeted sale or buy might not be successful and the Fund could sustain a loss on the transaction that may not be offset by the premium received. In addition, the Fund may be required to forego the benefit of an intervening increase or decline in value of the underlying security.
OPTIONS AND FUTURES STRATEGIES. The Adviser may seek to increase the current return of the Fund by writing covered call or put options. In addition, through the writing and purchase of options and the purchase and sale of U.S. and certain foreign stock index futures contracts, interest rate futures contracts, foreign currency futures contracts and related options on such futures contracts, the Adviser may at times seek to hedge against a decline in the value of securities included in the Fund or an increase in the price of securities that it plans to purchase for the Fund. Expenses and losses incurred as a result of such hedging strategies will reduce the Fund's current return. The Fund's investment in foreign stock index futures contracts and foreign interest rate futures contracts, and related options on such futures contracts, are limited to only those contracts and related options that have been approved by the CFTC for investment by U.S. investors. Additionally, with respect to the Fund's investment in foreign options, unless such options are specifically authorized for investment by order of the CFTC or meet the definition of trade options as set forth in CFTC Rule 32.4, the Fund will not make these investments.
The ability of the Fund to engage in the options and futures strategies described below will depend on the availability of liquid markets in such instruments. Markets in options and futures with respect to stock indices, foreign government securities and foreign currencies are relatively new and still developing. It is impossible to predict the amount of trading interest that may exist in various types of options or futures. Therefore, no assurance can be given that the Fund will be able to utilize these instruments effectively for the purposes stated below. Furthermore, the Fund's ability to engage in options and futures transactions may be limited by tax considerations. Although the Fund will only engage in options and futures transactions for limited purposes, these activities will involve certain risks which are described below under "Risk Factors Associated with Futures and Options Transactions." The Fund will not engage in options and futures transactions for leveraging purposes.
WRITING COVERED OPTIONS ON SECURITIES. The Fund may write covered call options and covered put options on securities in which it is permitted to invest from time to time as the Adviser determines is appropriate in seeking to attain its objective. Call options written by the Fund give the holder the right to buy the underlying securities from the Fund at a stated exercise price; put options give the holder the right to sell the underlying security to the Fund at a stated price.
The Fund may write only covered options, which means that, so long as the Fund is obligated as the writer of a call option, it will own the underlying securities subject to the option (or comparable securities satisfying the cover requirements of securities exchanges). In the case of put options, the Fund will maintain in a separate account cash or short-term U.S. Government securities with a value equal to or greater than the exercise price of the underlying securities. The Fund may also write combinations of covered puts and calls on the same underlying security.
The Fund will receive a premium from writing a put or call option, which increases the Fund's return in the event the option expires unexercised or is closed out at a profit. The amount of the premium will reflect, among other things, the relationship of the market price of the underlying security to the exercise price of the option, the term of the option and the volatility of the market price of the underlying security. By writing a call option, the Fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option. By writing a put option, the Fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then current market value, resulting in a potential capital loss if the purchase price exceeds the market value plus the amount of the premium received, unless the security subsequently appreciates in value.
The Fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction in which it purchases an option having the same terms as the option written. The Fund will realize a profit or loss from such transaction if the cost of such transaction is less or more than the premium received from the writing of the option. In the case of a put option, any loss so incurred may be partially or entirely offset by the premium received from a simultaneous or subsequent sale of a different put option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by unrealized appreciation of the underlying security owned by the Fund.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. The Fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such hedge protection is provided during the life of the put option since the Fund, as holder of the put option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the Fund will reduce any profit it might otherwise have realized in its underlying security by the premium paid for the put option and by transaction costs.
The Fund may also purchase call options to hedge against an increase in prices of securities that it wants ultimately to buy. Such hedge protection is provided during the life of the call option since the Fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. By using call options in this manner, the Fund will reduce any profit it might have realized had it bought the underlying security at the time it purchased the call option by the premium paid for the call option and by transaction costs.
PURCHASE AND SALE OF OPTIONS AND FUTURES ON STOCK INDICES. The Fund may purchase and sell options on non-U.S. stock indices and stock index futures as a hedge against movements in the equity markets.
Options on stock indices are similar to options on specific securities except that, rather than the right to take or make delivery of the specific security at a specific price, an option on a stock index gives the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of that stock index is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. This amount of cash is equal to such difference between the closing price of the index and the exercise price of the option expressed in dollars multiplied by a specified multiple. The writer of the option is obligated, in return for the premium received, to make delivery of this amount. Unlike options on specific securities, all settlements of options on stock indices are in cash and gain or loss depends on general movements in the stocks included in the index rather than price movements in particular stocks. A stock index futures contract is an agreement in which one party agrees to deliver to the other an amount of cash equal to a specific amount multiplied by the difference between the value of a specific stock index at the close of the last trading day of the contract and the price at which the agreement is made. No physical delivery of securities is made.
If the Adviser expects general stock market prices to rise, the Fund might purchase a call option on a stock index or a futures contract on that index as a hedge against an increase in prices of particular equity securities it wants ultimately to buy. If in fact the stock index does rise, the price of the particular equity securities intended to be purchased may also increase, but that increase would be offset in part by the increase in the value of the Fund's index option or futures contract resulting from the increase in the index. If, on the other hand, the Adviser expects general stock market prices to decline, the Fund might purchase a put option or sell a futures contract on the index. If that index does in fact decline, the value of some or all of the equity securities in the Fund may also be expected to decline, but that decrease would be offset in part by the increase in the value of the Fund's position in such put option or futures contract.
PURCHASE AND SALE OF INTEREST RATE FUTURES. The Fund may purchase and sell interest rate futures contracts on foreign government securities including, but not limited to, debt securities of the governments and central banks of France, Germany, Denmark and Japan for the purpose of hedging fixed income and interest sensitive securities against the adverse effects of anticipated movements in interest rates.
The Fund may sell interest rate futures contracts in anticipation of an increase in the general level of interest rates. Generally, as interest rates rise, the market value of the fixed income securities held by the Fund will fall, thus reducing the net asset value of the Fund. This interest rate risk can be reduced without employing futures as a hedge by selling long-term fixed income securities and either reinvesting the proceeds in securities with shorter maturities or by holding assets in cash. This strategy, however, entails increased transaction costs to the Fund in the form of dealer spreads and brokerage commissions.
The sale of interest rate futures contracts provides an alternative means of hedging against rising interest rates. As rates increase, the value of the Fund's short position in the futures contracts will also tend to increase, thus offsetting all or a portion of the depreciation in the market value of the Fund's investments that are being hedged. While the Fund will incur commission expenses in selling and closing out futures positions (which is done by taking an opposite position which operates to terminate the position in the futures contract), commissions on futures transactions are lower than transaction costs incurred in the purchase and sale of portfolio securities.
OPTIONS ON STOCK INDEX FUTURES CONTRACTS AND INTEREST RATE FUTURES CONTRACTS. The Fund may purchase and write call and put options on non-U.S. stock index and interest rate futures contracts. The Fund may use such options on futures contracts in connection with its hedging strategies in lieu of purchasing and writing options directly on the underlying securities or stock indices or purchasing and selling the underlying futures. For example, the Fund may purchase put options or write call options on stock index futures, or interest rate futures, rather than selling futures contracts, in anticipation of a decline in general stock market prices or rise in interest rates, respectively, or purchase call options or write put options on stock index or interest rate futures, rather than purchasing such futures, to hedge against possible increases in the price of equity securities or debt securities, respectively, which the Fund intends to purchase.
PURCHASE AND SALE OF CURRENCY FUTURES CONTRACTS AND RELATED OPTIONS. In order to hedge its portfolio and to protect it against possible variations in foreign exchange rates pending the settlement of securities transactions, the Fund may buy or sell currency futures contracts and related options. If a fall in exchange rates for a particular currency is anticipated, the Fund may sell a currency futures contract or a call option thereon or purchase a put option on such futures contract as a hedge. If it is anticipated that exchange rates will rise, the Fund may purchase a currency futures contract or a call option thereon or sell (write) a put option to protect against an increase in the price of securities denominated in a particular currency the Fund intends to purchase. These futures contracts and related options thereon will be used only as a hedge against anticipated currency rate changes, and all options on currency futures written by the Fund will be covered.
A currency futures contract sale creates an obligation by the Fund, as seller, to deliver the amount of currency called for in the contract at a specified future time for a special price. A currency futures contract purchase creates an obligation by the Fund, as purchaser, to take delivery of an amount of currency at a specified future time at a specified price. Although the terms of currency futures contracts specify actual delivery or receipt, in most instances the contracts are closed out before the settlement date without the making or taking of delivery of the currency. Closing out of a currency futures contract is effected by entering into an offsetting purchase or sale transaction. Unlike a currency futures contract, which requires the parties to buy and sell currency on a set date, an option on a currency futures contract entitles its holder to decide on or before a future date whether to enter into such a contract. If the holder decides not to enter into the contract, the premium paid for the option is fixed at the point of sale.
The Fund will write (sell) only covered put and call options on currency futures. This means that the Fund will provide for its obligations upon exercise of the option by segregating sufficient cash or short-term obligations or by holding an offsetting position in the option or underlying currency future, or a combination of the foregoing. The Fund will, so long as it is obligated as the writer of a call option on currency futures, own on a contract-for-contract basis an equal long position in currency futures with the same delivery date or a call option on stock index futures with the difference, if any, between the market value of the call written and the market value of the call or long currency futures purchased maintained by the Fund in cash, Treasury bills, or other high grade short-term obligations in a segregated account with its custodian. If at the close of business on any day the market value of the call purchased by the Fund falls below 100% of the market value of the call written by the Fund, the Fund will so segregate an amount of cash, Treasury bills or other high grade short-term obligations equal in value to the difference. Alternatively, the Fund may cover the call option through segregating with the custodian an amount of the particular foreign currency equal to the amount of foreign currency per futures contract option times the number of options written by the Fund. In the case of put options on currency futures written by the Fund, the Fund will hold the aggregate exercise price in cash, Treasury bills, or other high grade short-term obligations in a segregated account with its custodian, or own put options on currency futures or short currency futures, with the difference, if any, between the market value of the put written and the market value of the puts purchased or the currency futures sold maintained by the Fund in cash, Treasury bills or other high grade short-term obligations in a segregated account with its custodian. If at the close of business on any day the market value of the put options purchased or the currency futures by the Fund falls below 100% of the market value of the put options written by the Fund, the Fund will so segregate an amount of cash, Treasury bills or other high grade short-term obligations equal in value to the difference.
If other methods of providing appropriate cover are developed, the Fund reserves the right to employ them to the extent consistent with applicable regulatory and exchange requirements. In connection with transactions in stock index options, stock index futures, interest rate futures, foreign currency futures and related options on such futures, the Fund will be required to deposit as "initial margin" an amount of cash or short-term government securities equal to from 5% to 8% of the contract amount. Thereafter, subsequent payments (referred to as "variation margin") are made to and from the broker to reflect changes in the value of the futures contract.
LIMITATIONS ON PURCHASE OF OPTIONS. The staff of the SEC has taken the position that purchased over-the-counter options and assets used to cover written over-the-counter options are illiquid and, therefore, together with other illiquid securities, cannot exceed 15% of the Fund's assets. The Adviser intends to limit the Fund's writing of over-the-counter options in accordance with the following procedure. The Fund intends to write over-the-counter options only with primary U.S. Government securities dealers recognized by the Federal Reserve Bank of New York. Also, the contracts which the Fund has in place with such primary dealers will provide that the Fund has the absolute right to repurchase an option it writes at any time at a price which represents the fair market value, as determined in good faith through negotiation between the parties, but which in no event will exceed a price determined pursuant to a formula in the contract. Although the specific formula may vary between contracts with different primary dealers, the formula will generally be based on a multiple of the premium received by the Fund for writing the option, plus the amount, if any, of the option's intrinsic value (I.E., the amount that the option is in-the-money). The formula also may include a factor to account for the difference between the price of the security and the strike price of the option if the option is written out-of-the-money. The Fund will treat all or a part of the formula price as illiquid for purposes of any limitation on illiquid securities imposed by the SEC staff.
Risk Factors Associated with Futures and Options Transactions
The effective use of options and futures strategies depends on, among other things, the Fund's ability to terminate options and futures positions at times when its the Adviser deems it desirable to do so. Although the Fund will not enter into an option or futures position unless the Adviser believes that a liquid secondary market exists for such option or future, there is no assurance that the Fund will be able to effect closing transactions at any particular time or at an acceptable price. The Fund generally expects that its options and futures transactions will be conducted on recognized U.S. and foreign securities and commodity exchanges. In certain instances, however, the Fund may purchase and sell options in the over-the-counter market. The Fund's ability to terminate option positions established in the over-the-counter market may be more limited than in the case of exchange-traded options and may also involve the risk that securities dealers participating in such transactions would fail to meet their obligations to the Fund.
Options and futures markets can be highly volatile and transactions of this type carry a high risk of loss. Moreover, a relatively small adverse market movement with respect to these types of transactions may result not only in loss of the original investment but also in unquantifiable further loss exceeding any margin deposited.
The use of options and futures involves the risk of imperfect correlation between movements in options and futures prices and movements in the price of securities which are the subject of the hedge. Such correlation, particularly with respect to options on stock indices and stock index futures, is imperfect, and such risk increases as the composition of the Fund diverges from the composition of the relevant index. The successful use of these strategies also depends on the ability of the Adviser to correctly forecast interest rate movements, currency rate movements and general stock market price movements.
In addition to certain risk factors described above, the following sets forth certain information regarding the potential risks associated with the Fund's futures and options transactions.
RISK OF IMPERFECT CORRELATION. The Fund's ability effectively to hedge all or a portion of its portfolio through transactions in futures, options on futures or options on stock indices depends on the degree to which movements in the value of the securities or index underlying such hedging instrument correlate with movements in the value of the relevant portion of the Fund's securities. If the values of the securities being hedged do not move in the same amount or direction as the underlying security or index, the hedging strategy for the Fund might not be successful and the Fund could sustain losses on its hedging transactions which would not be offset by gains on its portfolio. It is also possible that there may be a negative correlation between the security or index underlying a futures or option contract and the portfolio securities being hedged, which could result in losses both on the hedging transaction and the fund securities. In such instances, the Fund's overall return could be less than if the hedging transactions had not been undertaken. Stock index futures or options based on a narrower index of securities may present greater risk than options or futures based on a broad market index, as a narrower index is more susceptible to rapid and extreme fluctuations resulting from changes in the value of a small number of securities. The Fund would, however, effect transactions in such futures or options only for hedging purposes.
The trading of futures and options on indices involves the additional risk of imperfect correlation between movements in the futures or option price and the value of the underlying index. The anticipated spread between the prices may be distorted due to differences in the nature of the markets, such as differences in margin requirements, the liquidity of such markets and the participation of speculators in the futures and options market. The purchase of an option on a futures contract also involves the risk that changes in the value of underlying futures contract will not be fully reflected in the value of the option purchased. The risk of imperfect correlation, however, generally tends to diminish as the maturity date of the futures contract or termination date of the option approaches. The risk incurred in purchasing an option on a futures contract is limited to the amount of the premium plus related transaction costs, although it may be necessary under certain circumstances to exercise the option and enter into the underlying futures contract in order to realize a profit. Under certain extreme market conditions, it is possible that the Fund will not be able to establish hedging positions, or that any hedging strategy adopted will be insufficient to completely protect the Fund.
The Fund will purchase or sell futures contracts or options only if, in the Adviser's judgment, there is expected to be a sufficient degree of correlation between movements in the value of such instruments and changes in the value of the relevant portion of the Fund's portfolio for the hedge to be effective. There can be no assurance that the Adviser's judgment will be accurate.
POTENTIAL LACK OF A LIQUID SECONDARY MARKET. The ordinary spreads between prices in the cash and futures markets, due to differences in the natures of those markets, are subject to distortions. First, all participants in the futures market are subject to initial deposit and variation margin requirements. This could require the Fund to post additional cash or cash equivalents as the value of the position fluctuates. Further, rather than meeting additional variation margin requirements, investors may close futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, the liquidity of the futures or options market may be lacking. Prior to exercise or expiration, a futures or option position may be terminated only by entering into a closing purchase or sale transaction, which requires a secondary market on the exchange on which the position was originally established. While the Fund will establish a futures or option position only if there appears to be a liquid secondary market therefor, there can be no assurance that such a market will exist for any particular futures or option contract at any specific time. In such event, it may not be possible to close out a position held by the Fund, which could require the Fund to purchase or sell the instrument underlying the position, make or receive a cash settlement, or meet ongoing variation margin requirements. The inability to close out futures or option positions also could have an adverse impact on the Fund's ability effectively to hedge its securities, or the relevant portion thereof.
The liquidity of a secondary market in a futures contract or an option on a futures contract may be adversely affected by "daily price fluctuation limits" established by the exchanges, which limit the amount of fluctuation in the price of a contract during a single trading day and prohibit trading beyond such limits once they have been reached. The trading of futures and options contracts also is subject to the risk of trading halts, suspensions, exchange or clearing house equipment failures, government intervention, insolvency of the brokerage firm or clearing house or other disruptions of normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess variation margin payments.
RISK OF PREDICTING INTEREST RATE MOVEMENTS. Investments in futures contracts on fixed income securities and related indices involve the risk that if the Adviser's investment judgment concerning the general direction of interest rates is incorrect, the Fund's overall performance may be poorer than if it had not entered into any such contract. For example, if the Fund has been hedged against the possibility of an increase in interest rates which would adversely affect the price of bonds held in its portfolio and interest rates decrease instead, the Fund will lose part or all of the benefit of the increased value of its bonds which have been hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash, it may have to sell bonds from its portfolio to meet daily variation margin requirements, possibly at a time when it may be disadvantageous to do so. Such sale of bonds may be, but will not necessarily be, at increased prices which reflect the rising market.
TRADING AND POSITION LIMITS. Each contract market on which futures and option contracts are traded has established a number of limitations governing the maximum number of positions which may be held by a trader, whether acting alone or in concert with others. The Adviser does not believe that these trading and position limits will have an adverse impact on the hedging strategies regarding the Fund's investments.
REGULATIONS ON THE USE OF FUTURES AND OPTIONS CONTRACTS. Regulations of the CFTC require that the Fund enter into transactions in futures contracts and options thereon for hedging purposes only, in order to assure that they are not deemed to be a "commodity pool" under such regulations. In particular, CFTC regulations require that all short futures positions be entered into for the purpose of hedging the value of investment securities held by the Fund, and that all long futures positions either constitute bona fide hedging transactions, as defined in such regulations, or have a total value not in excess of an amount determined by reference to certain cash and securities positions maintained for the Fund, and accrued profits on such positions. In addition, the Fund may not purchase or sell such instruments if, immediately thereafter, the sum of the amount of initial margin deposits on its existing futures positions and premiums paid for options on futures contracts would exceed 5% of the market value of the Fund's total assets.
When the Fund purchases a futures contract, an amount of cash or cash equivalents or high quality debt securities will be segregated with the Fund's custodian so that the amount so segregated, plus the initial deposit and variation margin held in the account of its broker, will at all times equal the value of the futures contract, thereby insuring that the use of such futures is unleveraged.
The Fund's ability to engage in the hedging transactions described herein may be limited by the current federal income tax requirement that the Fund derive less than 30% of its gross income from the sale or other disposition of stock or securities held for less than three months. The Fund also may further limit their ability to engage in such transactions in response to the policies and concerns of various Federal and state regulatory agencies. Such policies may be changed by vote of the Board of Trustees.
Additional Information on Futures and Options
As stated in the prospectus, the Fund may enter into futures contracts and options for hedging purposes. Such transactions are described in this Schedule. During the current fiscal year, the Fund intends to limit its transactions in futures contracts and options so that not more than 5% of the Fund's net assets are at risk. Furthermore, in no event would any Fund purchase or sell futures contracts, or related options thereon, for hedging purposes if, immediately thereafter, the aggregate initial margin that is required to be posted by the Fund under the rules of the exchange on which the futures contract (or futures option) is traded, plus any premiums paid by the Fund on its open futures options positions, exceeds 5% of the Fund's total assets, after taking into account any unrealized profits and unrealized losses on the Fund's open contracts and excluding the amount that a futures option is "in-the-money" at the time of purchase. (An option to buy a futures contract is "in-the-money" if the value of the contract that is subject to the option exceeds the exercise price; an option to sell a futures contract is "in-the-money" if the exercise Price exceeds the value of the contract that is subject of the option.)
I. Interest Rate Futures Contracts.
Use of Interest Rate Futures Contracts. Bond prices are established in both the cash market and the futures market. In the cash market, bonds are purchased and sold with payment for the full purchase price of the bond being made in cash, generally within five business days after the trade. In the futures market, only a contract is made to purchase or sell a bond in the future for a set price on a certain date. Historically, the prices for bonds established in the futures market have tended to move generally in the aggregate in concert with the cash market prices and have maintained fairly predictable relationships. Accordingly, the Fund may use interest rate futures as a defense, or hedge, against anticipated interest rate changes and not for speculation. As described below, this would include the use of futures contract sales to protect against expected increases in interest rates and futures contract purchases to offset the impact of interest rate declines.
The Fund presently could accomplish a similar result to that which it hopes to achieve through the use of futures contracts by selling bonds with long maturities and investing in bonds with short maturities when interest rates are expected to increase, or conversely, selling short-term bonds and investing in long-term bonds when interest rates are expected to decline. However, because of the liquidity that is often available in the futures market the protection is more likely to be achieved, perhaps at a lower cost and without changing the rate of interest being earned by the Fund, through using futures contracts.
Description of Interest Rates Futures Contracts. An interest rate futures contract sale would create an obligation by the Fund, as seller, to deliver the specific type of financial instrument called for in the contract at a specific future time for a specified price. A futures contract purchase would create an obligation by the Fund, as purchaser, to take delivery of the specific type of financial instrument at a specific future time at a specific price. The specific securities delivered or taken, respectively, at settlement date, would not be determined until at or near that date. The determination would be in accordance with the rules of the exchange on which the futures contract sale or purchase was made.
Although interest rate futures contracts by their terms call for actual delivery or acceptance of securities, in most cases the contracts are closed out before the settlement date without the making or taking of delivery of securities. Closing out a futures contract sale is effected by the Fund's entering into a futures contract purchase for the same aggregate amount of the specific type of financial instrument and the same delivery date. If the price in the sale exceeds the price in the offsetting purchase, the Fund is paid the difference and thus realizes a gain. If the offsetting purchase price exceeds the sale price, the Fund pays the difference and realizes a loss. Similarly, the closing out of a futures contract purchase is effected by the Fund's entering into a futures contract sale. If the offsetting sale price exceeds the purchase price, the Fund realizes a gain, and if the purchase price exceeds the offsetting sale price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment on the floors of several exchanges - principally, the Chicago Board of Trade, the Chicago Mercantile Exchange and the New York Futures Exchange. The Fund would deal only in standardized contracts on recognized changes. Each exchange guarantees performance under contract provisions through a clearing corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various financial instruments including long-term United States Treasury Bonds and Notes; GNMA modified pass-through mortgage-backed securities; three-month United States Treasury Bills; and ninety-day commercial paper. The Fund may trade in any futures contract for which there exists a public market, including, without limitation, the foregoing instruments.
Examples of Futures Contract Sale. The Fund would engage in an interest rate futures contract sale to maintain the income advantage from continued holding of a long-term bond while endeavoring to avoid part or all of the loss in market value that would otherwise accompany a decline in long-term securities prices. Assume that the market value of a certain security in the Fund tends to move in concert with the futures market prices of long-term United States Treasury bonds ("Treasury Bonds"). The Adviser wishes to fix the current market value of this portfolio security until some point in the future. Assume the portfolio security has a market value of 100, and the Adviser believes that, because of an anticipated rise in interest rates, the value will decline to 95. The Fund might enter into futures contract sales of Treasury bonds for an equivalent of 98. If the market value of the portfolio securities does indeed decline from 100 to 95, the equivalent futures market price for the Treasury bonds might also decline from 98 to 93.
In that case, the five-point loss in the market value of the portfolio security would be offset by the five-point gain realized by closing out the futures contract sale. Of course, the futures market price of Treasury bonds might well decline to more than 93 or to less than 93 because of the imperfect correlation between cash and futures prices mentioned below.
The Adviser could be wrong in its forecast of interest rates and the equivalent futures market price could rise above 98. In this case, the market value of the portfolio securities, including the portfolio security being protected, would increase. The benefit of this increase would be reduced by the loss realized on closing out the futures contract sale.
If interest rate levels did not change, the Fund in the above example might incur a loss of 2 points (which might be reduced by an offsetting transaction prior to the settlement date). In each transaction, transaction expenses would also be incurred.
Examples of Future Contract Purchase. The Fund would engage in an interest rate futures contract purchase when it is not fully invested in long-term bonds but wishes to defer for a time the purchase of long-term bonds in light of the availability of advantageous interim investments, E.G., shorter-term securities whose yields are greater than those available on long-term bonds. The Fund's basic motivation would be to maintain for a time the income advantage from investing in the short-term securities; the Fund would be endeavoring at the same time to eliminate the effect of all or part of an expected increase in market price of the long-term bonds that the Fund may purchase.
For example, assume that the market price of a long-term bond that the
Fund may purchase, currently yielding 10%, tends to move in concert with futures
market prices of Treasury bonds. The Adviser wishes to fix the current market
price (and thus 10% yield) of the long-term bond until the time (four months
away in this example) when it may purchase the bond. Assume the long-term bond
has a market price of 100, and the Adviser believes that, because of an
anticipated fall in interest rates, the price will have risen to 105 (and the
yield will have dropped to about 9-1/2%) in four months. The Fund might enter
into futures contracts purchases of Treasury bonds for an equivalent price of
98. At the same time, the Fund would assign a pool of investments in short-term
securities that are either maturing in four months or earmarked for sale in four
months, for purchase of the long-term bond at an assumed market price of 100.
Assume these short-term securities are yielding 15%. If the market price of the
long-term bond does indeed rise from 100 to 105, the equivalent futures market
price for Treasury bonds might also rise from 98 to 103. In that case, the
5-point increase in the price that the Fund pays for the long-term bond would be
offset by the 5-point gain realized by closing out the futures contract
Purchase.
The Adviser could be wrong in its forecast of interest rates; long-term interest rates might rise to above 10%; and the equivalent futures market price could fall below 98. If short-term rates at the same time fall to 10% or below, it is possible that the Fund would continue with its purchase program for long-term bonds. The market price of available long-term bonds would have decreased. The benefit of this price decrease, and thus yield increase, will be reduced by the loss realized on closing out the futures contract purchase.
If, however, short-term rates remained above available long-term rates, it is possible that the Fund would discontinue its purchase program for long-term bonds. The yield on short-term securities in the portfolio, including those originally in the pool assigned to the particular long-term bond, would remain higher than yields on long-term bonds. The benefit of this continued incremental income will be reduced by the loss realized on closing out the futures contract purchase.
In each transaction, expenses also would be incurred.
II. Index Futures Contracts.
A stock or bond index assigns relative values to the stocks or bonds included in the index, and the index fluctuates with changes in the market values of the stocks or bonds included. Some stock index futures contracts are based on broad market indices, such as the Standard & Poor's 500 or the New York Stock Exchange Composite Index. In contract, certain exchanges offer futures contracts on narrower market indices, such as the Standard & Poor's 100, the Bond Buyer Municipal Bond Index, an index composed of 40 term revenue and general obligation bonds, or indices based on an industry or market segment, such as oil and gas stocks. Futures contracts are traded on organized exchanges regulated by the Commodity Futures Trading Commission. Transactions on such exchanges are cleared through a clearing corporation, which guarantees the performance of the parties to each contract.
The Fund will sell index futures contracts in order to offset a decrease in market value of its portfolio securities that might otherwise result from a market decline. The Fund may do so either to hedge the value of its portfolio as a whole, or to protect against declines, occurring prior to sales of securities, in the value of the securities to be sold. Conversely, the Fund will purchase index futures contracts in anticipation of purchases of securities. In a substantial majority of these transactions, the Fund will purchase such securities upon termination of the long futures position, but a long futures position may be terminated without a corresponding purchase of securities.
In addition, the Fund may utilize index futures contracts in anticipation of changes in the composition of its portfolio holdings. For example, in the event that the Fund expects to narrow the range of industry groups represented in its holdings it may, prior to making purchases of the actual securities, establish a long futures position based on a more restricted index, such as an index comprised of securities of a particular industry group. The Fund also may sell futures contracts in connection with this strategy, in order to protect against the possibility that the value of the securities to be sold as part of the restructuring of the portfolio will decline prior to the time of sale.
The following are examples of transactions in stock index futures (net of commissions and premiums, if any).
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 130
Actual Cost = $65,000 Value of Futures = $65,000/Contract
Increase in Purchase Gain on Futures = $2,500
Price = $2,500
|
HEDGING A STOCK PORTFOLIO: Sell the Future Hedge
Objective: Protect Against Declining (Value of the Portfolio)
Factors
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 120
Stock with Value = $960,000 Value of Futures = $960,000
Loss in Portfolio Gain on Futures = $40,000
Value = $40 000
|
IF, HOWEVER, THE MARKET MOVED IN THE OPPOSITE DIRECTION, THAT IS, MARKET VALUE DECREASED AND THE FUND HAD ENTERED INTO AN ANTICIPATORY PURCHASE HEDGE, OR MARKET VALUE INCREASED AND THE FUND HAD HEDGED ITS STOCK PORTFOLIO, THE RESULTS OF THE FUND'S TRANSACTIONS IN STOCK INDEX FUTURES WOULD BE AS SET FORTH BELOW.
ANTICIPATORY PURCHASE HEDGE: Buy the Future
Hedge Objective: Protect Against Increasing Price
Portfolio Futures
-Day Hedge is Placed
Anticipate Buying $62,500 Buying 1 Index Futures at 125
Equity Portfolio Value of Futures = $62,500/Contract
-Day Hedge is Lifted-
Buy Equity Portfolio with Sell 1 Index Futures at 120
Actual Cost = $60,000 Value of Futures = $60,000/Contract
Decrease in Purchase Loss on Futures = $2,500/Contract
Price = $2,500
|
HEDGING A STOCK PORTFOLIO: Sell the Future
Hedge Objective: Protect Against Declining
Value of the Portfolio
Factors
Value of Stock Portfolio = $1,000,000
Value of Futures Contract = 125 x $500 = $62,500
Portfolio Beta Relative to the Index - 1.0
Portfolio Futures
-Day Hedge is Placed
Anticipate Selling $1,000,000 Sell 16 Index Futures at 125
Equity Portfolio Value of Futures = $1,000,000
-Day Hedge is Lifted-
Equity Portfolio-Own Buy 16 Index Futures at 130
Stock with Value = $1,040,000 Value of Futures = $1,040,000
Gain in Portfolio = $40,000 Loss of Futures = $40,000
Value = $40,000
|
III. Margin Payments
Unlike when the Fund purchases or sells a security, no price is paid or received by the Fund upon the purchase or sale of a futures contract. Initially, the Fund will be required to deposit with the broker or in a segregated account with the Fund's Custodian an amount of cash or cash equivalents, the value, of which may vary but is generally equal to 10% or less of the value of the contract. This amount is known as initial margin. The nature of initial margin in futures transactions is different from that of margin in security transactions in that futures contract margin does not involve the borrowing of funds by the customer to finance the transactions. Rather, the initial margin is in the nature of a performance bond or good faith deposit on the contract which is returned to the Fund upon termination of the futures contract assuming all contractual obligations have been satisfied. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the price of the underlying security or index fluctuates making the long and short positions in the futures contract more or less valuable, a process known as marking to the market. For example, when the Fund has purchased a futures contract and the price of the contract has risen in response to a rise in the underlying instruments, that position will have increased in value and the Fund will be entitled to receive from the broker a variation margin payment equal to that increase in value. Conversely, where the Fund has purchased a futures contract and the price of the futures contract has declined in response to a decrease in the underlying instruments, the position would be less valuable, the Fund would be required to make a variation margin payment to the broker. At any time prior to expiration of the futures contract, the Adviser may elect to close the position by taking an opposite position, subject to the availability of a secondary market, which will operate to terminate the Fund's position in the futures contract. A final determination of variation margin is then made, additional cash is required to be paid by or released to the Fund, and the Fund realizes a loss or gain.
IV. Risks of Transactions in Futures Contracts
There are several risks in connection with the use of futures by the Fund as a hedging device. One risk arises because of the imperfect correlation between movements in the price of the future and movements in the price of the securities which are the subject of the hedge. The price of the future may move more than or less than the price of the securities being hedged. If the price of the future moves less than the price of the securities which are the subject of the hedge, the hedge will not be fully effective but, if the price of securities being hedged has moved in an unfavorable direction, the Fund would be in a better position than if it had not hedged at Al. If the price of the securities being hedged has moved in a favorable direction, this advance will be partially offset by the loss on the future. If the price of the future moves more than the price of the hedged securities, the Fund involved will experience either a loss or gain on the future which will not be completely offset by movements in the price of the securities which are the subject of the hedge.
To compensate for the imperfect correlation of movements in the price of securities being hedged and movements in the price of futures contracts, the Fund may buy or sell futures contracts in a greater dollar amount than the dollar amount of securities being hedged if the volatility over a particular time period of the prices of such securities has been greater than the volatility over such time period of the future, or if otherwise deemed to be appropriate by the Adviser. Conversely, the Fund may buy or sell fewer futures contracts if the volatility over a particular time period of the prices of the securities being hedged is less than the volatility over such time period of the futures contract being used, or if otherwise deemed to be appropriate by the Adviser. It also is possible that, where the Fund has sold futures to hedge its portfolio against a decline in the market, the market may advance, and the value of securities held by the Fund may decline. If this occurred, the Fund would lose money on the future and also experience a decline in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the price of securities before the Fund is able to invest its cash (or cash equivalents) in securities (or options) in an orderly fashion, it is possible that the market may decline instead; if the Fund then concludes not to invest in securities or options at that time because of concern as to possible further market decline or for other reasons, the Fund will realize a loss on the futures contract that is not offset by a reduction in the price of securities purchased.
In instances involving the purchase of futures contracts by the Fund, an amount of cash and cash equivalents, equal to the market value of the futures contracts, will be deposited in a segregated account with the Fund's Custodian and/or in a margin account with a broker to collateralize the position and thereby insure that the use of such futures is unleveraged.
In addition to the possibility that there may be an imperfect correlation, or no correlation at all, between movements in the futures and the securities being hedged, the price of futures may not correlate perfectly with movement in the cash market due to certain market distortions. Rather than meeting additional margin deposit requirements, investors may close futures contracts through off-setting transactions which could distort the normal relationship between the cash and futures markets. Second, with respect to financial futures contracts, the liquidity of the futures market depends on participants entering into off-setting transactions rather than making or taking delivery. To the extent participants decide to make or take delivery, liquidity in the futures market could be reduced thus producing distortions. Third, from the point of view of speculators, the deposit requirements in the futures market are less onerous than margin requirements in the securities market. Therefore, increased participation by speculators in the futures market may also cause temporary price distortions. Due to the possibility of Price distortion in the futures market, and because of the imperfect correlation between the movements in the cash market and movements in the price of futures, a correct forecast of general market trends or interest rate movements by the Adviser still may not result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of trade which provides a secondary market for such futures. Although the Fund intends to purchase or sell futures only on exchanges or boards of trade where there appear to be active secondary markets, there is no assurance that a liquid secondary market on any exchange or board of trade will exist for any particular contract or at any particular time. In such event, it may not be possible to close a futures investment position, and in the event of adverse price movements, the Fund would continue to be required to make daily cash payments of variation margin. However, in the event futures contracts have been used to hedge portfolio securities, such securities will not be sold until the futures contract can be terminated. In such circumstances, an increase in the price of the securities, if any, may partially or completely offset losses on the futures contract. However, as described above, there is no guarantee that the price of the securities will in fact correlate with the price movements in the futures contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market in a futures contract may be adversely affected by "daily price fluctuation limits" established by commodity exchanges which limit the amount of fluctuation in a futures contract price during a single trading day. Once the daily limit has been reached in the contract, no trades may be entered into at a price beyond the limit, thus preventing the liquidation of open futures positions.
Successful use of futures by the Fund also is subject to the Adviser's ability to predict correctly movements in the direction of the market. For example, if the Fund has hedged against the possibility of a decline in the market adversely affecting securities held in its portfolio and securities prices increase instead, the Fund will lose part or all of the benefit to the increased value of its securities which it has hedged because it will have offsetting losses in its futures positions. In addition, in such situations, if the Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements. Such sales of securities may be, but will not necessarily be, at increased prices which reflect the rising market. The Fund may have to sell securities at a time when it may be disadvantageous to do so.
V. Options on Futures Contracts.
The Fund may purchase options on the futures contracts described above. A futures option gives the holder, in return for the premium paid, the right to buy (call) from or sell (put) to the writer of the option a futures contract at a specified price at any time during the period of the option. Upon exercise, the writer of the option is obligated to pay the difference between the cash value of the futures contract and the exercise price. Like the buyer or seller of a futures contract, the holder, or writer, of an option has the right to terminate its position prior to the scheduled expiration of the option by selling, or purchasing, an option of the same series, at which time the person entering into the closing transaction will realize a gain or loss.
Investments in futures options involve some of the same considerations that are involved in connection with investments in futures contracts (for example, the existence of a liquid secondary market). In addition, the purchase of an option also entails the risk that changes in the value of the underlying futures contract will not be fully reflected in the value of the option purchased. Depending on the pricing of the option compared to either the futures contract upon which it is based, or upon the price of the securities being hedged, an option may or may not be less risky than ownership of the futures contract or such securities. In general, the market prices of options can be expected to be more volatile than the market prices on the underlying futures contract. Compared to the purchase or sale of futures contracts, however, the purchase of call or put options on futures contracts may frequently involve less potential risk to the Fund because the maximum amount at risk is the premium paid for the options (plus transaction costs). Although permitted by their fundamental investment policies, the Fund does not currently intend to write future options, and will not do so in the future absent any necessary regulatory approvals.
Accounting Treatment.
Accounting for futures contracts and options will be in accordance with generally accepted accounting principles.
GUARANTEED INVESTMENT CONTRACTS
Guaranteed investment contracts, investment contracts or funding agreements (each referred to as a "GIC") are investment instruments issued by highly rated insurance companies. Pursuant to such contracts, the Fund may make cash contributions to a deposit fund of the insurance company's general or separate accounts. The insurance company then credits to the Fund guaranteed interest. The insurance company may assess periodic charges against a GIC for expense and service costs allocable to it, and the charges will be deducted from the value of the deposit fund. The purchase price paid for a GIC generally becomes part of the general assets of the issuer, and the contract is paid from the general assets of the issuer.
The Fund will only purchase GICs from issuers which, at the time of purchase, meet quality and credit standards established by the Adviser. Generally, GICs are not assignable or transferable without the permission of the issuing insurance companies, and an active secondary market in GICs does not currently exist. Also, the Fund may not receive the principal amount of a GIC from the insurance company on seven days' notice or less, at which point the GIC may be considered to be an illiquid investment.
INTEREST RATE TRANSACTIONS
Among the strategic transactions into which the Fund may enter are interest rate swaps and the purchase or sale of related caps and floors. The Fund expects to enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its portfolio, to protect against currency fluctuations, as a duration management technique or to protect against any increase in the price of securities the Fund anticipates purchasing at a later date. The Fund intends to use these transactions as hedges and not as speculative investments and will not sell interest rate caps or floors where it does not own securities or other instruments providing the income stream the Fund may be obligated to pay. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, E.G. an exchange of floating rate payments for fixed rate payments with respect to a notional amount of principal. A currency swap is an agreement to exchange cash flows on a notional amount of two or more currencies based on the relative value differential among them and an index swap is an agreement to swap cash flows on a notional amount based on changes in the values of the reference indices. The purchase of a cap entitles the purchaser to receive payments on a notional principal amount from the party selling such floor to the extent that a specified index falls below a predetermined interest rate or amount.
The Fund will usually enter into swaps on a net basis, I.E., the two payment streams are netted out in a cash settlement on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. In as much as these swaps, caps and floors are entered into for good faith hedging purposes, the Adviser and the Fund believe such obligations do not constitute senior securities under the 1940 Act and, accordingly, will not treat them as being subject to its borrowing restrictions. The Fund will not enter into any swap, cap and floor transaction unless, at the time of entering into such transaction, the unsecured long-term debt of the counterparty, combined with any credit enhancements, is rated at least "A" by Standard & Poor's Corporation or Moody's Investors Service, Inc. or has an equivalent rating from an NRSRO or is determined to be of equivalent credit quality by the Adviser. If there is a default by the counterparty, the Fund may have contractual remedies pursuant to the agreements related to the transaction. The swap market has grown substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents utilizing standardized swap documentation. As a result, the swap market has become relatively liquid. Caps and floors are more recent innovations for which standardized documentation has not yet been fully developed and, accordingly, they are less liquid than swaps.
With respect to swaps, the Fund will accrue the net amount of the excess, if any, of its obligations over its entitlements with respect to each swap on a daily basis and will segregate an amount of cash or liquid high grade securities having a value equal to the accrued excess. Caps and floors require segregation of assets with a value equal to the Fund's net obligation, if any.
LOWER RATED (OR HIGH YIELD) DEBT SECURITIES
The yields on lower rated debt and comparable unrated fixed-income securities generally are higher than the yields available on higher-rated securities. However, investments in lower rated debt and comparable unrated securities generally involve greater volatility of price and risk of loss of income and principal, including the probability of default by or bankruptcy of the issuers of such securities. Lower rated debt and comparable unrated securities (a) will likely have some quality and protective characteristics that, in the judgment of the rating organization, are outweighed by large uncertainties or major risk exposures to adverse conditions and (b) are predominantly speculative with respect to the issuer's capacity to pay interest and repay principal in accordance with the terms of the obligation. Accordingly, it is possible that these types of factors could, in certain instances, reduce the value of securities held in the Fund's portfolio, with a commensurate effect on the value of the Fund's shares. Therefore, an investment in the Fund should not be considered as a complete investment program and may not be appropriate for all investors.
The market prices of lower rated securities may fluctuate more than higher rated securities and may decline significantly in periods of general economic difficulty which may follow periods of rising interest rates. During an economic downturn or a prolonged period of rising interest rates, the ability of issuers of lower quality debt to service their payment obligations, meet projected goals, or obtain additional financing may be impaired.
Since the risk of default is higher for lower rated securities, the Adviser will try to minimize the risks inherent in investing in lower rated debt securities by engaging in credit analysis, diversification, and attention to current developments and trends affecting interest rates and economic conditions. The Adviser will attempt to identify those issuers of high-yielding securities whose financial condition is adequate to meet future obligations, have improved, or are expected to improve in the future.
Unrated securities are not necessarily of lower quality than rated securities, but they may not be attractive to as many buyers. The Fund's policies regarding lower rated debt securities are not fundamental and may be changed at any time without shareholder approval.
While the market values of lower rated debt and comparable unrated securities tend to react less to fluctuations in interest rate levels than the market values of higher-rated securities, the market values of certain lower rated debt and comparable unrated securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than higher-rated securities. In addition, lower rated debt securities and comparable unrated securities generally present a higher degree of credit risk. Issuers of lower rated debt and comparable unrated securities often are highly leveraged and may not have more traditional methods of financing available to them so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. The risk of loss due to default by such issuers is significantly greater because lower rated debt and comparable unrated securities generally are unsecured and frequently are subordinated to the prior payment of senior indebtedness. The Fund may incur additional expenses to the extent that it is required to seek recovery upon a default in the payment of principal or interest on its portfolio holdings. The existence of limited markets for lower rated debt and comparable unrated securities may diminish the Fund's ability to (a) obtain accurate market quotations for purposes of valuing such securities and calculating its net asset value and (b) sell the securities at fair value either to meet redemption requests or to respond to changes in the economy or in financial markets.
Fixed-income securities, including lower rated debt securities and comparable unrated securities, frequently have call or buy-back features that permit their issuers to call or repurchase the securities from their holders, such as the Fund. If an issuer exercises these rights during periods of declining interest rates, the Fund may have to replace the security with a lower yielding security, thus resulting in a decreased return to the Fund.
The market for certain lower rated debt and comparable unrated securities is relatively new and has not weathered a major economic recession. The effect that such a recession might have on such securities is not known. Any such recession, however, could disrupt severely the market for such securities and adversely affect the value of such securities. Any such economic downturn also could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon.
OPTIONS ON CURRENCIES
The Fund may purchase and sell options on currencies to hedge the value of securities the Fund holds or intends to buy. Options on foreign currencies may be traded on U.S. and foreign exchanges or over-the-counter.
OTHER INVESTMENT COMPANIES
In seeking to attain their investment objectives, the Fund may invest in securities issued by other investment companies within the limits prescribed by the 1940 Act, its rules and regulations and any exemptive relief obtained by the Fund. The Fund currently intends to limit its investments so that, as determined immediately after a securities purchase is made: (a) not more than 5% of the value of its total assets will be invested in the securities of any one investment company; (b) not more than 10% of the value of its total assets will be invested in the aggregate in securities of investment companies as a group; and (c) not more than 3% of the outstanding voting stock of any one investment company will be owned by the Fund or by the Trust as a whole. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of the other investment company's expenses, including Advisory fees. These expenses would be in addition to the Advisory and other expenses that the Fund bears in connection with its own operations. The Adviser has agreed to remit to the respective investing Fund fees payable to it under its respective Investment Advisory Agreement with an affiliated money market Fund to the extent such fees are based upon the investing Fund's assets invested in shares of the affiliated money market fund.
PARTICIPATION INTERESTS AND COMPANY RECEIPTS
The Fund may purchase from domestic financial institutions and trusts created by such institutions participation interests and trust receipts in high quality debt securities. A participation interest or receipt gives the Fund an undivided interest in the security in the proportion that the Fund's participation interest or receipt bears to the total principal amount of the security. As to certain instruments for which the Fund will be able to demand payment, the Fund intends to exercise its right to do so only upon a default under the terms of the security, as needed to provide liquidity or to maintain or improve the quality of its investment portfolio. It is possible that a participation interest or trust receipt may be deemed to be an extension of credit by the Fund to the issuing financial institution rather than to the obligor of the underlying security and may not be directly entitled to the protection of any collateral security provided by the obligor. In such event, the ability of the Fund to obtain repayment could depend on the issuing financial institution.
Participation interests and trust receipts may have fixed, floating or variable rates of interest, and will have remaining maturities of thirteen months or less (as defined by the SEC). If a participation interest or trust receipt is unrated, the Adviser will have determined that the interest or receipt is of comparable quality to those instruments in which the Fund may invest pursuant to guidelines approved by the Board of Trustees. For certain participation interests or trust receipts the Fund will have the right to demand payment, on not more than 30 days' notice, for all or any part of the Fund's participation interest or trust receipt in the securities involved, plus accrued interest.
REAL ESTATE INVESTMENT TRUSTS
A real estate investment trust ("REIT") is a managed portfolio of real estate investments which may include office buildings, apartment complexes, hotels and shopping malls. An equity REIT holds equity positions in real estate, and it seeks to provide its shareholders with income from the leasing of its properties, and with capital gains from any sales of properties. A mortgage REIT specializes in lending money to developers of properties, and passes any interest income it may earn to its shareholders.
REITs may be affected by changes in the value of the underlying property owned or financed by the REIT, while Mortgage REITs also may be affected by the quality of credit extended. Both equity and mortgage REITs are dependent upon management skill and may not be diversified. REITs also may be subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended.
REPURCHASE AGREEMENTS
The repurchase price under any repurchase agreements described in the prospectuses generally equals the price paid by the Fund plus interest negotiated on the basis of current short-term rates (which may be more or less than the rate on the securities underlying the repurchase agreement). Securities subject to repurchase agreements will be held by the Trust's custodian in a segregated account or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are considered to be loans by the Trust under the 1940 Act.
REVERSE REPURCHASE AGREEMENTS
At the time the Fund enters into a reverse repurchase agreement, it may establish a segregated account with its custodian bank in which it will maintain cash, U.S. Government securities or other liquid high grade debt obligations equal in value to its obligations in respect of reverse repurchase agreements. Reverse repurchase agreements involve the risk that the market value of the securities the Fund is obligated to repurchase under the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use of proceeds of the agreement may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. Reverse repurchase agreements are speculative techniques involving leverage, and are subject to asset coverage requirements if the Fund does not establish and maintain a segregated account (as described above). In addition, some or all of the proceeds received by the Fund from the sale of a portfolio instrument may be applied to the purchase of a repurchase agreement. To the extent the proceeds are used in this fashion and a common broker/dealer is the counterparty on both the reverse repurchase agreement and the repurchase agreement, the arrangement might be recharacterized as a swap transaction. Under the requirements of the 1940 Act, the Fund is required to maintain an asset coverage (including the proceeds of the borrowings) of at least 300% of all borrowings. Depending on market conditions, the Fund's asset coverage and other factors at the time of a reverse repurchase, the Fund may not establish a segregated account when the Adviser believes it is not in the best interests of the Fund to do so. In this case, such reverse repurchase agreements will be considered borrowings subject to the asset coverage described above.
SECURITIES LENDING
To increase return on portfolio securities, the Fund may lend its portfolio securities to broker/dealers and other institutional investors pursuant to agreements requiring that the loans be continuously secured by collateral equal at all times in value to at least the market value of the securities loaned. Collateral for such loans may include cash, securities of the U.S. Government, its agencies or instrumentalities, an irrevocable letter of credit issued by (i) a U.S. bank that has total assets exceeding $1 billion and that is a member of the Federal Deposit Insurance Corporation, or (ii) a foreign bank that is one of the 75 largest foreign commercial banks in terms of total assets, or any combination thereof. Such loans will not be made if, as a result, the aggregate of all outstanding loans of the Fund involved exceeds 33% of the value of its total assets which may include cash collateral received for securities loaned. There may be risks of delay in receiving additional collateral or in recovering the securities loaned or even a loss of rights in the collateral should the borrower of the securities fail financially. However, loans are made only to borrowers deemed by the Adviser to be of good standing and when, in its judgment, the income to be earned from the loan justifies the attendant risks. Pursuant to the securities loan agreement the Fund is able to terminate the securities loan upon notice of not more than five business days and thereby secure the return to the Fund of securities identical to the transferred securities upon termination of the loan.
SHORT SALES
The Fund may from time to time enter into short sales transactions. The Fund will not make short sales of securities nor maintain a short position unless at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. This is a technique known as selling short "against the box." Such short sales will be used by the Fund for the purpose of deferring recognition of gain or loss for federal income tax purposes.
SPECIAL SITUATIONS
The Fund may invest in "special situations." A special situation arises when, in the opinion of the Adviser, the securities of a particular company will, within a reasonably estimable period of time, be accorded market recognition at an appreciated value solely by reason of a development applicable to that company, and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others: liquidations, reorganizations, recapitalizations, mergers, material litigation, technical breakthroughs and new management or management policies. Although large and well known companies may be involved, special situations more often involve comparatively small or unseasoned companies. Investments in unseasoned companies and special situations often involve much greater risk than is inherent in ordinary investment securities.
STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS")
The Fund may purchase Standard & Poor's Depositary Receipts, or SPDRs, which are interests in a unit investment trust holding a portfolio of securities linked to the S&P 500 Index. Because a unit investment trust is an investment company under the 1940 Act, the Fund's investments in SPDRs are subject to the limitations set forth in Section 12(d)(1)(A) of the 1940 Act.
SPDRs closely track the underlying portfolio of securities, trade like a share of common stock and pay periodic dividends proportionate to those paid by the portfolio of stocks that comprise the S&P 500 Index. As a holder of interests in a unit investment trust, the Fund would indirectly bear its ratable share of that unit investment trust's expenses. At the same time the Fund would continue to pay its own management and advisory fees and other expenses, as a result of which the Fund and its shareholders in effect will be absorbing duplicate levels of fees with respect to investments in such unit investment trusts.
SPDRs are subject to the risks of an investment in a broadly based portfolio of large-capitalization common stocks, including the risk that the general level of stock prices may decline, thereby adversely affecting the value of such investment. In addition, because individual investments in SPDRs are not redeemable, except upon termination of the unit investment trust, the liquidity of small holdings of SPDRs will depend upon the existence of a secondary market. Large holdings of SPDRs are called "creation unit size" and are redeemable in kind only and are not redeemable for cash from the unit investment trust. The price of SPDRs is derived and based upon the securities held by the unit investment trust. Accordingly, the level of risk involved in the purchase or sale of a SPDR is similar to the risk involved in the purchase or sale of traditional common stock, with the exception that the pricing mechanism for SPDRs is based on a basket of stocks. Disruptions in the markets for the securities underlying SPDRs purchased or sold by the Fund could result in losses on SPDRs.
STRIPPED SECURITIES
The Fund may purchase stripped securities issued or guaranteed by the U.S. Government, where the principal and interest components are traded independently under the Separate Trading of Registered Interest and Principal of Securities program ("STRIPS"). Under STRIPS, the principal and interest components are individually numbered and separately issued by the U.S. Treasury at the request of depository financial institutions, which then trade the component parts independently.
In addition, the Fund may purchase stripped mortgage-backed securities ("SMBS") issued by the U.S. Government (or a U.S. Government agency or instrumentality) or by private issuers such as banks and other institutions. If the underlying obligations experience greater than anticipated prepayments of principal, the Fund may fail to fully recover its initial investment. The market value of the class consisting entirely of principal payments can be extremely volatile in response to changes in interest rates. The yields on a class of SMBS that receives all or most of the interest are generally higher than prevailing market yields on other mortgage-backed obligations because their cash flow patterns are also volatile and there is a greater risk that the initial investment will not be full recovered. SMBS issued by the U.S. Government (or a U.S. Government agency or instrumentality) may be considered liquid under guidelines established by the Trust's Board of Trustees if they can be disposed of promptly in the ordinary course of business at a value reasonably close to that used in the calculation of the Fund's per share net asset value.
Although stripped securities may not pay interest to holders prior to maturity, Federal income tax regulations require the Fund to recognize as interest income a portion of the bond's discount each year. This income must then be distributed to shareholders along with other income earned by the Fund. To the extent that any shareholders in the Fund elect to receive their dividends in cash rather than reinvest such dividends in additional Fund shares, cash to make these distributions will have to be provided from the assets of the Fund or other sources such as proceeds of sales of Fund shares and/or sales of portfolio securities. In such cases, the Fund will not be able to purchase additional income producing securities with cash used to make such distributions and its current income may ultimately be reduced as a result.
U.S. AND FOREIGN BANK OBLIGATIONS
These obligations include negotiable certificates of deposit, banker's acceptances and fixed time deposits. The Fund limits its investments in domestic bank obligations to banks having total assets in excess of $1 billion and subject to regulation by the U.S. Government. The Fund may also invest in certificates of deposit issued by members of the Federal Deposit Insurance Corporation ("FDIC") having total assets of less than $1 billion, provided that the Fund will at no time own more than $100,000 principal amount of certificates of deposit (or any higher principal amount which in the future may be fully covered by FDIC insurance) of any one of those issuers. Fixed time deposits are obligations which are payable at a stated maturity date and bear a fixed rate of interest. Generally, fixed time deposits may be withdrawn on demand by the Fund, but they may be subject to early withdrawal penalties which vary depending upon market conditions and the remaining maturity of the obligation. Although fixed time deposits do not have a market, there are no contractual restrictions on the Fund's right to transfer a beneficial interest in the deposit to a third party.
The Fund limits any investments in foreign bank obligations (I.E., obligations of foreign branches and subsidiaries of domestic banks, and domestic and foreign branches and agencies of foreign banks) to obligations of banks which at the time of investment are branches or subsidiaries of domestic banks which meet the criteria in the preceding paragraphs or are branches or agencies of foreign banks which (i) have more than $10 billion, or the equivalent in other currencies, in total assets; (ii) in terms of assets are among the 75 largest foreign banks in the world; (iii) have branches or agencies in the United States; and (iv) in the opinion of the Adviser, pursuant to the established by the Board of Trustees of the Trust, are of an investment quality comparable to obligations of domestic banks which may be purchased by the Fund. These obligations may be general obligations of the parent bank in addition to the issuing branch or subsidiary, but the parent bank's obligations may be limited by the terms of the specific obligation or by governmental regulation. The Fund also limits its investments in foreign bank obligations to banks, branches and subsidiaries located in Western Europe (United Kingdom, France, Germany, Belgium, The Netherlands, Italy and Switzerland), Scandinavia (Denmark and Sweden), Australia, Japan, the Cayman Islands, the Bahamas and Canada. The Fund will limit its investment in securities of foreign banks to not more than 20% of total assets at the time of investment.
The Fund may also make interest-bearing savings deposits in commercial and savings banks in amounts not in excess of 5% of the total assets of the Fund.
U.S. GOVERNMENT OBLIGATIONS
The Fund may invest in U.S. Government obligations. Examples of the types of U.S. Government obligations that may be held by the Fund include, in addition to U.S. Treasury bonds, notes and bills, the obligations of the Federal Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, Government National Mortgage Association, Federal National Mortgage Association, General Services Administration, Student Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate Credit Banks, Tennessee Valley Authority, Resolution Funding Corporation and Maritime Administration. Obligations guaranteed as to principal or interest by the U.S. Government, its agencies, authorities or instrumentalities are deemed to include: (a) securities for which the payment of principal and interest is backed by an irrevocable letter of credit issued by the U.S. Government, its agencies, authorities or instrumentalities and (b) participations in loans made to foreign governments or their agencies that are so guaranteed. The secondary market for certain of these participations is limited. If such participations are illiquid they will not be purchased.
U.S. Government obligations include principal and interest components of securities issued or guaranteed by the U.S. Treasury if the components are traded independently under the Separate Trading of Registered Interest and Principal of Securities program. Obligations issued or guaranteed as to principal or interest by the U.S. Government, its agencies, authorities or instrumentalities may also be acquired in the form of custodial receipts. These receipts evidence ownership of future interest payments, principal payments or both on certain notes or bonds issued by the U.S. Government, its agencies, authorities or instrumentalities.
USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS
Options, futures and forward foreign currency contracts that obligate the Fund to provide cash, securities or currencies to complete such transactions will entail that Fund to either segregate assets in an account with, or on the books of, the Trust's custodian, or otherwise "covering" the transaction as described below. For example, a call option written by the Fund will require the Fund to hold the securities subject to the call (or securities convertible into the needed securities without additional consideration) or liquid assets sufficient to meet the obligation by purchasing and delivering the securities if the call is exercised. A call option written on an index will require that Fund to have portfolio securities that correlate with the index. A put option written by the Fund also will require that Fund to have available assets sufficient to purchase the securities the Fund would be obligated to buy if the put is exercised.
A forward foreign currency contract that obligates the Fund to provide currencies will require the Fund to hold currencies or liquid securities denominated in a foreign currency which will equal the Fund's obligations. Such a contract requiring the purchase of currencies also requires segregation.
Unless a segregated account consists of the securities, cash or currencies that are the subject of the obligation, the Fund will hold cash, U.S. Government securities and other high grade liquid debt obligations in a segregated account. These assets cannot be transferred while the obligation is outstanding unless replaced with other suitable assets. In the case of an index-based transaction, the Fund could own securities substantially replicating the movement of the particular index.
In the case of a futures contract, the Fund must deposit initial margin and variation margin, as often as daily, if the position moves adversely, sufficient to meet its obligation to purchase or provide securities or currencies, or to pay the amount owed at the expiration of an index-based futures contract. Similarly, options on futures contracts require the Fund to deposit margin to the extent necessary to meet the Fund's commitments.
In lieu of such assets, such transactions may be covered by other means consistent with applicable regulatory policies. The Fund may enter into off-setting transactions so that its combined position, coupled with any segregated assets, equals its net outstanding obligation in related options and hedging transactions. For example, the Fund could purchase a put option if the strike price of that option is the same or higher than the strike price of a put option sold by that Fund. Moreover, instead of segregating assets if the Fund held a futures or forward contract, it could purchase a put option on the same futures or forward contract with a strike price as high or higher than the price of the contract held. Of course, the off-setting transaction must terminate at the time of or after the primary transaction.
VARIABLE- AND FLOATING-RATE INSTRUMENTS
The Fund may purchase variable-rate and floating rate obligations. If such instrument is not rated, the Adviser will consider the earning power, cash flows, and other liquidity ratios of the issuers and guarantors of such obligations and, if the obligation is subject to a demand feature, will monitor their financial status to meet payment on demand. In determining average weighted portfolio maturity, a variable-rate demand instrument issued or guaranteed by the U.S. Government or an agency or instrumentality thereof will be deemed to have a maturity equal to the period remaining until the obligations next interest rate adjustment. Other variable-rate obligations will be deemed to have a maturity equal to the longer of the period remaining to the next interest rate adjustment or the time the Fund can recover payment of principal as specified in the instrument.
Variable-rate demand notes held by a Money Market Fund may have maturities of more than 397 days, provided (i) the Fund is entitled to payment principal on not more than 30 days' notice, or at specified intervals not exceeding 397 days (upon not more than 30 days' notice), and (ii) the rate of interest on such note is adjusted automatically at periodic intervals which may extend up to 397 days.
The variable- and-floating rate demand instruments that the Fund may purchase include participations in Municipal Securities purchased from and owned by financial institutions, primarily banks. Participation interests provide the Fund with a specified undivided interest (up to 100%) in the underlying obligation and the right to demand payment of the unpaid principal balance plus accrued interest on the participation interest from the institution upon a specified number of days' notice, not to exceed 30 days. Each participation interest is backed by an irrevocable letter of credit or guarantee of a bank that the Adviser has determined meets the prescribed quality standards for the Fund. The bank typically retains fees out of the interest paid on the obligation for servicing the obligation, providing the letter of credit, and issuing the repurchase commitment.
WARRANTS
The Fund is permitted to invest in warrants. Warrants are privileges issued by corporations enabling the owner to subscribe to and purchase a specified number of shares of the corporation at a specified price during a specified period of time. The prices of warrants do not necessarily correlate with the prices of the underlying securities. The purchase of warrants involves the risk that the purchaser could lose the purchase value of the warrant if the right to subscribe to additional shares is not exercised prior to the warrant's expiration. Also, the purchase of warrants involves the risk that the effective price paid for the warrant added to the subscription price of the related security may exceed the value of the subscribed security's market price such as when there is no movement in the level of the underlying security.
WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS
The Fund may agree to purchase securities on a when-issued basis or enter into a forward commitment to purchase securities. When the Fund engages in these transactions, its custodian will segregate cash, U.S. Government securities or other high quality debt obligations equal to the amount of the commitment. Normally, the custodian will segregate portfolio securities to satisfy a purchase commitment, and in such a case the Fund may be required subsequently to segregate additional assets in order to ensure that the value of the segregated assets remains equal to the amount of the Fund's commitment. Because the Fund will segregate cash or liquid assets to satisfy its purchase commitments in the manner described, the Fund's liquidity and ability to manage its portfolio might be adversely affected in the event its commitments to purchase when-issued securities ever exceeded 25% of the value of its assets. In the case of a forward commitment to sell portfolio securities, the Fund's custodian will hold the portfolio securities themselves in a segregated account while the commitment is outstanding.
The Fund will make commitments to purchase securities on a when-issued basis or to purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment strategy, however, the Fund may dispose of or renegotiate a commitment after it is entered into, and may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. In these cases the Fund may realize a capital gain or loss.
When the Fund engages in when-issued and forward commitment transactions, it relies on the other party to consummate the trade. Failure of such party to do so may result in the Fund's incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
The value of the securities underlying a when-issued purchase or a forward commitment to purchase securities, and any subsequent fluctuations in their value, is taken into account when determining the net asset value of the Fund starting on the date the Fund agrees to purchase the securities. The Fund does not earn dividends on the securities it has committed to purchase until they are paid for and delivered on the settlement date. When the Fund makes a forward commitment to sell securities it owns, the proceeds to be received upon settlement are included in the Fund's assets. Fluctuations in the value of the underlying securities are not reflected in the Fund's net asset value as long as the commitment remains in effect.
PORTFOLIO TURNOVER
Generally, the Fund will purchase portfolio securities for capital appreciation or investment income, or both, and not for short-term trading profits. If the Fund's annual portfolio turnover rate exceeds 100%, it may result in higher brokerage costs and possible tax consequences for the Portfolio and its shareholders. For the Fund's portfolio turnover rates, see the "Financial Highlights" in the prospectus.
INVESTMENT RISKS AND CONSIDERATIONS
In addition to the investment risks and considerations identified in certain of the securities descriptions above, there are additional investment risks and considerations associated with an investment in certain of the Fund.
Investments by a Fund in common stocks and other equity securities are subject to stock market risks. The value of the stocks that the Fund holds, like the broader stock market, may decline over short or even extended periods. The U.S. stock market tends to be cyclical, with periods when stock prices generally rise and periods when prices generally decline. As of the date of this SAI, the stock market, as measured by the S&P 500 Index and other commonly used indexes, was trading at or close to record levels. There can be no guarantee that these levels will continue.
The value of the Fund's investments in debt securities, including U.S. Government Obligations, will tend to decrease when interest rates rise and increase when interest rates fall. In general, longer-term debt instruments tend to fluctuate in value more than shorter-term debt instruments in response to interest rate movements. In addition, debt securities that are not backed by the United States Government are subject to credit risk, which is the risk that the issuer may not be able to pay principal and/or interest when due. In addition, obligations with the lowest investment grade rating (E.G., "BBB" by Standard & Poor's Corporation ("S&P") or "Baa" by Moody's Investors Service, Inc. ("Moody's")) have speculative characteristics and changes in economic conditions or other circumstances are more likely to lead to a weakened capacity to make principal and interest payments than is the case with higher grade debt obligations. Subsequent to its purchase by the Fund, an issue of securities may cease to be rated or its rating may be reduced below the minimum rating required for purchase by the Fund. The Adviser will consider such an event in determining whether the Fund should continue to hold the obligation. Unrated obligations may be acquired by the Fund if they are determined by the Adviser to be of comparable quality at the time of purchase to rated obligations that may be acquired.
Certain of the Fund's investments constitute derivative securities, which are securities whose value is derived, at least in part, from an underlying index or reference rate. There are certain types of derivative securities that can, under certain circumstances, significantly increase a purchaser's exposure to market or other risks. The Adviser, however, only purchases derivative securities in circumstances where it believes such purchases are consistent with the Fund's investment objective and do not unduly increase the Fund's exposure to market or other risks. For additional risk information regarding the Fund's investments in particular instruments, see "Appendix A -- Fund Securities."
The Fund may invest in securities of smaller and newer issuers. Investments in such companies may present greater opportunities for capital appreciation because of high potential earnings growth, but also present greater risks than investments in more established companies with longer operating histories and greater financial capacity.
MANAGEMENT OF THE TRUST
The business and affairs of the Trust is managed under the direction of its Board of Trustees. This SAI contains the names of and general background information concerning each Trustee. The Trustees and executive officers of the Trust and their principal occupations during the last five years are set forth below. The address of each, unless otherwise indicated, is 111 Center Street, Little Rock, Arkansas 72201. Those trustees who are "interested persons" of the Trust (as defined in the 1940 Act) are indicated by an asterisk(*).
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME, ADDRESS, AND AGE THE TRUST DIRECTORSHIPS/TRUSTEESHIPS
---------------------- --------- --------------------------
Edmund L. Benson, III, 62 Trustee Director, President and Treasurer,
Saunders & Benson, Inc. Saunders & Benson, Inc. (Insurance),
1510 Willow Lawn Drive Insurance Managers, Inc.
Suite 216 (insurance); Trustee, Nations
Richmond, VA 23230 Reserves, Master Investment Trust,
Nations Annuity Trust and Nations
Fund Trust; Director, Nations Fund,
Inc., and Nations LifeGoal Funds,
Inc.; Director, Nations Fund
Portfolios, Inc. through August,
1999.
William P. Carmichael, 66 Trustee Trustee - 231 Funds (investment
Succession Fund company) from 1993 to 1995, Time
The Wrigley Building Horizon Fund (investment company)
400 North Michigan Avenue from 1995 to 1999, Pacific
Suite 1016 Innovations Trust (investment
Chicago, IL 60611 company) from 1997 to 1999, Nations
Annuity Trust (investment company)
since December 1999, Nations Master
Investment Trust (investment company)
since December 1999 and Nations Funds
Trust (investment company) since
December 1999; Director- The Hain
Food Group, Inc. (specialty food
products distributor) until December
1998, Cobra Electronics Corporation
(electronic equipment manufacturer),
Opta Food Ingredients, Inc. (food
ingredients manufacturer), Golden
Rule Insurance Company, Nations
LifeGoal Funds, Inc. (investment
company) since December 1999.
31
|
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME, ADDRESS, AND AGE THE TRUST DIRECTORSHIPS/TRUSTEESHIPS
---------------------- --------- --------------------------
James Ermer, 56 Trustee Retired Executive Vice President,
11511 Compass Point Drive Corporate Development and Planning -
Ft. Myers, FL 33908 Land America (title insurance);
Senior Vice President, Finance - CSX
Corporation (transportation and
natural resources); Director -
National Mine Service (mining
supplies), Lawyers Title Corporation
(title insurance); Trustee, Nations
Reserves, Nations Fund Trust,
Nations Annuity Trust and Nations
Master Investment Trust; Director,
Nations Fund, Inc. and Nations
LifeGoal Funds, Inc.; Director,
Nations Fund Portfolios, Inc.
through August, 1999.
William H. Grigg, 66 Trustee Chairman Emeritus since July 1997,
Duke Power Co. Chairman and Chief Executive Officer
16092A Reap Road from April 1994 to July 1997 - Duke
Albermarle, NC 28001 Power Co.; Director - The Shaw
Group, Inc.; Director and Vice
Chairman, Aegis Insurance Services,
Ltd. (a mutual insurance company in
Bermuda); Trustee, Nations
Reserves, Nations Fund Trust,
Nations Annuity Trust and Nations
Master Investment Trust; Director,
Hatteras Income Securities, Inc.,
Nations Government Income Term Trust
2003, Inc., Nations Government
Income Term Trust 2004, Inc.,
Nations Balanced Target Maturity
Fund, Inc., Nations Fund, Inc. and
Nations LifeGoal Funds, Inc.;
Director, Nations Fund Portfolios,
Inc. through August, 1999.
Thomas F. Keller, 67 Trustee R.J. Reynolds Industries Professor
Fuqua School of Business of Business Administration and
P.O. Box 90120 Former Dean - Fuqua School of
Duke University Business, Duke University; Director
Durham, NC 27708 - LADD Furniture, Inc. (furniture),
Wendy's International, Inc.
(restaurant operating and
franchising), American Business
Products, Inc. (printing services),
Dimon, Inc. (tobacco), Biogen, Inc.
(pharmaceutical biotechnology);
Trustee, The Mentor Funds, Mentor
Institutional Trust, Cash Reserve
Trust, Nations Reserves, Nations
Fund Trust, Nations Annuity Trust
and Nations Master Investment Trust;
Director, Hatteras Income
Securities, Inc., Nations Government
Income Term Trust 2003, Inc.,
Nations Government Income Term Trust
2004, Inc., Nations Balanced Target
Maturity Fund, Inc. and Nations
LifeGoal Funds, Inc.; Director,
Nations Fund Portfolios, Inc.
through August, 1999.
Carl E. Mundy, Jr., 64 Trustee President and CEO - USO from May
USO World Headquarters 1996 to present; Commandant - United
Washington Navy Yard States Marine Corps from July 1991
Building 198 to July 1995; Director -
901 M Street, S.E. Shering-Plough (pharmaceuticals and
Washington, D.C. 20374-5096 health care products); General
Dynamics Corporation (defense
systems); Trustee, Nations Reserves,
Nations Fund Trust, Nations Annuity
Trust and Nations Master Investment
Trust; Director, Nations Fund, Inc.
and Nations LifeGoal Funds, Inc.;
Director, Nations Fund Portfolios,
Inc. through August, 1999.
32
|
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME, ADDRESS, AND AGE THE TRUST DIRECTORSHIPS/TRUSTEESHIPS
---------------------- --------- --------------------------
Dr. Cornelius J. Pings, 70* Trustee President - Association of American
480 S. Orange Grove Blvd. Universities from February 1993 to
Pasadena, CA 91105 June 1998; Director - Farmers Group,
Inc. (insurance company), Nations
Fund, Inc. and Nations LifeGoal
Funds, Inc.; Trustee, Master
Investment Trust, Series I from 1995
to 1999, Master Investment Trust,
Series II from 1995 to 1997, Nations
Reserves, Nations Fund Trust,
Nations Annuity Trust and Nations
Master Investment Trust.;
Director/Trustee and Chairman -
Pacific Horizon Funds, Inc. and
Master Investment Trust, Series I,
from inception to May 1999;
Director - Time Horizon Funds and
Pacific Innovations Trust; Director,
Nations Fund Portfolios, Inc.
through August, 1999.
James B. Sommers*, 60 Trustee President - NationsBank Trust from
237 Cherokee Road January 1992 to September 1996;
Charlotte, NC 28207 Executive Vice President -
NationsBank Corporation from January
1992 to May 1997; Chairman - Central
Piedmont Community College
Foundation; Board of Commissioners,
Charlotte/ Mecklenberg Hospital
Authority; Director - Nations Fund,
Inc. and Nations LifeGoal Funds,
Inc.; Trustee, Central Piedmont
Community College; Mint Museum of
Art, Nations Reserves, Nations Fund
Trust, Nations Annuity Trust and
Nations Master Investment Trust;
Director, Nations Fund Portfolios,
Inc. through August, 1999.
A. Max Walker*, 77 President, Trustee and Independent Financial Consultant;
4580 Windsor Gate Court Chairman of the Board Director and Chairman of the Board -
Atlanta, GA 30342 Hatteras Income Securities, Inc.,
Nations Government Income Term Trust
2003, Inc., Nations Government
Income Term Trust 2004, Inc.,
Nations Balanced Target Maturity
Fund, Inc.; President, Director and
Chairman of the Board - Nations
Fund, Inc. and Nations LifeGoal
Funds, Inc.; President, Trustee and
Chairman of the Board - Nations
Reserves, Nations Fund Trust,
Nations Annuity Trust and Nations
Master Investment Trust; Director,
Nations Fund Portfolios, Inc.
through August, 1999.
Charles B. Walker, 60 Trustee Director-Ethyl Corporation (chemical
Albermarle Corporation manufacturing); Vice Chairman and
Vice Chairman and CFO Chief Financial Officer - Albemarle
330 South Fourth Street Corporation (chemical
Richmond, VA 23219 manufacturing); Director, Nations
Fund, Inc. and Nations LifeGoal
Funds, Inc.; Trustee, Nations
Reserves, Nations Fund Trust,
Nations Annuity Trust and Nations
Master Investment Trust; Director,
Nations Fund Portfolios, Inc.
through August, 1999.
33
|
PRINCIPAL OCCUPATIONS
DURING PAST 5 YEARS
POSITION WITH AND CURRENT
NAME, ADDRESS, AND AGE THE TRUST DIRECTORSHIPS/TRUSTEESHIPS
---------------------- --------- --------------------------
Thomas S. Word, Jr.*, 61 Trustee Partner - McGuire, Woods, Battle &
McGuire, Woods, Battle & Boothe LLP Boothe LLP (law firm); Director -
One James Center Vaughan-Bassett Furniture Companies,
8th Floor Inc. (furniture), Nations Fund, Inc.
Richmond, VA 23219 and Nations LifeGoal Funds, Inc.;
Trustee, Nations Reserves, Nations
Fund Trust, Nations Annuity Trust
and Nations Master Investment Trust;
Director, Nations Fund Portfolios,
Inc. through August, 1999.
Richard H. Blank, Jr., 42 Secretary and Treasurer Senior Vice President since 1998,
Stephens Inc. Vice President from 1994 to 1998 and
111 Center Street Manager from 1990 to 1994 - Mutual
Little Rock, AR 72201 Fund Services, Stephens Inc.;
Secretary since September 1993 and
Treasurer since November 1998 -
Nations Fund, Inc., Nations LifeGoal
Funds, Inc., Nations Reserves,
Nations Fund Trust, Nations Annuity
Trust and Nations Master Investment
Trust.; Secretary and Treasurer,
Nations Fund Portfolios, Inc.
through August, 1999.
Michael W. Nolte, 38 Assistant Secretary Assistant Secretary - Nations Fund
Stephens Inc. Trust, Nations Fund, Inc., Nations
Reserves, Nations LifeGoal Funds,
Inc., Nations Annuity Trust and
Nations Master Investment Trust;
Assistant Secretary, Nations Fund
Portfolios, Inc. through August,
1999.
James E. Banks, 43 Assistant Secretary Assistant Secretary - Nations Fund
Stephens Inc. Trust, Nations Fund, Inc., Nations
Reserves, Nations LifeGoal Funds,
Inc., Nations Annuity Trust and
Nations Master Investment Trust; ;
Director, Nations Fund Portfolios,
Inc. through August, 1999.
|
Each Trustee is a board member of the Trust, Nations Fund Trust, Nations Fund, Inc., Nations Reserves, Nations Annuity Trust, Nations Master Investment Trust and Nations LifeGoal Funds, Inc., each a registered investment company that is part of the Nations Funds family. Richard H. Blank, Jr., Michael W. Nolte, and James E. Banks. Jr. also are officers of Trust, Nations Fund Trust, Nations Fund, Inc., Nations Reserves, Nations Annuity Trust, Nations Master Investment Trust and Nations LifeGoal Funds, Inc.
The Trust and the Adviser have adopted codes of ethics which contain
policies on personal securities transactions by "access persons," including
portfolio managers and investment analysts. These policies substantially comply
in all material respects with the recommendations set forth in the May 9, 1994
Report of the Advisory Group on Personal Investing of the Investment Company
Institute. The Trust's Code of Ethics, among other things, prohibits each access
person of the Trust from purchasing or selling securities when such person knows
or should have known that, at the time of the transaction, the security (i) was
being considered for purchase or sale by the Fund, or (ii) was being purchased
or sold by the Fund. For purposes of the Code of Ethics, an access person means
(i) a trustee or officer of the Trust, (ii) any employee of the Trust (or any
company in a control relationship with the Trust) who, in the course of his/her
regular duties, obtains information about, or makes recommendations with respect
to, the purchase or sale of securities by the Trust, and (iii) any natural
person in a control relationship with the Trust who obtains information
concerning recommendations made to the Trust regarding the purchase or sale of
securities. Portfolio managers and other persons who assist in the investment
process are subject to additional restrictions, including a requirement that
they disgorge to the Trust any profits realized on short-term trading (I.E., the
purchase/sale or sale/purchase of securities within any 60-day period). The
above restrictions do not apply to purchases or sales of certain types of
securities, including mutual fund shares, money market instruments and certain
U.S. Government securities. To facilitate enforcement, the Code of Ethics
generally requires that the Trust's access persons, other than its
"disinterested" directors or trustees, submit reports to the Trust's designated
compliance person regarding transactions involving securities which are eligible
for purchase by the Fund.
NATIONS FUNDS RETIREMENT PLAN
Under the terms of the Nations Funds Retirement Plan for Eligible Directors/Trustees (the "Retirement Plan"), each Director/Trustee may be entitled to certain benefits upon retirement from the Board of Directors/Trustees. Pursuant to the Retirement Plan, the normal retirement date is the date on which the eligible director/trustee has attained age 65 and has completed at least five years of continuous service with one or more of the open-end investment companies advised by the Adviser. If a director/trustee retires before reaching age 65, no benefits are payable. Each eligible director/trustee is entitled to receive an annual benefit from the Fund and the other funds in the Nations Funds family commencing on the first day of the calendar quarter coincident with or next following his date of retirement equal to 5% of the aggregate director's/trustee's fees payable by the Funds during the calendar year in which the director's/trustee's retirement occurs multiplied by the number of years of service (not in excess of ten years of service) completed with respect to the Fund. Such benefit is payable to each eligible director/trustee in quarterly installments for a period of no more than five years. If an eligible director/trustee's dies after attaining age 65, the director's/trustees surviving spouse (if any) will be entitled to receive 50% of the benefits that would have been paid (or would have continued to have been paid) to the director/trustee if he had not died. The Retirement Plan is unfunded. The benefits owed to each director/trustee are unsecured and subject to the general creditors of the Fund.
NATIONS FUNDS DEFERRED COMPENSATION PLAN
Under the terms of the Nations Funds Deferred Compensation Plan for Eligible Directors/Trustees (the "Deferred Compensation Plan"), each director/trustee may elect, on an annual basis, to defer all or any portion of the annual board fees (including the annual retainer and all attendance fees) payable to the director/trustee for that calendar year. An application was submitted to and approved by the SEC to permit deferring directors/trustees to elect to tie the rate of return on fees deferred pursuant to the Deferred Compensation Plan to one or more of certain investment portfolios of the funds in the Nations Funds family, including the Fund. Distributions from the deferring directors'/trustees deferral accounts will be paid in cash, in generally equal quarterly installments over a period of five years beginning on the date the deferring director's/trustees' retirement benefits commence under the Retirement Plan. The Board of Directors/Trustees, in its sole discretion, may accelerate or extend such payments after a director's/trustee's termination of service. If a deferring director/trustee dies prior to the commencement of the distribution of amounts in his deferral account, the balance of the deferral account will be distributed to his designated beneficiary in a lump sum as soon as practicable after the director's/trustee's death. If a deferring director/trustee dies after the commencement of such distribution, but prior to the complete distribution of his deferral account, the balance of the amounts credited to his deferral account will be distributed to his designated beneficiary over the remaining period during which such amounts were distributable to the director/trustee. Amounts payable under the Deferred Compensation Plan are not funded or secured in any way and deferring directors/trustees have the status of unsecured creditors of the Fund from which they are deferring compensation.
Trustee Compensation
Board members of the Trust are compensated for their services to the Nations Funds family on a flat rate basis, and not on a per registered investment company or per fund basis. The Nations Funds family currently consists of the Trust, Nations Fund Trust, Nations Fund, Inc., Nations Reserves, Nations Annuity Trust, Nations LifeGoal Funds, Inc. and Nations Master Investment Trust.
Under the structure, each Board member receives a base retainer fee in the amount of $65,000 per year, in addition to $5,000 for each in-person meeting attended; in addition to $1,000 for each telephonic meeting attended. Each Board member is compensated only for a maximum of six in-person meetings per calendar year. In addition, the Chairman of the Board, currently A. Max Walker, receives an additional fee of 20% of the base retainer fee; the Chairman of the Audit Committees receives an additional fee of 10% of the base retainer fee. The members of the Nominating Committees receive additional compensation at the rate of $1,000 per meeting attended.
SHAREHOLDER AND TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that shareholders shall not be subject to any personal liability for the acts or obligations of the Trust, and also provides for indemnification out of the trust property of any shareholder held personally liable solely by reason of his being or having been a shareholder and not because of his acts or omissions or some other reason.
The Declaration of Trust states further that no Trustee, officer, or agent of the Trust shall be personally liable for or on account of any contract, debt, tort, claim, damage, judgment, or decree arising out of or connected with the administration or preservation of the trust estate or the conduct of any business of the Trust; nor shall any Trustee be personally liable to any person for any action or failure to act except by reason of his own bad faith, willful misfeasance, gross negligence, or reckless disregard of his duties as Trustee. The Declaration of Trust also provides that all persons having any claim against the Trustees shall look solely to the trust property for payment.
With the exceptions stated, the Declaration of Trust provides that a Trustee is entitled to be indemnified against all liabilities and expenses reasonably incurred by him in connection with the defense or disposition of any proceeding in which he may be involved or with which he may be threatened by reason of his being or having been a Trustee, and that the Trustees have the power, but not the duty, to indemnify officers and employees of the Trust unless any such person would not be entitled to indemnification had he or she been a Trustee.
INVESTMENT ADVISORY, ADMINISTRATION, CUSTODY,
TRANSFER AGENCY, OTHER SERVICE PROVIDERS, SHAREHOLDER SERVICING AND
DISTRIBUTION AGREEMENTS
INVESTMENT ADVISER AND SUB-ADVISERS
Bank of America and its Investment Adviser and Sub-Adviser Affiliates
BAAI is the investment adviser to the Fund. Marsico Capital is the investment sub-adviser to the Fund.
BAAI also serves as the investment adviser to the funds of Nations Fund, Inc., Nations Fund Trust, Nations Reserves and the portfolios of Nations Annuity Trust, Nations LifeGoal Funds, Inc. and Nations Master Investment Trust, each a registered investment company that is part of the Nations Funds Family. In addition, BAAI serves as the investment advisor to Hatteras Income Securities, Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and Nations Balanced Target Maturity Fund, Inc., each a closed-end diversified management investment company traded on the New York Stock Exchange.
The principal offices of BAAI are located at One Bank of America Plaza, Charlotte, N.C. 28255.
Since 1874, Bank of America and its predecessors have been managing money for foundations, universities, corporations, institutions and individuals. Today, Bank of America affiliates collectively manage in excess of $100 billion, including more than $70 billion in mutual fund assets. It is a company dedicated to a goal of providing responsible investment management and superior service. Bank of America is recognized for its sound investment approaches, which place it among the nation's foremost financial institutions. Bank of America and its affiliates organization makes available a wide range of financial services to its over 6 million customers through over 1700 banking and investment centers.
Marsico Capital is located at 1200 17th Street, Suite 1300, Denver, CO 80202. Thomas F. Marsico is Chairman and Chief Executive Officer of Marsico Capital. Prior to forming Marsico Capital in September 1997, Mr. Marsico had 18 years of experience as a securities analyst/portfolio manager. Bank of America owns 50% of Marsico Capital.
Investment Advisory and Sub-Advisory Agreements
Pursuant to the terms of the Trust's Investment Advisory Agreement and Sub-Advisory Agreements (at times, the "Advisory Agreements") with BAAI and/or Marsico Capital and subject at all times to the control of the Board of Trustees and, in conformity with the stated policies of the Trust, Marsico Capital selects and manages the investments of the Fund. Marsico Capital also obtains and evaluates economic, statistical and financial information to formulate and implement investment policies for the Fund.
The Advisory Agreements each provide that in the absence of willful misfeasance, bad faith, negligence or reckless disregard of obligations or duties thereunder on the part of an Adviser, respectively, or any of its respective officers, trustees, employees or agents, such Adviser shall not be subject to liability to the Trust or to any shareholder of the Trust for any act or omission in the course of, or connected with, rendering services under thereunder or for any losses that may be sustained in the purchase, holding or sale of any security.
The Advisory Agreements became effective with respect to the Fund after approved by the Board of the Trust, and continues from year to year, provided that such continuation of the Agreement is specifically approved at least annually by (a) (i) the Trust's Board or (ii) the vote of "a majority of the outstanding voting securities" of the Fund (as defined in Section 2(a)(42) of the 1940 Act), and (b) the affirmative vote of a majority of the Trust's Board of Trustees who are not parties to such Agreement or "interested persons" (as defined in the 1940 Act) of a party to such Agreement (other than as Trustees of the Trust), by votes cast in person at a meeting specifically called for such purpose. The respective Advisory Agreement terminates automatically in the event of its assignment, and is terminable with respect to the Fund at any time without penalty by the Trust (by vote of the Board of Trustees or by vote of a majority of the outstanding voting securities of the Fund) or by BAAI on 60 days' written notice.
The Fund, in any advertisement or sales literature, may advertise the names, experience and/or qualifications of the portfolio manager(s) of the Fund.
The Adviser may waive a portion of its fees; however, any such waiver may be discontinued at any time. As discussed below," the Adviser will be required to reduce its fees charged to the Fund, in direct proportion to the fees payable by the Fund to an Adviser and the Administrator, if the expenses of the Fund exceed the applicable expense limitation of any state in which the Fund's shares are registered or qualified for sale.
Because the Fund is a new series it has not yet paid any advisory or sub-advisory fees.
CO-ADMINISTRATORS AND SUB-ADMINISTRATOR
Stephens Inc. and BAAI (the "Co-Administrators") serve as
co-administrators of the Trust pursuant to co-administration agreements
("Co-Administration Agreements"). Under the Co-Administration Agreements, the
co-administrators receive, as compensation for their services rendered,
co-administration fees, computed daily and paid monthly, at the annual rate of:
[0.XX%] of the average daily net assets of the Fund.
Pursuant to the Co-Administration Agreement, Stephens has agreed to, among other things, (i) maintain office facilities for the Fund, (ii) furnish statistical and research data, data processing, clerical, and internal executive and administrative services to the Trust, (iii) furnish corporate secretarial services to the Trust, including coordinating the preparation and distribution of materials for Board meetings, (iv) coordinate the provision of legal advice to the Trust with respect to regulatory matters, (v) coordinate the preparation of reports to the Trust's shareholders and the SEC, including annual and semi-annual reports, (vi) coordinating the provision of services to the Trust by the Transfer Agent, Sub-Transfer Agent and the Custodian, and (vii) generally assist in all aspects of the Trust's operations. Stephens bears all expenses incurred in connection with the performance of its services.
Also, pursuant to the Co-Administration Agreement, BAAI has agreed to, among other things, (i) provide accounting and bookkeeping services for the Fund, (ii) compute the Fund's net asset value and net income, (iii) accumulate information required for the Trust's reports to shareholders and the SEC, (iv) prepare and file the Trust's federal and state tax returns, (v) perform monthly compliance testing for the Trust, and (vi) prepare and furnish the Trust monthly broker security transaction summaries and transaction listings and performance information. BAAI bears all expenses incurred in connection with the performance of its services.
The Co-Administration Agreement may be terminated by a vote of a majority of the Trustees, by Stephens or by BAAI, respectively, on 60 days' written notice without penalty. The Co-Administration Agreements are not assignable without the written consent of the other party. Furthermore, the Co-Administration Agreements provide that Stephens and BAAI shall not be liable to the Fund or to its shareholders except in the case of Stephens's or BAAI's, willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
BNY serves as sub-administrator for the Fund pursuant to a sub-administration agreement. Pursuant to its terms, BNY assists Stephens and BAAI in supervising, coordinating and monitoring various aspects of the Fund's administrative operations. For providing such services, BNY is entitled to receive a monthly fee from Stephens and BAAI based on an annual rate of 0.01% of the Fund's average daily net assets.
DISTRIBUTION PLANS AND SHAREHOLDER SERVICING ARRANGEMENTS
PRIMARY A SHARES
The Trust has not adopted an shareholder servicing or distribution plan for the Primary A Shares.
INVESTOR A SHARES
The Trust has adopted a Shareholder Servicing and Distribution Plan (the "Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to each Fund's Investor A Shares. The Investor A Plan provides that the Fund may pay, up to 0.25% (on an annualized basis) of the average daily net asset value of the Fund: (i) the Distributor for reimbursements of distribution-related expenses actually incurred by the Distributor, including, but not limited to, expenses of organizing and conducting sales seminars, printing of prospectuses and statements of additional information (and supplements thereto) and reports for other than existing shareholders, preparation and distribution of advertising material and sales literature and costs of administering the Investor A Plan; or (ii) certain broker/dealers and other financial institutions ("Agents") who offer shares to their customers and who have entered into Shareholder Servicing Agreements, and Sales Support Agreements with respect to the Fund, for providing the services contemplated thereunder.
The shareholder servicing activities for which compensation may be
received under the Investor A Plan may include, among other things: (i)
aggregating and processing purchase and redemption requests and transmitting
promptly net purchase and redemption orders to the Distributor or transfer
agent; (ii) providing customers with a service that invests the assets of their
accounts in Shares pursuant to specific or pre-authorized instructions; (iii)
processing dividend and distribution payments; (iv) providing information
periodically to customers showing their positions in Shares; (v) arranging for
bank wires; (vi) responding to customers' inquiries concerning their investment
in Shares; (vii) providing subaccounting with respect to Shares beneficially
owned by customers or the information to the Trust necessary for subaccounting;
(viii) if required by law, forwarding shareholder communications (such as
proxies, shareholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to customers; (ix) forwarding to
customers proxy statements and proxies containing any proposals regarding the
Shareholder Servicing Agreement; (x) general shareholder liaison services; and
(xi) providing such other similar services as the Trust may reasonably request
to the extent such firms are permitted to do so under applicable statutes, rules
or regulations.
The Investor A Plan may be terminated at any time by a vote of a majority of the non-interested Trustees or with respect to a particular Fund, by vote of a majority of the outstanding securities of the Investor A Shares of the Fund.
Because the Fund is a new series, it has not yet paid any fees pursuant to the Investor A Plan.
INVESTOR B SHARES
The Trust has adopted a Distribution Plan (the "Investor B Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Investor B Shares. The Trust also has adopted a Shareholder Servicing Plan (the "Investor B Servicing Plan") for the Fund's Investor B Shares.
Under the Investor B Distribution Plan, the Trust may compensate or reimburse its Distributor for any activities or expenses primarily intended to result in the sale of Investor B Shares of the Fund. Payments by the Trust may not exceed, on an annual basis, 0.75% of the average daily net asset value of the Fund's Investor B Shares.
The fees payable under the Investor B Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse banks, broker/dealers or other financial
institutions that have entered into Sales Support Agreements with the
Distributor ("Selling Agents"), for sales support services provided, and related
expenses incurred, by such Selling Agents. These services may include:
preparation, printing and distribution of prospectuses, sales literature and
advertising materials by the Distributor or, as applicable, Selling Agents,
attributable to distribution or sales support activities, respectively;
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; overhead
and other office expenses of the Distributor or Selling Agents, attributable to
distribution or sales support activities, respectively; opportunity costs
relating to the foregoing (which may be calculated as a carrying charge on the
Distributor's or Selling Agents' unreimbursed expenses incurred in connection
with distribution or sales support activities, respectively); and any other
costs and expenses relating to distribution or sales support activities.
Notwithstanding anything herein to the contrary, the Fund shall be obligated to make any payments under this Plan that exceed the maximum amounts payable under Rule 2830, of the National Association of Securities Dealers, Inc. Conduct Rules.
Under the Investor B Servicing Plan, the Trust may execute agreements with broker/dealers, banks and other financial institutions that are dealers of record or holders of record or which have a servicing relationship ("Servicing Agents") with the beneficial owners of Investor B Shares of the Trust, pursuant to which, Servicing Agents shall provide shareholder support services to their clients who beneficially own Investor B Shares of the Fund in consideration of a fee, at an annual rate of up to 0.25% of the average daily net asset value of the Investor B Shares beneficially owned by or attributable to such clients. Affiliates of the Trust's distributor, administrator, co-administrator and adviser are eligible to become Servicing Agents and to receive fees under this Plan. The Investor B Servicing Plan further provides that all expenses incurred by the Fund in connection with the Agreements and the implementation of such Plan is be borne either by the holders of the Investor B Shares of the particular Fund involved. If more than one fund is involved and these expenses are not directly attributable to the Investor B Shares of a particular fund, then the expenses may be allocated between or among the Shares of the funds in a fair and equitable manner.
The Investor B Servicing Plan may be terminated only by a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons," as defined in the Investment Company Act of 1940, of the Trust.
INVESTOR C SHARES
The Trust has adopted a Distribution Plan (the "Investor C Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Investor C Shares. The Trust also has adopted a Shareholder Servicing Plan (the "Investor C Servicing Plan") for each Fund's Investor C Shares.
Under the Investor C Distribution Plan, the Trust may compensate or reimburse its Distributor for any activities or expenses primarily intended to result in the sale of Investor C Shares of the Fund. Payments by the Trust may not exceed, on an annual basis, 0.75% of the average daily net asset value of the Fund's Investor C Shares.
The fees payable under the Investor C Distribution Plan are used
primarily to compensate or reimburse the Distributor for distribution services
provided by it, and related expenses incurred, including payments by the
Distributor to compensate or reimburse banks, broker/dealers or other financial
institutions that have entered into Sales Support Agreements with the
Distributor ("Selling Agents"), for sales support services provided, and related
expenses incurred, by such Selling Agents. These services may include:
preparation, printing and distribution of prospectuses, sales literature and
advertising materials by the Distributor or, as applicable, Selling Agents,
attributable to distribution or sales support activities, respectively;
commissions, incentive compensation or other compensation to, and expenses of,
account executives or other employees of the Distributor or Selling Agents,
attributable to distribution or sales support activities, respectively; overhead
and other office expenses of the Distributor or Selling Agents, attributable to
distribution or sales support activities, respectively; opportunity costs
relating to the foregoing (which may be calculated as a carrying charge on the
Distributor's or Selling Agents' unreimbursed expenses incurred in connection
with distribution or sales support activities, respectively); and any other
costs and expenses relating to distribution or sales support activities.
Notwithstanding anything herein to the contrary, the Fund shall be obligated to make any payments under this Plan that exceed the maximum amounts payable under Rule 2830, of the National Association of Securities Dealers, Inc. Conduct Rules.
Under the Investor C Servicing Plan, the Trust may execute agreements with broker/dealers, banks and other financial institutions that are dealers of record or holders of record or which have a servicing relationship ("Servicing Agents") with the beneficial owners of Investor C Shares of the Trust, pursuant to which, Servicing Agents shall provide shareholder support services to their clients who beneficially own Investor C Shares of the Fund in consideration of a fee, at an annual rate of up to 0.25% of the average daily net asset value of the Investor C Shares beneficially owned by or attributable to such clients. Affiliates of the Trust's distributor, administrator, co-administrator and adviser are eligible to become Servicing Agents and to receive fees under this Plan. The Investor C Servicing Plan further provides that all expenses incurred by the Fund in connection with the Agreements and the implementation of such Plan is be borne either by the holders of the Investor C Shares of the Fund involved. If more than one Fund is involved and these expenses are not directly attributable to the Investor C Shares of a particular Fund, then the expenses may be allocated between or among the Shares of the Fund in a fair and equitable manner.
The Investor C Servicing Plan may be terminated only by a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons," as defined in the Investment Company Act of 1940, of the Trust.
INFORMATION APPLICABLE TO INVESTOR A, INVESTOR B, INVESTOR C PLANS
The Investor A Plan, the Investor B Plans and the Investor C Plans (each a "Plan" and collectively the "Plans") may only be used for the purposes specified above and as stated in each such Plan. Compensation payable to Selling Agents or Servicing Agents for shareholder support services under the Plans subject to, among other things, the National Association of Securities Dealers, Inc. ("NASD") Conduct Rules, which govern receipt by NASD members of Plan fees from registered investment companies.
Each Plan requires the officers of the Trust or the Distributor to provide the Board of Trustees at least quarterly with a written report of the amounts expended pursuant to the Plan and the purposes for which such expenditures were made. The Board of Trustees reviews these reports in connection with its decisions with respect to the Plans.
As required by Rule 12b-1 under the 1940 Act, the Investor A Plan, Investor B Distribution Plan and Investor C Distribution Plan were approved by the Board of Trustees, including a majority of the trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of any Plan or in any agreements related to such Plan.
In approving the Investor A Plan, Investor B Distribution Plan and Investor C Distribution Plan in accordance with the requirements of Rule 12b-1, the Trustees considered various factors and determined that there was a reasonable likelihood that each such Plan will benefit the respective Investor A, Investor B or Investor C Shares and the holders of such shares. The Investor A Plan, Investor B Distribution Plan and Investor C Distribution Plan were approved by the initial shareholders of the Fund's Investor A, B and C Shares, respectively, on December 9, 1999.
EXPENSES
The Administrator furnishes, without additional cost to the Trust, the services of the Treasurer and Secretary of the Trust and such other personnel (other than the personnel of the Adviser) as are required for the proper conduct of the Trust's affairs. The Distributor bears the incremental expenses of printing and distributing prospectuses used by the Distributor or furnished by the Distributor to investors in connection with the public offering of the Trust's shares and the costs of any other promotional or sales literature, except that to the extent permitted under the Plans relating to the Investor A, Investor B or Investor C Shares of each Fund, sales-related expenses incurred by the Distributor may be reimbursed by the Trust.
The Trust pays or causes to be paid all other expenses of the Trust, including, without limitation: the fees of the Adviser, the Administrator and Co-Administrator; the charges and expenses of any registrar, any custodian or depository appointed by the Trust for the safekeeping of its cash, fund securities and other property, and any stock transfer, dividend or accounting agent or agents appointed by the Trust; brokerage commissions chargeable to the Trust in connection with fund securities transactions to which the Trust is a party; all taxes, including securities issuance and transfer taxes; corporate fees payable by the Trust to federal, state or other governmental agencies; all costs and expenses in connection with the registration and maintenance of registration of the Trust and its shares with the SEC and various states and other jurisdictions (including filing fees, legal fees and disbursements of counsel); the costs and expenses of typesetting prospectuses and statements of additional information of the Trust (including supplements thereto) and periodic reports and of printing and distributing such prospectuses and statements of additional information (including supplements thereto) to the Trust's shareholders; all expenses of shareholders' and trustees' meetings and of preparing, printing and mailing proxy statements and reports to shareholders; fees and travel expenses of trustees or trustee members of any advisory board or committee; all expenses incident to the payment of any dividend or distribution, whether in shares or cash; charges and expenses of any outside service used for pricing of the Trust's shares; fees and expenses of legal counsel and of independent auditors in connection with any matter relating to the Trust; membership dues of industry associations; interest payable on Trust borrowings; postage and long-distance telephone charges; insurance premiums on property or personnel (including officers and trustees) of the Trust which inure to its benefit; extraordinary expenses (including, but not limited to, legal claims and liabilities and litigation costs and any indemnification related thereto); and all other charges and costs of the Trust's operation unless otherwise explicitly assumed by the Adviser), the Administrator or Co-Administrator.
Expenses of the Trust which are not directly attributable to the operations of any class of shares or Fund are pro-rated among all classes of shares or Fund of the Trust based upon the relative net assets of each class or Fund. Expenses of the Trust which are not directly attributable to a specific class of shares but are directly attributable to a specific Fund are prorated among all the classes of shares of the Fund based upon the relative net assets of each such class of shares. Expenses of the Trust which are directly attributable to a class of shares are charged against the income available for distribution as dividends to such class of shares.
The Advisory Agreement, the Sub-Advisory Agreements, and the Administration Agreement require BAAI, Marsico Capital, and the Administrator to reduce their fees to the extent required to satisfy any expense limitations which may be imposed by the securities laws or regulations thereunder of any state in which the Fund's shares are registered or qualified for sale, as such limitations may be raised or lowered from time to time, and the aggregate of all such investment advisory, sub-advisory, and administration fees shall be reduced by the amount of such excess. The amount of any such reduction to be borne by BAAI or the Administrator shall be deducted from the monthly investment advisory and administration fees otherwise payable to BAAI and the Administrator during such fiscal year. If required pursuant to such state securities regulations, BAAI and the Administrator will reimburse the Trust no later than the last day of the first month of the next succeeding fiscal year, for any such annual operating expenses (after reduction of all investment advisory and administration fees in excess of such limitation).
TRANSFER AGENTS AND CUSTODIANS
PFPC, Inc. is located at One Exchange Place, 53 State Street, Boston, Massachusetts 02109, and acts as transfer agent for the Fund's Shares. Under the transfer agency agreements, the transfer agent maintains shareholder account records for the Trust, handles certain communications between shareholders and the Trust, and distributes dividends and distributions payable by the Trust to shareholders, and produces statements with respect to account activity for the Trust and its shareholders for these services. The transfer agent receives a monthly fee computed on the basis of the number of shareholder accounts that it maintains for the Trust during the month and is reimbursed for out-of-pocket expenses.
Bank of America serves as sub-transfer agent for the Fund's Primary A Shares.
The Bank of New York ("BONY") 100 Church Street, New York, N.Y. 10286 serves as custodian for the Fund's assets. As custodian, BONY maintains the Fund's securities cash and other property, delivers securities against payment upon sale and pays for securities against delivery upon purchase, makes payments on behalf of the Fund for payments of dividends, distributions and redemptions, endorses and collects on behalf of the Fund all checks, and receives all dividends and other distributions made on securities owned by the Fund.
The SEC has amended Rule 17f-5 under the 1940 Act to permit boards to delegate certain foreign custody matters to foreign custody managers and to modify the criteria applied in the selection process. Accordingly, BONY serves as Foreign Custody Manager, pursuant to a Foreign Custody Manager Agreement, under which the Board of Trustees retain the responsibility for selecting foreign compulsory depositories, although BONY agrees to make certain findings with respect to such depositories and to monitor such depositories.
DISTRIBUTOR
Stephens Inc. (the "Distributor") serves as the principal underwriter and distributor of the shares of the Fund.
Pursuant to a distribution agreement (the "Distribution Agreement"), the Distributor, as agent, sells shares of the Fund on a continuous basis and transmits purchase and redemption orders that its receives to the Trust or the Transfer Agent. Additionally, the Distributor has agreed to use appropriate efforts to solicit orders for the sale of shares and to undertake such advertising and promotion as it believes appropriate in connection with such solicitation. Pursuant to the Distribution Agreement, the Distributor, at its own expense, finances those activities which are primarily intended to result in the sale of shares of the Fund, including, but not limited to, advertising, compensation of underwriters, dealers and sales personnel, the printing of prospectuses to other than existing shareholders, and the printing and mailing of sales literature. The Distributor, however, may be reimbursed for all or a portion of such expenses to the extent permitted by a distribution plan adopted by the Trust pursuant to Rule 12b-1 under the 1940 Act.
The Distribution Agreement will continue year to year as long as such continuance is approved at least annually by (i) the Board of Trustees or a vote of the majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund and (ii) a majority of the trustees who are not parties to the Distribution Agreement or "interested persons" of any such party by a vote cast in person at a meeting called for such purpose. The Distribution Agreement is not assignable and is terminable with respect to the Fund, without penalty, on 60 days' notice by the Board of Directors/Trustees, the vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, or by the Distributor.
INDEPENDENT ACCOUNTANTS AND REPORTS
The Trust issues unaudited financial information semi-annually and audited financial statements annually. The Trust furnishes proxy statements and other shareholder reports to shareholders of record.
The annual financial statements will be audited by the Trust's independent accountant. The Board of Trustees has selected PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New York 10036, as the Trust's independent accountant to audit the Trust's books and review the Trust's tax returns for the Fund's fiscal year ended March 31, 2000.
Because the Trust is a newly registered investment company, it has not yet issued any annual or semi-annual shareholder reports.
COUNSEL
Morrison & Foerster LLP serves as legal counsel to the Trust. Their address is 2000 Pennsylvania Avenue, N.W., Washington, D.C. 20006.
FUND TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Trustees of the Trust, the Adviser is responsible for decisions to buy and sell securities for the Fund, for the selection of broker/dealers, for the execution of the Fund's securities transactions, and for the allocation of brokerage fees in connection with such transactions. The Adviser's primary consideration in effecting a security transaction is to obtain the best net price and the most favorable execution of the order. Purchases and sales of securities on a securities exchange are effected through brokers who charge a negotiated commission for their services. Orders may be directed to any broker to the extent and in the manner permitted by applicable law.
In the over-the-counter market, securities are generally traded on a "net" basis with dealers acting as principal for their own accounts without stated commissions, although the price of a security usually includes a profit to the dealer. In underwritten offerings, securities are purchased at a fixed price that includes an amount of compensation to the underwriter, generally referred to as the underwriter's concession or discount. On occasion, certain money market instruments may be purchased directly from an issuer, in which case no commissions or discounts are paid.
In placing orders for portfolio securities of the Fund, the Adviser is required to give primary consideration to obtaining the most favorable price and efficient execution. This means that the Adviser will seek to execute each transaction at a price and commission, if any, which provide the most favorable total cost or proceeds reasonably attainable in the circumstances. In seeking such execution, the Adviser will use its best judgment in evaluating the terms of a transaction, and will give consideration to various relevant factors, including, without limitation, the size and type of the transaction, the nature and character of the market for the security, the confidentiality, speed and certainty of effective execution required for the transaction, the general execution and operational capabilities of the broker-dealer, the reputation, reliability, experience and financial condition of the firm, the value and quality of the services rendered by the firm in this and other transactions and the reasonableness of the spread or commission, if any. In addition, the Adviser will consider research and investment services provided by brokers or dealers who effect or are parties to portfolio transactions of the Fund, the Adviser or its other clients. Such research and investment services are those which brokerage houses customarily provide to institutional investors and include statistical and economic data and research reports on particular companies and industries. Such services are used by the Adviser in connection with all of its investment activities, and some of such services obtained in connection with the execution of transactions for the Fund may be used in managing other investment accounts. Conversely, brokers furnishing such services may be selected for the execution of transactions of such other accounts, whose aggregate assets are far larger than those of the Fund. Services furnished by such brokers may be used by the Adviser in providing investment advisory and investment management services for the Trust.
Commission rates are established pursuant to negotiations with the broker based on the quality and quantity of execution services provided by the broker in the light of generally prevailing rates. The allocation of orders among brokers and the commission rates paid are reviewed periodically by the Trustees of the Trust. On exchanges on which commissions are negotiated, the cost of transactions may vary among different brokers. Transactions on foreign stock exchanges involve payment of brokerage commissions which are generally fixed. Transactions in both foreign and domestic over-the-counter markets are generally principal transactions with dealers, and the costs of such transactions involve dealer spreads rather than brokerage commissions. With respect to over-the-counter transactions, the Adviser, where possible, will deal directly with dealers who make a market in the securities involved except in those circumstances in which better prices and execution are available elsewhere.
In certain instances there may be securities which are suitable for more than one series as well as for one or more of the other clients of the Adviser. Investment decisions for each Fund and for the Adviser's other clients are made with the goal of achieving their respective investment objectives. It may happen that a particular security is bought or sold for only one client even though it may be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more other clients are selling that same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could have a detrimental effect on the price or volume of the security in a particular transaction as far as the Fund is concerned. The Trust believes that over time their ability to participate in volume transactions will produce superior executions for the Fund.
The portfolio turnover rate for each Fund is calculated by dividing the lesser of purchases or sales of portfolio securities for the reporting period by the monthly average value of the portfolio securities owned during the reporting period. The calculation excludes all securities, including options, whose maturities or expiration dates at the time of acquisition are one year or less. Portfolio turnover may vary greatly from year to year as well as within a particular year, and may be affected by cash requirements for redemption of shares and by requirements which enable the Fund to receive favorable tax treatment.
The Fund may participate, if and when practicable, in bidding for the purchase of portfolio securities directly from an issuer in order to take advantage of the lower purchase price available to members of a bidding group. The Fund will engage in this practice, however, only when the Adviser, in its sole discretion, believes such practice to be otherwise in the Fund's interests.
The Trust will not execute portfolio transactions through, or purchase or sell portfolio securities from or to the distributor, the Adviser, the administrator, the co-administrator or their affiliates, acting as principal (including repurchase and reverse repurchase agreements), except to the extent permitted by applicable law. In addition, the Trust will not give preference to correspondents of Bank of America or its affiliates, with respect to such transactions or securities. (However, the Adviser is authorized to allocate purchase and sale orders for portfolio securities to certain financial institutions, including, in the case of agency transactions, financial institutions which are affiliated with Bank of America or its affiliates, and to take into account the sale of Fund shares if the Adviser believes that the quality of the transaction and the commission are comparable to what they would be with other qualified brokerage firms.) In addition, the Fund will not purchase securities during the existence of any underwriting or selling group relating thereto of which the distributor, the Adviser, the administrator, or the co-administrator, or any of their affiliates, is a member, except to the extent permitted by the SEC. Under certain circumstances, the Fund may be at a disadvantage because of these limitations in comparison with other investment companies which have similar investment objectives but are not subject to such limitations.
Certain affiliates of Bank of America Corporation and its subsidiary banks may have deposit, loan or commercial banking relationships with the corporate users of facilities financed by industrial development revenue bonds or private activity bonds that the Fund may purchase. Bank of America or certain of its affiliates may serve as trustee, tender agent, guarantor, placement agent, underwriter, or in some other capacity, with respect to certain issues of municipal securities.
Under the 1940 Act, persons affiliated with the Trust are prohibited from dealing with the Trust as a principal in the purchase and sale of securities unless an exemptive order allowing such transactions is obtained from the SEC. The Fund may purchase securities from underwriting syndicates of which Bank of America or any of its affiliates is a member under certain conditions, in accordance with the provisions of a rule adopted under the 1940 Act and any restrictions imposed by the Board of Governors of the Federal Reserve System.
Investment decisions for each Fund are made independently from those for the Trust's other investment portfolios, other investment companies, and accounts advised or managed by the Adviser. Such other investment portfolios, investment companies, and accounts may also invest in the same securities as the Fund. When a purchase or sale of the same security is made at substantially the same time on behalf of one or more of the Fund and another investment portfolio, investment company, or account, the transaction will be averaged as to price and available investments allocated as to amount, in a manner which the Adviser believes to be equitable to the Fund and such other investment portfolio, investment company or account. In some instances, this investment procedure may adversely affect the price paid or received by the Fund or the size of the position obtained or sold by the Fund. To the extent permitted by law, the Adviser may aggregate the securities to be sold or purchased for the Fund with those to be sold or purchased for other investment portfolios, investment companies, or accounts in executing transactions.
Because the Trust is a new registered investment company, it has not yet paid any brokerage commissions.
SECTION 28(E) STANDARDS
Under Section 28(e) of the Securities Exchange Act of 1934, the Adviser
shall not be "deemed to have acted unlawfully or to have breached its fiduciary
duty" solely because under certain circumstances it has caused the account to
pay a higher commission than the lowest available. To obtain the benefit of
Section 28(e), the Adviser must make a good faith determination that the
commissions paid are "reasonable in relation to the value of the brokerage and
research services provided ...viewed in terms of either that particular
transaction or its overall responsibilities with respect to the accounts as to
which it exercises investment discretion and that the services provided by a
broker provide an adviser with lawful and appropriate assistance in the
performance of its investment decision making responsibilities." Accordingly,
the price to the Fund in any transaction may be less favorable than that
available from another broker/dealer if the difference is reasonably justified
by other aspects of the portfolio execution services offered.
Broker/dealers utilized by the Adviser may furnish statistical, research and other information or services which are deemed by the Adviser to be beneficial to the Fund's investment programs. Research services received from brokers supplement the Adviser's own research and may include the following types of information: statistical and background information on industry groups and individual companies; forecasts and interpretations with respect to U.S. and foreign economies, securities, markets, specific industry groups and individual companies; information on political developments; fund management strategies; performance information on securities and information concerning prices of securities; and information supplied by specialized services to the Adviser and to the Trust's Directors/Trustees with respect to the performance, investment activities and fees and expenses of other mutual funds. Such information may be communicated electronically, orally or in written form. Research services may also include the providing of equipment used to communicate research information, the arranging of meetings with management of companies and the providing of access to consultants who supply research information.
The outside research assistance is useful to the Adviser since the brokers utilized by the Adviser as a group tend to follow a broader universe of securities and other matters than the Adviser's staff can follow. In addition, this research provides the Adviser with a diverse perspective on financial markets. Research services which are provided to the Adviser by brokers are available for the benefit of all accounts managed or advised by the Adviser. In some cases, the research services are available only from the broker providing such services. In other cases, the research services may be obtainable from alternative sources in return for cash payments. The Adviser is of the opinion that because the broker research supplements rather than replaces its research, the receipt of such research does not tend to decrease its expenses, but tends to improve the quality of its investment advice. However, to the extent that the Adviser would have purchased any such research services had such services not been provided by brokers, the expenses of such services to the Adviser could be considered to have been reduced accordingly. Certain research services furnished by broker/dealers may be useful to the Adviser with clients other than the Fund. Similarly, any research services received by the Adviser through the placement of fund transactions of other clients may be of value to the Adviser in fulfilling its obligations to the Fund. The Adviser is of the opinion that this material is beneficial in supplementing its research and analysis; and, therefore, it may benefit the Trust by improving the quality of the Adviser's investment advice. The advisory fees paid by the Trust are not reduced because the Adviser receives such services.
Some broker/dealers may indicate that the provision of research services is dependent upon the generation of certain specified levels of commissions and underwriting concessions by the Adviser's clients, including the Fund.
DESCRIPTION OF SHARES
DESCRIPTION OF SHARES OF THE TRUST
The Trust's Board of Trustees has authorized the issuance of the classes of shares of the Fund indicated above and may, in the future, authorize the creation of additional investment portfolios or classes of shares.
The Board may classify or reclassify any unissued shares of the Trust into shares of any class, classes or Fund in addition to those already authorized by setting or changing in any one or more respects, from time to time, prior to the issuance of such shares, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption, of such shares and, pursuant to such classification or reclassification to increase or decrease the number of authorized shares of any Fund or class. Any such classification or reclassification will comply with the provisions of the 1940 Act. Fractional shares shall have the same rights as full shares to the extent of their proportionate interest.
All shares of the Fund have equal voting rights and will be voted in the aggregate, and not by series, except where voting by a series is required by law or where the matter involved only affects one series. For example, a change in the Fund's fundamental investment policy would be voted upon only by shareholders of the Fund involved. Shareholders are entitled to one votE for each full share held and fractional votes for fractional shares held.
The Trust may dispense with an annual meeting of shareholders in any year in which it is not required to elect Trustees under the 1940 Act. The Trust will hold a special meeting of its shareholders for the purpose of voting on the question of removal of a Board member, only to the extent required by the 1940 Act.
Each share of the Fund represents an equal proportional interest in the Fund with each other share and is entitled to such dividends and distributions out of the income earned on the assets belonging to the Fund, as are declared in the discretion of the Board members. In the event of the liquidation or dissolution of the Trust, shareholders of the Fund are entitled to receive the assets attributable to the Fund that are available for distribution, and a distribution of any general assets not attributable to a particular Fund that are available for distribution in such manner and on such basis as the Board members in their sole discretion may determine.
Shareholders are not entitled to any preemptive rights. All shares, when issued, will be fully paid and non-assessable by the Trust.
Net investment income for the Fund for dividend purposes consists of
(i) interest accrued and original issue discount earned on the Fund's assets,
(ii) plus the amortization of market discount and minus the amortization of
market premium on such assets, (iii) less accrued expenses directly attributable
to the Fund and the general expenses of the Trust prorated to the Fund on the
basis of its relative net assets, plus dividend or distribution income on the
Fund's assets.
Prior to purchasing shares in the Fund, the impact of dividends or distributions which are expected to be or have been declared, but not paid, should be carefully considered. Any dividend or distribution declared shortly after a purchase of such shares prior to the record date will have the effect of reducing the per share net asset value by the per share amount of the dividend or distribution. All or a portion of such dividend or distribution, although in effect a return of capital, may be subject to tax.
Shareholders receiving a distribution in the form of additional shares will be treated as receiving an amount equal to the fair market value of the shares received, determined as of the reinvestment date.
The Fund uses the so-called "equalization accounting method" to allocate a portion of earnings and profits to redemption proceeds. This method permits a fund to achieve more balanced distributions for both continuing and departing shareholders. Continuing shareholders should realize tax savings or deferrals through this method, and departing shareholders will not have their tax obligations change. Although using this method will not affect the Fund's total returns, it may reduce the amount that otherwise would be distributable to continuing shareholders by reducing the effect of redemptions on dividend and distribution amounts.
NET ASSET VALUE DETERMINATION
With respect to the Fund, a security listed or traded on an exchange is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the mean between the closing bid and asked prices on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued at the mean between the last bid and asked prices based upon quotes furnished by market makers for such securities. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date.
Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Trust's officers in a manner specifically authorized by the Board of Trustees of the Trust. Short-Term obligations having 60 days or less to maturity are valued at amortized cost, which approximates market value.
Generally, trading in foreign securities, as well as U.S. Government securities, money market instruments and repurchase agreements, is substantially completed each day at various times prior to the close of the New York Stock Exchange. The values of such securities used in computing the net asset value of the shares of the Fund are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the New York Stock Exchange. Occasionally, events affecting the value of such securities and such exchange rates may occur between the times at which they are determined and the close of the New York Stock Exchange, which will not be reflected in the computation of net asset value. If during such periods events occur which materially affect the value of such securities, the securities will be valued at their fair market value as determined in good faith by the Trustees.
The Trust may redeem shares involuntarily to reimburse the Fund for any loss sustained by reason of the failure of a shareholder to make full payment for Investor Shares purchased by the shareholder or to collect any charge relating to a transaction effected for the benefit of a shareholder which is applicable to Investor Shares as provided in the related prospectuses from time to time. The Trust also may make payment for redemptions in readily marketable securities or other property if it is appropriate to do so in light of the Trust's responsibilities under the 1940 Act.
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment for Shares during any period when (a) trading on
the Exchange is restricted by applicable rules and regulations of the SEC; (b)
the Exchange is closed for other than customary weekend and holiday closings;
(c) the SEC has by order permitted such suspension; or (d) an emergency exists
as determined by the SEC. (The Fund also may suspend or postpone the recordation
of the transfer of its shares upon the occurrence of any of the foregoing
conditions.)
ADDITIONAL INFORMATION CONCERNING TAXES
The following information supplements and should be read in conjunction with the prospectuses. The prospectuses of the Fund describe generally the tax treatment of distributions by the Fund. This section of the SAI includes additional information concerning Federal income taxes.
GENERAL
The Trust intends to qualify each Fund as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), as long as such qualification is in the best interest of the Fund's shareholders. Each Fund will be treated as a separate entity for tax purposes and, thus, the provisions of the Code applicable to regulated investment companies generally will be applied to each Fund, rather than to the Trust as a whole. In addition, net capital gain, net investment income, and operating expenses will be determined separately for each Fund. As a regulated investment company, each Fund will not be taxed on its net investment income and capital gains distributed to shareholders.
Qualification as a regulated investment company under the Code requires, among other things, that (a) each Fund derive at least 90% of its annual gross income from dividends, interest, certain payments with respect to securities loans, gains from the sale or other disposition of stock or securities or foreign currencies (to the extent such currency gains are directly related to the regulated investment company's principal business of investing in stock or securities) and other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business of investing in such stock, securities or currencies; and (b) the Fund diversify its holdings so that, at the end of each quarter of the taxable year, (i) at least 50% of the market value of the Fund's assets is represented by cash, government securities and other securities limited in respect of any one issuer to an amount not greater than 5% of the Fund's assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. Government obligations and the securities of other regulated investment companies), or in two or more issuers which the Fund controls and which are determined to be engaged in the same or similar trades or businesses.
Each Fund also must distribute or be deemed to distribute to its shareholders at least 90% of its net investment income which, for this purpose, includes net short-term capital gains and certain other items earned in each taxable year. In general, these distributions must actually or be deemed to be made in the taxable year. However, in certain circumstances, such distributions may be made in the 12 months following the taxable year. Furthermore, distributions declared in October, November or December of one taxable year and paid by January 31 of the following taxable year will be treated as paid by December 31 the first taxable year. The Fund intends to pay out substantially all of its net investment income and net capital gain (if any) for each year.
EXCISE TAX
A 4% nondeductible excise tax will be imposed on each Fund (other than to the extent of its tax-exempt interest income) to the extent it does not meet certain minimum distribution requirements by the end of each calendar year. Each Fund intends to actually or be deemed to distribute substantially all of its net investment income and net capital gain by the end of each calendar year and, thus, expects not to be subject to the excise tax.
FOREIGN TAXES
Income and dividends received by the Fund from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes. An individual with $300 or less of creditable foreign taxes generally is exempt from foreign source income and certain other limitations imposed by the Code on claiming a credit for such taxes. The $300 amount is increased to $600 for joint filers.
CAPITAL GAIN DISTRIBUTIONS
Distributions which are designated by the Fund as capital gain distributions will be taxed to shareholders as long-term term capital gain (to the extent such distributions equal or exceed the Fund's/Master Portfolio's actual net capital gains for the taxable year), regardless of how long a shareholder has held Fund shares. Such distributions will be designated as capital gain distributions in a written notice mailed by the Fund to its shareholders not later than 60 days after the close of the Fund's taxable year.
DISPOSITION OF FUND SHARES
A disposition of Fund shares pursuant to a redemption (including a redemption in-kind) or an exchange will ordinarily result in a taxable capital gain or loss, depending on the amount received for the shares (or are deemed to be received in the case of an exchange) and the cost of the shares.
If a shareholder exchanges or otherwise disposes of Fund shares within 90 days of having acquired such shares and if, as a result of having acquired those shares, the shareholder subsequently pays a reduced sales charge on a new purchase of shares of the Fund or a different regulated investment company, the sales charge previously incurred in acquiring the Fund's shares shall not be taken into account (to the extent such previous sales charges do not exceed the reduction in sales charges on the new purchase) for the purpose of determining the amount of gain or loss on the disposition, but will be treated as having been incurred in the acquisition of such other shares. Also, any loss realized on a redemption or exchange of shares of the Fund will be disallowed to the extent that substantially identical shares are acquired within the 61-day period beginning 30 days before and ending 30 days after the shares are disposed of.
If a shareholder receives a capital gain distribution with respect to any Fund share and the Fund share is held for six months or less, then (unless otherwise disallowed) any loss on the sale or exchange of that Fund share will be treated as a long-term capital loss to the extent of the capital gain distribution. In addition, if a shareholder holds Fund shares for six months or less, any loss on the sale or exchange of those shares will be disallowed to the extent of the amount of exempt-interest dividends received with respect to the shares. The Treasury Department is authorized to issue regulations reducing the six months holding requirement to a period of not less than the greater of 31 days or the period between regular distributions where the Fund regularly distributes at least 90% of its net tax-exempt interest, if any. No such regulations have been issued as of the date of this SAI. The loss disallowance rules described in this paragraph do not apply to losses realized under a periodic redemption plan.
FEDERAL INCOME TAX RATES
As of the printing of this SAI, the maximum individual tax rate applicable to ordinary income is 39.6% (marginal tax rates may be higher for some individuals to reduce or eliminate the benefit of exemptions and deductions); the maximum individual marginal tax rate applicable to net capital gain is 20%; and the maximum corporate tax rate applicable to ordinary income and net capital gain is 35% (marginal tax rates may be higher for some corporations to reduce or eliminate the benefit of lower marginal income tax rates). Naturally, the amount of tax payable by an individual or corporation will be affected by a combination of tax laws covering, for example, deductions, credits, deferrals, exemptions, sources of income and other matters.
CORPORATE SHAREHOLDERS
Corporate shareholders of the Fund may be eligible for the dividends-received deduction on distributions attributable to dividends received from domestic corporations, which, if received directly by the corporate shareholder, would qualify for such deduction. A distribution by the Fund attributable to dividends of a domestic corporation will only qualify for the dividends-received deduction if (i) the corporate shareholder generally holds the Fund shares upon which the distribution is made for at least 46 days during the 90 day period beginning 45 days prior to the date upon which the shareholder becomes entitled to the distribution; and (ii) the Fund generally holds the shares of the domestic corporation producing the dividend income for at least 46 days during the 90 day period beginning 45 days prior to the date upon which the Fund becomes entitled to such dividend income.
FOREIGN SHAREHOLDERS
Under the Code, distributions of net investment income by the Fund to a nonresident alien individual, foreign trust (I.E., trust which a U.S. court is able to exercise primary supervision over administration of that trust and one or more U.S. persons have authority to control substantial decisions of that trust), foreign estate (I.E., the income of which is not subject to U.S. tax regardless of source), foreign corporation, or foreign partnership (each a "foreign shareholder") will be subject to U.S. withholding tax (at a rate of 30% or a lower treaty rate if applicable). Withholding will not apply if a distribution paid by the Fund to a foreign shareholder is "effectively connected" with a U.S. trade or business (or, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the foreign shareholder), in which case the reporting and withholding requirements applicable to U.S. persons will apply. Distributions of net long-term capital gains are generally not subject to tax withholding.
BACKUP WITHHOLDING
The Trust may be required to withhold, subject to certain exemptions, at a rate of 31% ("backup withholding") on dividends, capital gain distributions, and redemption proceeds (including proceeds from exchanges and redemptions in-kind) paid or credited to an individual Fund shareholder, if the shareholder fails to certify that the Taxpayer Identification Number ("TIN") provided is correct and that the shareholder is not subject to backup withholding, or the IRS notifies the Trust that the shareholder's TIN is incorrect or that the shareholder is subject to backup withholding. Such tax withheld does not constitute any additional tax imposed on the shareholder, and may be claimed as a tax payment on the shareholder's Federal income tax return. An investor must provide a valid TIN upon opening or reopening an account. Failure to furnish a valid TIN to the Trust could subject the investor to penalties imposed by the IRS.
OTHER MATTERS
Investors should be aware that the investments to be made by the Fund may involve sophisticated tax rules that may result in income or gain recognition by the Fund without corresponding current cash receipts. Although the Fund will seek to avoid significant noncash income, such noncash income could be recognized by the Fund, in which case the Fund may distribute cash derived from other sources in order to meet the minimum distribution requirements described above.
The foregoing discussion and the discussions in the prospectus applicable to each shareholder address only some of the Federal tax considerations generally affecting investments in the Fund. Each investor is urged to consult his or her tax advisor regarding specific questions as to Federal, state, local or foreign taxes.
ADDITIONAL INFORMATION ON PERFORMANCE
Yield information and other performance information for the Fund may be obtained by calling (800) 321-7854. From time to time, the yield and total return of the Fund's Shares may be quoted in advertisements, shareholder reports, and other communications to shareholders. Quotations of yield and total return reflect only the performance of a hypothetical investment in the Fund or class of shares during the particular time period shown. Yield and total return vary based on changes in the market conditions and the level of the Fund's expenses, and no reported performance figure should be considered an indication of performance which may be expected in the future.
Standardized performance for the Fund, I.E., that required in both form and content by Form N-1A, is shown below and may be advertised by the Fund. The main purpose of standardized performance is to allow an investor to review the performance of the Fund's class of shares and compare such performance with that of investment alternatives, including other mutual funds.
Non-standardized performance also may be advertised by the Fund. One purpose of providing non-standardized performance to an investor is to provide that investor with a different snapshot of the Fund's performance that may not be captured by standardized performance. The non-standardized performance of the Fund's class of shares, however, may not be directly comparable to the performance of investment alternatives because of differences in certain variables (such as the length of time over which performance is shown and the exclusion of certain charges or expenses) and methods used to value portfolio securities, compute expenses and calculate performance. Non-standardized performance may include, but is not limited to, performance for non-standardized periods, including year-to-date and other periods less than a year, performance not reflecting the deduction of certain charges, fees and/or expenses, and performance reflecting the deduction of applicable state or federal taxes. After-tax returns are generally calculated using the same methodology as that used in calculating total return, except that such after-tax returns reflect the deduction of taxes according to applicable federal income and capital gain tax rates attributable to dividends, distributions and an investor's redemptions. Of course, after-tax returns for individual investors will vary as the tax rates applicable to such investors vary. In addition, the Fund may also advertise their tax efficiency ratios and compare those ratios with other mutual funds. A tax efficiency ratio is intended to let an investor know how tax efficient a fund has been over a period of time, and is typically related to its portfolio turnover rate. That is, an investor could expect that the higher the Fund's portfolio turnover rate, the greater the percentage of its gains that would have been realized and consequently, the less tax efficient it was over a given period of time.
In general, comparisons to other mutual funds or investment alternatives may be useful to investors who wish to compare past performance of the Fund or a class with that of competitors. Of course, past performance cannot be a guarantee of future results.
Each Fund may quote information obtained from the Investment Company Institute, national financial publications, trade journals and other industry sources in its advertising and sales literature. In addition, the Fund also may compare the performance and yield of a class or series of shares to those of other mutual funds with similar investment objectives and to other relevant indices or to rankings prepared by independent services or other financial or industry publications that monitor the performance of mutual funds. For example, the performance and yield of a class of shares in the Fund may be compared to data prepared by Lipper Analytical Services, Inc. Performance and yield data as reported in national financial publications such as MONEY MAGAZINE, FORBES, BARRON'S, THE WALL STREET JOURNAL, and THE NEW YORK TIMES, OR in publications of a local or regional nature, also may be used in comparing the performance of a class of shares in the Fund. The "yield" and "effective yield" of each class of shares of a Money Market Fund may be compared to the respective averages compiled by DONOGHUE'S MONEY FUND REPORT, a widely recognized independent publication that monitors the performance of money market funds, or to the average yields reported by the BANK RATE MONITOR for money market deposit accounts offered by leading banks and thrift institutions in the top five metropolitan statistical areas.
The Fund also may use the following information in advertisements and other types of literature, only to the extent the information is appropriate for the Fund: (i) the Consumer Price Index may be used to assess the real rate of return from an investment in the Fund; (ii) other government statistics, including, but not limited to, The Survey of Current Business, may be used to illustrate investment attributes of the Fund or the general economic, business, investment, or financial environment in which the Fund operates; (iii) the effect of tax-deferred compounding on the investment returns of the Fund, or on returns in general, may be illustrated by graphs, charts, etc., where such graphs or charts would compare, at various points in time, the return from an investment in the Fund (or returns in general) on a tax-deferred basis (assuming reinvestment of capital gains and dividends and assuming one or more tax rates) with the return on a taxable basis; and (iv) the sectors or industries in which the Fund invests may be compared to relevant indices of stocks or surveys (E.G., S&P Industry Surveys) to evaluate the Fund's historical performance or current or potential value with respect to the particular industry or sector. In addition, the performance of the Fund's class of shares may be compared to the Standard & Poor's 500 Stock Index, an unmanaged index of a group of common stocks, the Consumer Price Index, the Dow Jones Industrial Average, a recognized unmanaged index of common stocks of 30 industrial companies listed on the New York Stock Exchange, the Europe, Far East and Australia Index, a recognized unmanaged index of international stocks, or any similar recognized index. The performance of the Fund's class of shares also may be compared to a composite index prepared by the Adviser, an affiliate of the Adviser, or an unaffiliated party to the Adviser.
In addition, the Fund also may use, in advertisements and other types of literature, information and statements: (1) showing that bank savings accounts offer a guaranteed return of principal and a fixed rate of interest, but no opportunity for capital growth; and (2) describing Bank of America, and its affiliates and predecessors, as one of the first investment managers to advise investment accounts using asset allocation and index strategies. The Fund also may include in advertising and other types of literature information and other data from reports and studies prepared by the Tax Foundation, including information regarding federal and state tax levels and the related "Tax Freedom Day."
The Fund also may discuss in advertising and other types of literature that the Fund has been assigned a rating by an NRSRO, such as Standard & Poor's Corporation. Such rating would assess the creditworthiness of the investments held by the Fund. The assigned rating would not be a recommendation to purchase, sell or hold the Fund's shares since the rating would not comment on the market price of the Fund's shares or the suitability of the Fund for a particular investor. In addition, the assigned rating would be subject to change, suspension or withdrawal as a result of changes in, or unavailability of, information relating to the Fund or its investments. The Fund may compare the Fund's performance with other investments which are assigned ratings by NRSROs. Any such comparisons may be useful to investors who wish to compare the Fund's past performance with other rated investments.
The Fund also may disclose in sales literature the distribution rate on the shares of the Fund. Distribution rate, which may be annualized, is the amount determined by dividing the dollar amount per share of the most recent dividend by the most recent NAV or maximum offering price per share as of a date specified in the sales literature. Distribution rate will be accompanied by the standard 30-day yield as required by the SEC.
In addition, certain potential benefits of investing in world securities markets may be discussed in promotional materials. Such benefits include, but are not limited to: a) the expanded opportunities for investment in securities markets outside the U.S.; b) the growth of securities markets outside the U.S. vis-a-vis U.S. markets; c) the relative return associated with foreign securities markets vis-a-vis U.S. markets; and d) a reduced risk of portfolio volatility resulting from a diversified securities portfolio consisting of both U.S. and foreign securities.
IBBOTSON DATA. Ibbotson Associates of Chicago, Illinois, ("Ibbotson") provides historical returns of the capital markets in the United States. The Fund may compare the performance of their share classes or series to the long-term performance of the U.S. capital markets in order to demonstrate general long-term risk versus reward investment scenarios. Performance comparisons could also include the value of a hypothetical investment in common stocks, long-term bonds or treasuries.
The capital markets tracked by Ibbotson are common stocks, small capitalization stocks, long-term corporate bonds, intermediate-term government bonds, long-term government bonds, Treasury Bills, and the U.S. rate of inflation. These capital markets are based on the returns of several different indices. For common stocks, the S&P is used. For small capitalization stocks, return is based on the return achieved by Dimensional Fund Advisors (DFA) Small Company Fund. This fund is a market-value-weighted index of the ninth and tenth deciles of the Exchange, plus stocks listed on the American Stock Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization as the upperbound of the Exchange ninth docile. At year-end 199, the DFA Small Company Fund contained approximately 2,663 stocks, with a weighted average market capitalization of $16.7 million. The unweighted average market capitalization was $82.97 million, while the median was $6.0 million.
Unlike an investment in a common stock mutual fund, an investment in bonds that are held to maturity provides a fixed and stated rate of return. Bonds have a senior priority in liquidation or bankruptcy to common stocks, and interest on bonds is generally paid from assets of the corporation before any distributions to common shareholders. Bonds rated in the two highest rating categories are considered high quality and to present minimal risks of default. See Schedule A for a more complete explanation of these ratings of corporate bonds. An advantage of investing in government bonds is that, in many cases, they are backed by the credit and taxing power of the United States government, and therefore, such securities may present little or no risk of default. Although government securities fluctuate in price, they are highly liquid and may be purchased and sold with relatively small transaction costs (direct purchase of Treasury securities can be made with no transaction costs).
Long-term corporate bond returns are based on the performance of the Salomon Brothers Long-Term-High-Grade Corporate Bond Index and include nearly all "Aaa-" and "Aa-" rated bonds. Returns on intermediate-term government bonds are based on a one-bond portfolio constructed each year, containing a bond which is the shortest noncallable bond available with a maturity not less than 5 years. This bond is held for the calendar year and returns are recorded. Returns on long-term government bonds are based on a one-bond portfolio constructed each year, containing a bond that meets several criteria, including having a term of approximately 20 years. The bond is held for the calendar year and returns are recorded. Returns on U.S. Treasury Bills are based on a one-bill portfolio constructed each month, containing the shortest-term bill having not less than one month to maturity. The total return on the bill is the month end price divided by the previous month-end price, minus one. Data up to 1976 is from the U.S. Government Bond file at the University of Chicago's Center for Research in Security Prices; the Wall Street Journal is the source thereafter. Inflation rates are based on the CPI. Ibbotson calculates total returns in the same method as the Fund.
YIELD CALCULATIONS
Income calculated for the purposes of calculating the Fund's yield differs from income as determined for other accounting purposes. Because of the different accounting methods used, and because of the compounding assumed in yield calculations, the yield quoted for the Fund may differ from the rate of distributions the Fund paid over the same period or the rate of income reported in the Fund's financial statements.
Yield is calculated separately for the Primary A, Investor A, Investor B and Investor C Shares of the Fund by dividing the net investment income per share for a particular class or series of shares (as described below) earned during a 30-day period by the maximum offering price per share on the last day of the period (for Primary A, maximum offering price per share is the same as the net asset value per share) and annualizing the result on a semi-annual basis by adding one to the quotient, raising the sum to the power of six, subtracting one from the result and then doubling the difference. For a class or series of shares in the Fund, net investment income per share earned during the period is based on the average daily number of shares outstanding during the period entitled to receive dividends and includes dividends and interest earned during the period minus expenses accrued for the period, net of reimbursements. This calculation can be expressed as follows:
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = maximum offering price per share on the last day
of the period (again, for Primary A Shares, this
is equivalent to net asset value per share).
|
For the purpose of determining net investment income earned during the period (variable- "a" in the formula), dividend income on equity securities held by the Fund is recognized by accruing 1/360 of the stated dividend rate of the security each day that the security is in the portfolio. Each Fund calculates interest earned on any debt obligations held in its portfolio by computing the yield to maturity of each obligation held by it based on the market value of the obligation (including actual accrued interest) at the close of business on the last business day of each month, or, with respect to obligations purchased during the month, the purchase price (plus actual accrued interest) and dividing the result by 360 and multiplying the quotient by the market value of the obligation (including actual accrued interest) in order to determine the interest income on the obligation for each day of the subsequent month that the obligation is in the portfolio. For purposes of this calculation, it is assumed that each month contains 30 days. The maturity of an obligation with a call provision is the next call date on which the obligation reasonably may be expected to be called or, if none, the maturity date. With respect to debt obligations purchased at a discount or premium, the formula generally calls for amortization of the discount or premium. The amortization schedule will be adjusted monthly to reflect changes in the market values of such debt obligations.
Expenses accrued for the period (variable "b" in the formula) include recurring fees charged by Nations Funds to shareholder accounts in proportion to the length of the base period. Undeclared earned income will be subtracted from the maximum offering price per share (which for Primary A Shares is net asset value per share) (variable "d" in the formula). Undeclared earned income is the net investment income which, at the end of the base period, has not been declared as a dividend, but is reasonably expected to be and is declared as a dividend shortly thereafter. The Fund's maximum offering price per share for purposes of the formula includes the maximum sales charge, if any, imposed by the Fund, as reflected in the Fund's prospectus.
The Fund may provide additional yield calculations in communications (other than advertisements) to the holders of Primary A, Investor A, Investor B or Investor C Shares. These may be calculated based on the Primary A, Investor A, Investor B or Investor C Shares' net asset values per share (rather than their maximum offering prices) on the last day of the period covered by the yield computations. That is, some communications provided to the holders of Primary A, Investor A, Investor B or Investor C Shares may also include additional yield calculations prepared for the holders of Primary A Shares. Such additional quotations, therefore, will not reflect the effect of the sales charges mentioned above.
Because the Fund is a new series its does not yet have any historical yield performance.
TOTAL RETURN CALCULATIONS
Total return measures both the net investment income generated by, and the effect of any realized or unrealized appreciation or depreciation of the underlying investments in the Fund. The Fund's average annual and cumulative total return figures are computed in accordance with the standardized methods prescribed by the SEC. Average annual total return figures are computed by determining the average annual compounded rates of return over the periods indicated in the advertisement, sales literature or shareholders' report that would equate the initial amount invested to the ending redeemable value, according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period.
|
This calculation (i) assumes all dividends and distributions are reinvested at net asset value on the appropriate reinvestment dates, and (ii) deducts (a) the maximum sales charge from the hypothetical initial $1,000 investment, and (b) all recurring fees, such as advisory and administrative fees, charged as expenses to all shareholder accounts. All performance calculations for the period ended March 31, 1999, reflect the deduction of sales charges, if any, that would have been deducted from a sale of shares.
Cumulative total return is based on the overall percentage change in value of a hypothetical investment in the Fund, assuming all Fund dividends and capital gain distributions are reinvested, without reflecting the effect of any sales charge that would be paid by an investor, and is not annualized.
Cumulative total return is computed by finding the cumulative compounded rate of return over the period indicated in the advertisement that would equate the initial amount invested to the ending redeemable value, according to the following formula:
P
Where: CTR = Cumulative total return
ERV = ending redeemable value at the end of the period of a
hypothetical $1,000 payment made at the beginning of such
period
P = initial payment of $1,000.
|
This calculation (i) assumes all dividends and distributions are reinvested at net asset value on the appropriate reinvestment dates, and (ii) deducts (a) the maximum sales charge from the hypothetical initial $1,000 investment, and (b) all recurring fees, such as advisory and administrative fees, charged as expenses to all shareholder accounts.
Because the Fund is a new series it does not yet have any historical return performance.
MISCELLANEOUS
CERTAIN RECORD HOLDERS
The name, address and percentage of ownership of each person who is known by the Trust that will own of record or beneficially five percent or more of the Fund as of its commencement of operations is:
Class; Amount
of Shares
Owned; Type of Percentage Percentage
Name and Address Ownership of Class of Fund
---------------- --------- -------- -------
Stephens Inc. Primary A; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor A; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor B; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor C; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Primary A; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor A; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor B; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor C; 1; 100% 25%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
54
|
Class; Amount
of Shares
Owned; Type of Percentage Percentage
Name and Address Ownership of Class of Fund
---------------- --------- -------- -------
Stephens Inc. Primary A; 1; 100% 50%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
Stephens Inc. Investor A; 1; 100% 50%
111 Center Street Record and
Little Rock, AR 72201 Beneficial
|
SCHEDULE A
DESCRIPTION OF RATINGS
The following summarizes the highest six ratings used by Standard & Poor's Corporation ("S&P") for corporate and municipal bonds. The first four ratings denote investment-grade securities.
AAA - This is the highest rating assigned by S&P to a debt obligation and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA is considered to have a very strong capacity to pay interest and repay principal and differs from AAA issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher-rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than for those in higher-rated categories.
BB, B - Bonds rated BB and B are regarded, on balance as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to inadequate capacity to meet timely interest and principal payments. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal.
To provide more detailed indications of credit quality, the AA, A and BBB, BB and B ratings may be modified by the addition of a plus or minus sign to show relative standing within these major rating categories.
The following summarizes the highest six ratings used by Moody's Investors Service, Inc. ("Moody's") for corporate and municipal bonds. The first four denote investment grade securities.
Aaa - Bonds that are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A - Bonds that are rated A possess many favorable investment attributes and are to be considered upper medium grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade obligations, I.E., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well.
Ba - Bonds that are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not as well safeguarded during both good times and bad times over the future. Uncertainty of position characterizes bonds in this class.
B - Bond that are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to corporate bonds rated Aa through B. The modifier 1 indicates that the bond being rated ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower end of its generic rating category. With regard to municipal bonds, those bonds in the Aa, A and Baa groups which Moody's believes possess the strongest investment attributes are designated by the symbols Aa1, A1 or Baa1, respectively.
The following summarizes the highest four ratings used by Duff & Phelps Credit Rating Co. ("D&P") for bonds, each of which denotes that the securities are investment grade.
AAA - Bonds that are rated AAA are of the highest credit quality. The risk factors are considered to be negligible, being only slightly more than for risk-free U.S. Treasury debt.
AA - Bonds that are rated AA are of high credit quality. Protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.
A - Bonds that are rated A have protection factors which are average but adequate. However risk factors are more variable and greater in periods of economic stress.
BBB - Bonds that are rated BBB have below average protection factors but still are considered sufficient for prudent investment. Considerable variability in risk exists during economic cycles.
To provide more detailed indications of credit quality, the AA, A and BBB ratings may modified by the addition of a plus or minus sign to show relative standing within these major categories.
The following summarizes the highest four ratings used by Fitch Investors Service, Inc. ("Fitch") for bonds, each of which denotes that the securities are investment grade:
AAA - Bonds considered to be investment grade and of the highest credit quality. The obligor has an exceptionally strong ability to pay interest and repay principal, which is unlikely to be affected by reasonably foreseeable events.
AA - Bonds considered to be investment grade and of very high credit quality. The obligor's ability to pay interest and repay principal is very strong, although not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA categories are not significantly vulnerable to foreseeable future developments, short-term debt of these issuers is generally rated F-1+.
A - Bonds considered to be investment grade and of high credit quality. The obligor's ability to pay interest and repay principal is considered to be strong, but may be more vulnerable to adverse changes in economic conditions and circumstances than bonds with higher ratings.
BBB - Bonds considered to be investment grade and of satisfactory credit quality. The obligor's ability to pay interest and repay principal is considered to be adequate. Adverse changes in economic conditions and circumstances, however, are more likely to have adverse impact on these bonds, and therefore impair timely payment. The likelihood that the ratings of these bonds will fall below investment grade is higher than for bonds with higher ratings.
To provide more detailed indications of credit quality, the AA, A and BBB ratings may be modified by the addition of a plus or minus sign to show relative standing within these major rating categories.
The following summarizes the two highest ratings used by Moody's for short-term municipal notes and variable-rate demand obligations:
MIG-1/VMIG-1 -- Obligations bearing these designations are of the best quality, enjoying strong protection from established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing.
MIG-2/VMIG-2 -- Obligations bearing these designations are of high quality, with ample margins of protection although not so large as in the preceding group.
The following summarizes the two highest ratings used by S&P for short-term municipal notes:
SP-1 - Indicates very strong or strong capacity to pay principal and interest. Those issues determined to possess overwhelming safety characteristics are given a "plus" (+) designation.
SP-2 - Indicates satisfactory capacity to pay principal and interest.
The three highest rating categories of D&P for short-term debt, each of which denotes that the securities are investment grade, are D-1, D-2, and D-3. D&P employs three designations, D-1+, D-1 and D-1-, within the highest rating category. D-1+ indicates highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or access to alternative sources of funds, is judged to be "outstanding, and safety is just below risk-free U.S. Treasury short-term obligations." D-1 indicates very high certainty of timely payment. Liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are considered to be minor. D-1 indicates high certainty of timely payment. Liquidity factors are strong and supported by good fundamental protection factors. Risk factors are very small. D-2 indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Although ongoing funding needs may enlarge total financing requirements, access to capital markets is good. Risk factors are small. D-3 indicates satisfactory liquidity and other protection factors which qualify the issue as investment grade. Risk factors are larger and subject to more variation. Nevertheless, timely payment is expected.
The following summarizes the two highest rating categories used by Fitch for short-term obligations each of which denotes that the securities are investment grade:
F-1+ securities possess exceptionally strong credit quality. Issues assigned this rating are regarded as having the strongest degree of assurance for timely payment.
F-1 securities possess very strong credit quality. Issues assigned this rating reflect an assurance of timely payment only slightly less in degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues carrying this rating have a satisfactory degree of assurance for timely payment, but the margin of safety is not as great as for issues assigned the F-1+ and F-1 ratings.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding timely payment is strong. Those issues determined to possess extremely strong safety characteristics are denoted A-1+. Capacity for timely payment on commercial paper rated A-2 is satisfactory, but the relative degree of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by Moody's. Issuers rated Prime-1 (or related supporting institutions) are considered to have a superior capacity for repayment of senior short-term promissory obligations. Issuers rated Prime-2 (or related supporting institutions) are considered to have a strong capacity for repayment of senior short-term promissory obligations. This will normally be evidenced by many of the characteristics of issuers rated Prime-1, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained.
For commercial paper, D&P uses the short-term debt ratings described above.
For commercial paper, Fitch uses the short-term debt ratings described above.
Thomson BankWatch, Inc. ("BankWatch") ratings are based upon a qualitative and quantitative analysis of all segments of the organization including, where applicable, holding company and operating subsidiaries. BankWatch ratings do not constitute a recommendation to buy or sell securities of any of these companies. Further, BankWatch does not suggest specific investment criteria for individual clients.
BankWatch long-term ratings apply to specific issues of long-term debt and preferred stock. The long-term ratings specifically assess the likelihood of untimely payment of principal or interest over the term to maturity of the rated instrument. The following are the four investment grade ratings used by BankWatch for long-term debt:
AAA - The highest category; indicates ability to repay principal and interest on a timely basis is extremely high.
AA - The second highest category; indicates a very strong ability to repay principal and interest on a timely basis with limited incremental risk versus issues rated in the highest category.
A - The third highest category; indicates the ability to repay principal and interest is strong. Issues rated "A" could be more vulnerable to adverse developments (both internal and external) than obligations with higher ratings.
BBB - The lowest investment grade category; indicates an acceptable capacity to repay principal and interest. Issues rated "BBB" are, however, more vulnerable to adverse developments (both internal and external) than obligations with higher ratings.
Long-term debt ratings may include a plus (+) or minus (-) sign to indicate where within a category the issue is placed.
The BankWatch short-term ratings apply to commercial paper, other senior short-term obligations and deposit obligations of the entities to which the rating has been assigned. The BankWatch short-term ratings specifically assess the likelihood of an untimely payment of principal or interest.
TBW-1 The highest category; indicates a very high
likelihood that principal and interest will be paid
on a timely basis.
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded
as non-investment grade and therefore speculative.
|
The following summarizes the four highest long-term debt ratings used by IBCA Limited and its affiliate, IBCA Inc. (collectively "IBCA"):
AAA - Obligations for which there is the lowest expectation of investment risk. Capacity for timely repayment of principal and interest is substantial such that adverse changes in business, economic or financial conditions are unlikely to increase investment risk significantly.
AA - Obligations for which there is a very low expectation of investment risk. Capacity for timely repayment of principal and interest is substantial. Adverse changes in business, economic or financial conditions may increase investment risk albeit not very significantly.
A - Obligations for which there is a low expectation of investment risk. Capacity for timely repayment of principal and interest is strong, although adverse changes in business, economic or financial conditions may lead to increased investment risk.
BBB - Obligations for which there is currently a low expectation of investment risk. Capacity for timely repayment of principal and interest is adequate, although adverse changes in business, economic or financial conditions are more likely to lead to increased investment risk than for obligations in other categories.
A plus or minus sign may be appended to a rating below AAA to denote relative status within major rating categories.
The following summarizes the two highest short-term debt ratings used by
IBCA:
A1+ When issues possess a particularly strong credit feature, a rating of A1+ is assigned.
A1 - Obligations supported by the highest capacity for timely repayment.
A2 - Obligations supported by a good capacity for timely repayment.
NATIONS FUNDS TRUST
ONE BANK OF AMERICA PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
1-800-626-2275
FORM N-1A
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
All references to the "Registration Statement" in the following
list of Exhibits refer to the Registrant's Registration Statement on Form N-1A
(File Nos. 333-89661; 811-09645)
---------------------- -------------------------------------------------------------------------------------
EXHIBIT LETTER DESCRIPTION
---------------------- -------------------------------------------------------------------------------------
(a) ARTICLES OF INCORPORATION:
(a)(1) Certificate of Trust, dated October 22, 1999, filed herewith.
(a)(2) Declaration of Trust, dated February 7, 2000, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(b) BYLAWS:
Not Applicable.
---------------------- -------------------------------------------------------------------------------------
(c) INSTRUMENTS DEFINING RIGHTS OF SECURITIES HOLDERS:
Not Applicable
---------------------- -------------------------------------------------------------------------------------
(d) INVESTMENT ADVISORY CONTRACTS:
(d)(1) Investment Advisory Agreement between Nations Funds Trust ("Registrant") and Banc
of America Advisors, Inc. ("BAAI"), to be filed by amendment.
(d)(2) Investment Sub-Advisory Agreement among Registrant, BAAI and Banc of America
Capital Management, Inc. ("BACAP"), to be filed by amendment.
---------------------- -------------------------------------------------------------------------------------
C-1
|
---------------------- -------------------------------------------------------------------------------------
EXHIBIT LETTER DESCRIPTION
(e) UNDERWRITING CONTRACT:
Distribution Agreement between Registrant and Stephens Inc. ("Stephens"), dated
February 14, 2000, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(f) BONUS OR PROFIT SHARING CONTRACTS:
Nations Funds Trust Deferred Compensation Plan, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(g) CUSTODIAN AGREEMENT:
Custody Agreement between Registrant and The Bank of New
York ("BNY"), dated February 14, 2000, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(h) OTHER MATERIAL CONTRACTS:
(h)(1) Co-Administration Agreement among Registrant, Stephens and BAAI, dated February 14,
2000, filed herewith.
(h)(2) Sub-Administration Agreement among Registrant, BNY and BAAI, dated February 14,
2000, filed herewith.
(h)(3) Adoption Agreement and Amendment to Transfer Agency and Services Agreement among
PFPC Inc. (formerly First Data Investor Services Group, Inc.) ("PFPC"), the Nations
Funds family and Registrant, dated February 14, 2000, filed herewith.
(h)(4) Transfer Agency and Services Agreement among PFPC and the
Nations Funds family, dated June 1, 1995, Schedule G
dated February 14, 2000, filed herewith.
(h)(5) Amendment to Transfer Agency and Services Agreement among
PFPC and the Nations Funds family, dated January 1, 1999,
to be filed by amendment.
(h)(6) Sub-Transfer Agency Agreement among PFPC, Bank of
America, N.A. ("Bank of America") and the Nations Funds
family, dated September 11, 1995, Schedule A dated
February 14, 2000, filed herewith.
(h)(7) Cross Indemnification Agreement among Nations Fund Trust, Nations Fund, Inc.,
Nations Reserves, Nations Master Investment Trust and Registrant, dated
February 14, 2000, filed herewith.
C-2
|
---------------------- -------------------------------------------------------------------------------------
EXHIBIT LETTER DESCRIPTION
(h)(8) Shareholder Servicing Plan relating to Investor B Shares,
Exhibit I dated December 9, 1999, filed herewith.
(h)(9) Shareholder Servicing Plan relating to Investor C Shares,
Exhibit I dated December 9, 1999, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(i) LEGAL OPINION
Not Applicable
---------------------- -------------------------------------------------------------------------------------
(j) OTHER OPINIONS
Not Applicable
---------------------- -------------------------------------------------------------------------------------
(k) OMITTED FINANCIAL STATEMENTS
Not Applicable
---------------------- -------------------------------------------------------------------------------------
---------------------- -------------------------------------------------------------------------------------
(l) INITIAL CAPITAL AGREEMENTS:
Investment Letter, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(m) RULE 12B-1 PLANS:
(m)(1) Shareholder Servicing and Distribution Plan relating to
Investor A Shares, Exhibit A dated December 9, 1999,
filed herewith.
(m)(2) Distribution Plan relating to Investor B Shares, Exhibit
A dated December 9, 1999, filed herewith.
(m)(3) Distribution Plan relating to Investor C Shares, Exhibit
A dated December 9, 1999, filed herewith.
---------------------- -------------------------------------------------------------------------------------
(n) FINANCIAL DATA SCHEDULE:
Not Applicable
---------------------- -------------------------------------------------------------------------------------
(o) RULE 18F-3 PLAN:
Rule 18f-3 Multi-Class Plan, filed herewith.
---------------------- -------------------------------------------------------------------------------------
|
ITEM 24. PERSONS CONTROLLED BY OF UNDER COMMON CONTROL WITH THE FUND
No person is controlled by or under common control with the Registrant.
ITEM 25. INDEMNIFICATION
Article VII of the Declaration of Trust provides for the indemnification of Registrant's trustees, officers, employees and other agents, Indemnification of Registrant's administrators, principal underwriter, custodian, transfer agent and sub-transfer agent is provided for, respectively, in the:
1. Co-Administration Agreement with Stephens and BAAI;
2. Sub-Administration Agreement with BNY;
3. Distribution Agreement with Stephens;
4. Custody Agreement with BNY;
5. Transfer Agency and Services Agreement with PFPC; and
6. Sub-Transfer Agency Agreement with PFPC and Bank of America.
The Registrant has entered into a Cross Indemnification Agreement with Nations Fund Trust (the "Trust") Nations Fund, Inc. (the "Company"), Nations Reserves ("Reserves") and Nations Master Investment Trust ("Master Trust"), dated February 14, 2000. The Trust, the Company, Reserves and/or the Master Trust will indemnify and hold harmless the Registrant against any losses, claims, damages or liabilities, to which the Registrant may become subject, under the Securities Act of 1933 (the "Act") and the 1940 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any prospectuses, any preliminary prospectuses, the registration statements, any other prospectuses relating to the securities, or any amendments or supplements to the foregoing (hereinafter referred to collectively as the "Offering Documents"), or arise out of or are based upon the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Documents in reliance upon and in conformity with written information furnished to the Registrant by the Trust, the Company, Reserves and/or the Master Trust expressly for use therein; and will reimburse the Registrant for any legal or other expenses reasonably incurred by the Registrant in connection with investigating or defending any such action or claim; provided, however, that the Trust, the Company, Reserves and/or the Master Trust shall not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents in reliance upon and in conformity with written information furnished to the Trust, the Company, Reserves and/or the Master Trust by the Registrant expressly for use in the Offering Documents.
Promptly after receipt by an indemnified party above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, to assume the defense thereof, with counsel satisfactory to such indemnified party, and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation.
Registrant has obtained from a major insurance carrier a directors' and officers' liability policy covering certain types of errors and omissions. In no event will Registrant indemnify any of its directors, officers, employees, or agents against any liability to which such person would otherwise be subject by reason of his/her willful misfeasance, bad faith, gross negligence in the performance of his/her duties, or by reason of his/her reckless disregard of the duties involved in the conduct of his/her office or arising under his agreement with Registrant. Registrant will comply with Rule 484 under the Act and Release No. 11330 under the 1940 Act, in connection with any indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to trustees, officers and controlling persons of the Registrant by the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Act and, therefore, is 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 trustees, directors, officers or controlling persons of the Registrant in connection with the successful defense of any act, suit or proceeding) is asserted by such trustees, officers or controlling persons 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 issues.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
To the knowledge of the Registrant, none of the directors or officers of BAAI, the adviser to the Registrant's portfolios, or the investment sub-advisers, except those set forth below, are or have been, at any time during the past two calendar years, engaged in any other business, profession, vocation or employment of a substantial nature, except that certain directors and officers also hold various positions with, and engage in business for, the company that owns all the outstanding stock (other than directors' qualifying shares) of BAAI or BACAP, respectively, or other subsidiaries of Bank of America Corporation.
(a) BAAI performs investment advisory services for the Registrant and certain other customers. BAAI is a wholly owned subsidiary of Bank of America, which in turn is a wholly owned banking subsidiary of Bank of America Corporation. Information with respect to each director and officer of the investment adviser is incorporated by reference to Form ADV filed by BAAI (formerly NationsBanc Advisors, Inc.) with the SEC pursuant to the Investment Advisers Act of 1940, as amended (the "Advisers Act") (file no. 801-49874).
(b) BACAP performs investment sub-advisory services for the Registrant (and certain other customers). BACAP is a wholly owned subsidiary of Bank of America Corporation. Information with respect to each director and officer of the investment sub-adviser is incorporated by reference to Form ADV filed by BACAP (formerly TradeStreet Investment Associates, Inc.) with the SEC pursuant to the Advisers Act (file no. 801-50372).
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Stephens, distributor for the Registrant, does not presently act as investment adviser for any other registered investment companies, but does act as principal underwriter for Nations Fund Trust, Nations Fund, Inc., Nations Reserves, Nations LifeGoal Funds, Inc., Nations Annuity Trust, Wells Fargo Funds Trust, Wells Fargo Variable Trust, and is the exclusive placement agent for Master Investment Trust, Managed Series Investment Trust, Wells Fargo Core Trust, Nations Master Investment and Trust Master Investment Portfolio, all of which are registered open-end management investment companies, and has acted as principal underwriter for the Liberty Term Trust, Inc., Nations Government Income Term Trust 2003, Inc., Nations Government Income Term Trust 2004, Inc. and the Managed Balanced Target Maturity Fund, Inc., closed-end management investment companies.
(b) Information with respect to each director and officer of the principal underwriter is incorporated by reference to Form ADV filed by Stephens Inc. with the SEC pursuant to the Investment Company Act of 1940, as amended (the "1940 Act") (file No. 501-15510).
(c) Not applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
(1) BAAI, One Bank of America Plaza, Charlotte, NC 28255 (records relating to its function as investment adviser and co-administrator).
(2) BACAP, One Bank of America Plaza, Charlotte, NC 28255 (records relating to its function as investment sub-advisor).
(3) Stephens, 111 Center Street, Little Rock, AR 72201 (records relating to its function as distributor and co-administrator).
(4) PFPC, 400 Bellevue Parkway, Wilmington, DE 19809 (records relating to its function as transfer agent).
(5) BNY, 90 Washington Street, New York, NY 10286 (records relating to its function as custodian and sub-administrator)
(6) Bank of America, One Bank of America Plaza, Charlotte, NC 28255 (records relating to its function as sub-transfer agent)
ITEM 29. MANAGEMENT SERVICES
Not Applicable
ITEM 30. UNDERTAKINGS
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Post-Effective Amendment No. 1 to the Registration Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Little Rock, State of Arkansas on the 10th day of February, 2000.
NATIONS FUNDS TRUST
By: *
------------------------------------
A. Max Walker
President and Chairman
of the Board of Trustees
By: /s/ Richard H. Blank, Jr.
---------------------------------
Richard H. Blank, Jr.
|
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
SIGNATURES TITLE DATE
---------- ----- ----
* President and Chairman February 10, 2000
---------------------------------- of the Board of Trustees
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer February 10, 2000
---------------------------------- Secretary
(Richard H. Blank, Jr.) (Principal Financial and
Accounting Officer)
* Trustee February 10, 2000
----------------------------------
(Edmund L. Benson, III)
* Trustee February 10, 2000
-----------------------------------
(James Ermer)
* Trustee February 10, 2000
----------------------------------
(William H. Grigg)
* Trustee February 10, 2000
----------------------------------
(Thomas F. Keller)
* Trustee February 10, 2000
----------------------------------
(Carl E. Mundy, Jr.)
* Trustee February 10, 2000
----------------------------------
(Cornelius J. Pings)
* Trustee February 10, 2000
----------------------------------
(Charles B. Walker)
* Trustee February 10, 2000
----------------------------------
(Thomas S. Word)
* Trustee February 10, 2000
----------------------------------
(James B. Sommers)
/s/ Richard H. Blank, Jr.
----------------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
|
NATIONS FUNDS TRUST
EXHIBIT INDEX
Exhibit No. Description EX-99.23a1 Certificate of Trust EX-99.23a2 Declaration of Trust EX-99.23e Distribution Agreement EX-99.23f Form of Deferred Compensation Plan EX-99.23g Custody Agreement EX-99.23h1 Co-Administration Agreement EX-99.23h2 Sub-Administration Agreement EX-99.23h3 Adoption Agreement and Amendment to Transfer Agency Agreement EX-99.23h4 Transfer Agency and Services Agreement EX-99.23h6 Sub-Transfer Agency and Services Agreement EX-99.23h7 Cross Indemnification Agreement EX-99.23h8 Shareholder Servicing Plan--Investor B Shares EX-99.23h9 Shareholder Servicing Plan--Investor C Shares EX-99.23l Investor Letter EX-99.23m1 Shareholder Servicing and Distribution Plan--Investor A Shares EX-99.23m2 Distribution Plan--Investor B Shares EX-99.23m3 Distribution Plan--Investor C Shares EX-99.23o Rule 18f-3 Multi-Class Plan |
CERTIFICATE OF TRUST
OF
NATIONS FUNDS TRUST
THIS Certificate of Trust of Nations Funds Trust (the "Trust"), has been duly executed and is being filed by the undersigned, as Initial Trustees, to form a business trust under the Delaware Business Trust Act (12 Del. Code ss. 3801 et seq.) (the "Act").
1. Name. The name of the business trust formed hereby is NATIONS FUNDS TRUST.
2. Registered Office; Registered Agent. The business address of the registered office of the Trust in the State of Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name of the Trust's registered agent at such address is The Corporation Trust Company.
3. Notice of Series. Notice is hereby given that the Trust shall consist of one or more series. Notice is given pursuant to Section 3804 of the Act that the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series of the Trust shall be enforceable against the assets of such series only, and not against the assets of the Trust generally or any other series thereof, and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other series thereof shall be enforceable against the assets of such series.
4. Investment Company. The Trust will become a registered investment company under the Investment Company Act of 1940, as amended, prior to the issuance of beneficial interests in the Trust.
5. Effective Date. This Certificate shall be effective as of its filing.
IN WITNESS WHEREOF, the undersigned Trustees of the NATIONS FUNDS TRUST have executed this certificate as of this 22nd day of October, 1999.
/s/ Marco E. Adelfio -------------------- Marco E. Adelfio /s/ Steven G. Cravath --------------------- Steven G. Cravath /s/ Barry I. Pershkow --------------------- Barry I. Pershkow |
DECLARATION OF TRUST
OF
NATIONS FUNDS TRUST
WHEREAS, THIS DECLARATION OF TRUST is made and entered into as of the date set forth below by the Trustees named hereunder for the purpose of forming a Delaware business trust in accordance with the provisions hereinafter set forth.
NOW, THEREFORE, the Board hereby directs that a Certificate of Trust be filed with the Office of the Secretary of State of the State of Delaware and does hereby declare that the Board will hold in trust all cash, securities and other assets which the Trust now possesses or may hereafter acquire from time to time in any manner and manage and dispose of the same upon the following terms and conditions for the pro rata benefit of the holders of Shares in this Trust.
ARTICLE I
NAME AND DEFINITIONS
SECTION 1. NAME. This Trust shall be known as Nations Funds Trust and the Board shall conduct the business of the Trust under that name or any other name as it may from time to time determine.
SECTION 2. DEFINITIONS. Whenever used herein, unless otherwise defined or required by the context or specifically provided:
a) "1940 Act" means the Investment Company Act of 1940, as amended from time to time, and all terms and requirements that are defined herein by reference to the 1940 Act shall be interpreted as that term or requirement has been modified or interpreted by applicable orders of the Commission or any rules or regulations adopted by, or interpretive releases of the Commission or its staff, and staff no-action letters issued under the 1940 Act;
b) "Board" refers to the Board of the Trust;
c) "Declaration of Trust" refers to this Declaration of Trust, as amended or restated from time to time;
d) "Class" means any division of Shares of a Series. A Series may have a single named or unnamed Class, or multiple Classes.
e) "Commission" shall have the meaning given it in the 1940 Act;
f) "Interested Person" has the meaning given it in Section 2(a)(19) of the 1940 Act;
g) "Investment Adviser(s)" means a party, or parties, furnishing investment advisory services to the Trust pursuant to any contract described in Article IV, Section 20 hereof;
h) "Person" means and includes individuals, corporations, partnerships, trusts, associations, joint ventures, estates and other entities, whether or not legal entities, and governments and agencies and political subdivisions thereof, whether domestic or foreign;
i) "Principal Underwriter" shall have the meaning given it in the 1940 Act;
j) "Series" refers to each series of the Trust established and designated under or in accordance with the provisions of Article III hereof.
k) "Shares" means the shares of beneficial interest into which the beneficial interest in the Trust shall be divided from time to time and includes fractions of Shares as well as whole Shares;
l) "Shareholder" means a record owner of a Class of outstanding Shares;
m) "Trust" refers to Nations Funds Trust, which is the Delaware business trust established by this Declaration of Trust, as amended from time to time;
n) "Trustees" refers to the persons who have signed this Declaration of Trust, so long as they continue in office in accordance with the terms hereof, and all other persons who may from time to time be duly elected or appointed to serve on the Board in accordance with the provisions hereof, and reference herein to a Trustee or the Trustees shall refer to such person or persons only in their capacity as trustees of the Trust;
o) The "Trust Property" means any and all property, real or personal, tangible or intangible, which is owned or held by or for the account of the Trust;
ARTICLE II
PURPOSE OF TRUST AND OFFICES
SECTION 1. PURPOSE OF THE TRUST. The purpose of the Trust is to conduct, operate and carry on the business of an open-end management investment company registered under the 1940 Act through one or more Series investing primarily in securities.
SECTION 2. PRINCIPAL OFFICE. The principal office of the Trust is: 111 Center Street, Suite 300, Little Rock, AR 72201. The Board may, from time to time, change the location of the principal office of the Trust to any place within or outside the State of Delaware.
SECTION 3. DELAWARE OFFICE. The Board shall establish a registered office in the State of Delaware and shall appoint as the Trust's registered agent for service of process in the State of Delaware an individual resident of the State of Delaware or a Delaware corporation or a corporation authorized to transact business in the State of Delaware; in each case the business office of such registered agent for service of process shall be identical with the registered Delaware office of the Trust.
SECTION 4. OTHER OFFICES. The Board may at any time establish branch or subordinate offices at any place or places where the Trust intends to do business.
ARTICLE III
SHARES
SECTION 1. DIVISION OF BENEFICIAL INTEREST. The beneficial interest in the Trust shall at all times be divided into an unlimited number of Shares, without par value. The Board may authorize the division of Shares into separate Series and the division of Series into a separate Class of Shares. The different Series shall be established and designated, and the variations in the relative rights and preferences as among the different Series and Classes shall be fixed and determined, by the Board.
No Shares shall have any priority or preference over any other Share of the same Class of a Series with respect to dividends or distributions upon termination of the Trust or of such Series. All dividends and distributions shall be made ratably among all Shareholders of a particular Class of a Series from the assets held with respect to such Series according to the number of Shares of such Class of such Series held of record by such Shareholder on the record date for any dividend or distribution or on the date of termination, as the case may be. Shareholders shall have no preemptive or other right to subscribe to any additional Shares or other securities issued by the Trust or any Series. The Board may from time to time divide or combine the Shares of any particular Series into a greater or lesser number of Shares of that Series.
SECTION 2. OWNERSHIP OF SHARES. The ownership of Shares shall be recorded on the books of the Trust or a transfer or similar agent for the Trust, which books shall be maintained separately for the Shares of each Series and Class. No certificates certifying the ownership of Shares shall be issued except as the Board may otherwise determine from time to time. The Board may make such rules as it considers appropriate for the transfer of Shares of each Series and Class and similar matters. The record books of the Trust as kept by the Trust or any transfer or similar agent, as the case may be, shall be conclusive as to who are the Shareholders of each Series and Class and as to the number of Shares of each Series and Class held from time to time by each.
SECTION 3. INVESTMENTS IN THE TRUST. Investments may be accepted by the Trust from such Persons, at such times, on such terms, and for such consideration as the Board from time to time may authorize.
SECTION 4. STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY. Every Shareholder by virtue of having become a Shareholder shall be held to have expressly assented and agreed to the terms hereof and to have become a party hereto. The death of a Shareholder during the existence of the Trust shall not operate to terminate the Trust, nor entitle the representative of any deceased Shareholder to an accounting or to take any action in court or elsewhere against the Trust or the Trustees, but entitles such representative only to the rights of said deceased Shareholder under this Trust. Ownership of Shares shall not entitle the Shareholder to any title in or to the whole or any part of the Trust Property or right to call for a partition or division of the same or for an accounting, nor shall the ownership of Shares constitute the Shareholders as partners.
SECTION 5. ESTABLISHMENT AND DESIGNATION OF SERIES OR CLASS. The establishment and designation of any Series or Class of Shares shall be effective upon the
adoption by a majority of the then Trustees, of a resolution that sets forth such establishment and designation. Each such resolution shall be incorporated herein by reference upon adoption.
Shares of each Series established pursuant to this Section 5, unless otherwise provided in the resolution establishing such Series or Class, shall have the following relative rights and preferences:
(a) ASSETS and LIABILITIES HELD WITH RESPECT TO A PARTICULAR SERIES. All consideration received by the Trust for the issue or sale of Shares of a particular Series, together with all assets in which such consideration is invested or reinvested, all income, earnings, profits, and proceeds thereof (including any proceeds derived from the sale, exchange or liquidation of such assets, and any funds or payments derived from any reinvestment of such proceeds in whatever form the same may be), shall be held and accounted for separately from the other assets of the Trust and every other Series and are referred to as "assets belonging to" that Series. The assets belonging to a Series shall belong only to that Series for all purposes, and to no other Series, and shall be subject only to the rights of creditors of that Series. Any assets, income, earnings, profits, and proceeds thereof, funds, or payments which are not readily identifiable as belonging to any particular Series shall be between and among one or more Series as the Treasurer, subject to the supervision of the President, Chairman of the Board, if any, and the Board itself, deems fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series for all purposes, and such assets, earnings, income, profits or funds, or payments and proceeds thereof shall be referred to as assets belonging to that Series. The assets belonging to a Series shall be so recorded upon the books of the Trust, and shall be held in trust for the benefit of the Shareholders of that Series. The assets belonging to a Series shall be charged with the liabilities of that Series and all expenses, costs, charges and reserves attributable to that Series, except that liabilities, expenses, costs, charges and reserves allocated solely to a particular Class, if any, shall be borne by that Class. Any general liabilities, expenses, costs, charges or reserves of the Trust which are not readily identifiable as belonging to any particular Series or Class shall be allocated and charged between and among any one or more of the Series or Classes in such manner as the Board deems fair and equitable. Each such allocation shall be conclusive and binding upon the Shareholders of all Series and Classes for all purposes.
Without limiting the foregoing, but subject to the right of the Treasurer, subject to the supervision of the President, Chairman of the Board, if any, and the Board itself, to allocate general liabilities, expenses, costs, charges or reserves as herein provided, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Series shall be enforceable against the assets of such Series only, and not against the assets of the Trust generally or of any other Series and, unless otherwise provided in this Declaration, none of the debts, liabilities, obligations, expenses incurred, contracted for or otherwise existing with respect to the Trust generally or any other Series shall be enforceable against the assets of such Series. Notice of this contractual limitation on liabilities among Series may, in the Board's discretion, be set forth in the certificate of trust of the Trust (whether originally or by amendment) as filed or to be filed in the Office of the Secretary of State of the State of Delaware pursuant to the Delaware Act, and upon the giving of such notice in the certificate of trust, the statutory provisions of Section 3804 of the Delaware Act relating to limitations on liabilities among Series (and the statutory effect under Section 3804 of the Delaware Act of setting forth such notice in the certificate of trust) shall become applicable to the Trust and each Series. Any person extending credit to, contracting with or having any claim against any Series may look only to the assets of that Series to satisfy or enforce any debt, with
respect to that Series. No Shareholder or former Shareholder of any Series shall have a claim on or any right to any assets allocated or belonging to any other Series.
(b) DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS, AND REPURCHASES. Notwithstanding any other provisions of this Declaration of Trust, no dividend or distribution including, without limitation, any distribution paid upon termination of the Trust or of any Series or Class with respect to, nor any redemption or repurchase of, the Shares of any Series or Class shall be effected by the Trust other than from the assets held with respect to such Series, nor shall any Shareholder of any particular Series otherwise have any right or claim against the assets held with respect to any other Series except to the extent that such Shareholder has such a right or claim hereunder as a Shareholder of such other Series. The Board shall have full discretion, to the extent not inconsistent with the 1940 Act, to determine which items shall be treated as income and which items as capital; and each such determination and allocation shall be conclusive and binding upon the Shareholders.
(c) EQUALITY. All the Shares of each particular Series shall represent an equal proportionate interest in the assets held with respect to that Series (subject to the liabilities held with respect to that Series and such rights and preferences as may have been established and designated with respect to Classes of Shares within such Series).
(d) FRACTIONS. Any fractional Share of a Series shall carry proportionately all the rights and obligations of a whole share of that Series, including rights with respect to voting, receipt of dividends and distributions, redemption of Shares and termination of the Trust.
(e) EXCHANGE PRIVILEGE. The Board shall have the authority to provide that the holders of Shares of any Series shall have the right to exchange said Shares for Shares of one or more other Series of Shares in conformity with such requirements and procedures as may be established by the Board.
SECTION 6. INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder or former Shareholder shall be exposed to liability by reason of a claim or demand relating solely to his being or having been a Shareholder, and not because of his acts or omissions, the Shareholder or former Shareholder (or his heirs, executors, administrators, or other legal representatives or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified out of the assets of the Trust against all loss and expense arising from such claim or demand.
ARTICLE IV
THE BOARD AND POWERS
SECTION 1. MANAGEMENT OF THE TRUST. The business and affairs of the Trust shall be managed by or under the direction of the Board, and it shall have all powers necessary or desirable, convenient or incidental, to carry out that responsibility. The Board may execute all instruments and take all action they deem necessary, desirable, convenient or incidental, to promote the interests of the Trust. Any determination made by the Board in good faith as to what is in the interests of the Trust shall be conclusive. To the extent allowable under federal and state law, the Board may delegate any or all of its responsibilities to one or more
appropriate officers of the Trust and/or any other Person.
SECTION 2. INITIAL TRUSTEES. The initial Trustees shall be the persons initially signing this Declaration of Trust prior to its amendment and restatement. All of the initial Trustees may resign by written instrument to be effective on the date specified in the instrument ("Resignation Instrument"). However, before resigning as permitted in this paragraph, the initial Trustees shall determine and set forth in the Resignation Instrument the number of Trustees of the Trust and shall appoint their successors.
SECTION 3. NUMBER AND TERM OF OFFICE. The number of Trustees (other
than the initial Trustees) constituting the Board shall be fixed from time to
time by a written instrument signed, or by resolution approved at a duly
constituted meeting, by a majority of the Trustees, provided, however, that the
number of Trustees shall in no event be less than one (1) nor more than fifteen
(15). Each Trustee shall hold office through the term described in this section,
or until his or her successor is elected or the Trust terminates; except that
(a) any Trustee may resign by delivering to the other Trustees or to any Trust
officer a written resignation effective upon delivery or a later date specified
therein; (b) any Trustee may be removed with or without cause at any time by a
written instrument signed by at least two-thirds of the other Trustees,
specifying the effective date of removal; (c) any Trustee who requests to be
retired, or has become physically or mentally incapacitated or is otherwise
unable to serve fully, may be retired by a written instrument signed by a
majority of the other Trustees, specifying the effective date of retirement; and
(d) if required by Section 16(c) of the 1940 Act, any Trustee may be removed at
any meeting of the Shareholders by a vote of at least two-thirds of the
Outstanding Shares.
SECTION 4. QUALIFICATION OF TRUSTEES. Except as provided in the following sentence, no person shall be qualified to stand for election or appointment as a Trustee if such person has already reached the age of 70. Each Trustee shall retire from service on the Board no later than the end of the calendar year in which such Trustee reaches age 70, provided that (i) any Director who is a Director as of December 31, 1999, and who had reached the age of 70 prior to such date may continue to serve as a Director of the Company until the end of the calendar year in which such Director reaches age 75 and may continue to serve for successive annual periods thereafter upon the vote of a majority of the other Directors; and (ii) any person who has already reached the age of 70 may stand for election or appointment, pursuant to a vote of the Directors, in connection with an investment company reorganization or merger, and any such person may continue to serve for successive annual periods thereafter upon the vote of a majority of the other Directors.
SECTION 5. VACANCIES, APPOINTMENT, EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. Vacancies on the Board may be filled by a majority of the remaining Trustees, though less than a quorum, or by a sole remaining Trustee, unless the Board calls a meeting of Shareholders for the purposes of electing Trustees. In the event that at any time less than a majority of the Trustees holding office at that time were so elected by the holders of the outstanding voting securities of the Trust, the Board shall forthwith cause to be held as promptly as possible, and in any event within sixty (60) days, a meeting of such holders for the purpose of electing Trustees to fill any existing vacancies in the Board, unless such period is extended by order of the Commission.
The death, resignation, retirement, removal or incapacity of one or more Trustees, or all of them, shall not operate to annul the Trust or to revoke any existing agency created pursuant to the terms of this Declaration of Trust. Whenever a vacancy on the Board shall occur, until
such vacancy is filled, the Trustees in office, regardless of their number, shall have all the powers granted to the Trustees and shall discharge all the duties imposed upon the Trustees by this Declaration of Trust. As conclusive evidence of such vacancy, a written instrument certifying the existence of such vacancy may be executed by an officer of the Trust or by a majority of the Board. In the event of the death, resignation, retirement, removal or incapacity of all the then Trustees within a short period of time and without the opportunity for at least one Trustee being able to appoint additional Trustees to fill vacancies, the Trust's Investment Adviser(s) are empowered to appoint new Trustees subject to the provisions of Section 16(a) of the 1940 Act.
SECTION 6. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. All meetings of the Board may be held at any place that has been designated from time to time by the Board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the Trust or the Investment Adviser(s). Any meeting, regular or special, may be held by conference telephone or similar electronic media, so long as all Trustees participating in the meeting can hear one another and all such Trustees shall be deemed to be present in person at the meeting.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board shall be held at such time as shall from time to time be fixed by the Board. Such regular meetings may be held without notice, unless required so by law.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board for any purpose or purposes may be called at any time by the Chairman of the Board or the President or the Secretary or any two (2) Trustees.
Notice of the time and place of special meetings shall be delivered to each Trustee personally, or by telephone, first-class mail, express mail, overnight mail, electronic mail, telefacsimile, internet or other similar electronic medium, addressed to each Trustee at that Trustee's address as it is shown on the records of the Trust. In case the notice is sent by first class mail, it shall be deposited in the United States mail at least seven (7) calendar days before the time of the holding of the meeting. In case the notice is delivered by other means, it shall be given using means whereby it is intended to be received by each Trustee at least twenty-four (24) hours before the time of the holding of the meeting.
SECTION 9. QUORUM. A majority of the authorized number of Trustees shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 11 of this Article III. Every act or decision done or made by a majority of the Trustees present at a meeting duly held at which a quorum is present shall be regarded as the act of the Board, subject to the provisions of the Declaration of Trust. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of Trustees if any action taken is approved by a least a majority of the required quorum for that meeting. Presence by telephone shall constitute presence at the meeting for purposes of obtaining a quorum. If the Board creates a committee pursuant to Article VI, a majority of the authorized number of committee members shall constitute a quorum for the transaction of business of such committee, unless the Board designates a lower percentage.
SECTION 10. WAIVER OF NOTICE. Notice of any meeting need not be given to any Trustee who either before or after the meeting signs a written waiver of notice or a consent to holding the meeting. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers or consents shall be filed with the records of the Trust or made a part
of the minutes of the meeting, either in person or by telephone. Notice of a meeting shall also be deemed given to any Trustee who attends the meeting, either in person or by telephone or similar electronic media, without protesting before or at its commencement the lack of notice to that Trustee.
SECTION 11. ADJOURNMENT. A majority of the Trustees present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than fourteen (14) days, in which case notice of the time and place shall be given before the time of the adjourned meeting in the manner specified in Section 8 of this Article III to the Trustees who were present at the time of the adjournment.
SECTION 13. ACTION WITHOUT A MEETING. Any action required or permitted to be taken by the Board may be taken without a meeting if a majority of the Trustees shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a majority vote of the Board. Such written consent or consents shall be filed with the minutes of the proceedings of the Board.
SECTION 14. POWERS. Subject to the provisions of this Declaration of Trust, the business of the Trust shall be managed by the Board, and such Board shall have all powers necessary or convenient to carry out that responsibility including the power to engage in securities transactions of all kinds on behalf of the Trust. Without limiting the foregoing, the Trustees may: fill vacancies in or remove from their number, and may elect and remove such officers and appoint and terminate such agents as they consider appropriate; appoint from their own number and establish and terminate one or more committees consisting of two or more Trustees which may exercise the powers and authority of the Board to the extent that the Trustees determine; employ one or more Investment Advisers to the Series of the Trust; employ one or more custodians of the assets of the Trust and may authorize such custodians to employ subcustodians and to deposit all or any part of such assets in a system or systems for the central handling of securities or with a Federal Reserve Bank, retain a transfer agent or a Shareholder servicing agent, or both; provide for the issuance and distribution of Shares by the Trust directly or through one or more Principal Underwriters or otherwise; redeem, repurchase and transfer Shares pursuant to applicable law; set record dates for the determination of Shareholders with respect to various matters; declare and pay dividends and distributions to Shareholders of each Series from the assets of such Series; and in general delegate such authority as they consider desirable to any officer of the Trust, to any committee of the Trustees and to any agent or employee of the Trust or to any such custodian, transfer or Shareholder servicing agent, Investment Adviser(s) or Principal Underwriter. Any determination as to what is in the interests of the Trust made by the Trustees in good faith shall be conclusive. In construing the provisions of this Declaration of Trust, the presumption shall be in favor of a grant of power to the Trustees. Unless otherwise specified or required by law, any action by the Board shall be deemed effective if approved or taken by a majority of the Trustees then in office.
Without limiting the foregoing, the Trust shall have power and authority:
(a) To invest and reinvest cash, to hold cash uninvested, and to subscribe for, invest in, reinvest in, purchase or otherwise acquire, own, hold, pledge, sell, assign, transfer, exchange, distribute, write options on, lend or otherwise deal in or dispose of contracts for the future acquisition or delivery of fixed income or other securities, and securities of every nature and
kind, including, without limitation, all types of bonds, debentures, stocks, negotiable or non-negotiable instruments, obligations, evidences of indebtedness, certificates of deposit or indebtedness, commercial paper, repurchase agreements, bankers' acceptances, and other securities of any kind, issued, created, guaranteed, or sponsored by any and all Persons, including, without limitation, states, territories, and possessions of the United States and the District of Columbia and any political subdivision, agency, or instrumentality thereof, any foreign government or any political subdivision of the U.S. Government or any foreign government, or any international instrumentality, or by any bank or savings institution, or by any corporation or organization organized under the laws of the United States or of any state, territory, or possession thereof, or by any corporation or organization organized under any foreign law, or in "when issued" contracts for any such securities; to change the investments of the assets of the Trust; and to exercise any and all rights, powers, and privileges of ownership or interest in respect of any and all such investments of every kind and description, including, without limitation, the right to consent and otherwise act with respect thereto, with power to designate one or more Persons, to exercise any of said rights, powers, and privileges in respect of any of said instruments;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or write options with respect to or otherwise deal in any property rights relating to any or all of the assets of the Trust or any Series;
(c) To vote or give assent, or exercise any rights of ownership, with respect to stock or other securities or property, and to execute and deliver proxies or powers of attorney to such person or persons as the Trustees shall deem proper, granting to such person or persons such power and discretion with relation to securities or property as the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or otherwise which in any manner arise out of ownership of securities;
(e) To hold any security or property in a form not indicating any trust, whether in bearer, unregistered or other negotiable form, or in its own name or in the name of a custodian or subcustodian or a nominee or nominees or otherwise;
(f) To consent to or participate in any plan for the reorganization, consolidation or merger of any corporation or issuer of any security which is held in the Trust; to consent to any contract, lease, mortgage, purchase or sale of property by such corporation or issuer; and to pay calls or subscriptions with respect to any security held in the Trust;
(g) To join with other security holders in acting through a committee, depositary, voting trustee or otherwise, and in that connection to deposit any security with, or transfer any security to, any such committee, depositary or trustee, and to delegate to them such power and authority with relation to any security (whether or not so deposited or transferred) as the Board shall deem proper, and to agree to pay, and to pay, such portion of the expenses and compensation of such committee, depositary or trustee as the Board shall deem proper;
(h) To compromise, arbitrate or otherwise adjust claims in favor of or against the Trust or any matter in controversy, including but not limited to claims for taxes;
(i) To enter into joint ventures, general or limited partnerships and any other combination or associations;
(j) To borrow funds or other property in the name of the Trust exclusively for Trust purposes;
(k) To endorse or guarantee the payment of any notes or other obligations of any Person; to make contracts of guaranty or suretyship, or otherwise assume liability for payment thereof;
(l) To purchase and pay for entirely out of Trust Property such insurance as the Board may deem necessary or appropriate for the conduct of the business, including, without limitation, insurance policies insuring the assets of the Trust or payment of distributions and principal on its portfolio investments, and insurance policies insuring the Shareholders, Trustees, officers, employees, agents, Investment Adviser(s), Principal Underwriters, or independent contractors of the Trust, individually against all claims and liabilities of every nature arising by reason of holding Shares, holding, being or having held any such office or position, or by reason of any action alleged to have been taken or omitted by any such Person as Trustee, officer, employee, agent, Investment Adviser(s), Principal Underwriter, or independent contractor, including any action taken or omitted that may be determined to constitute negligence, whether or not the Trust would have the power to indemnify such Person against liability; and
(m) to adopt, establish and carry out pension, profit-sharing, share bonus, share purchase, savings, thrift and other retirement, incentive and benefit plans, trusts and provisions, including the purchasing of life insurance and annuity contracts as a means of providing such retirement and other benefits, for any or all of the Trustees, officers, employees and agents of the Trust.
The Trust shall not be limited to investing in obligations maturing before the possible termination of the Trust or one or more of its Series. The Trust shall not in any way be bound or limited by any present or future law or custom in regard to investment by fiduciaries. The Trust shall not be required to obtain any court order to deal with any assets of the Trust or take any other action hereunder.
SECTION 15. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by power of attorney, delegate his power for a period not exceeding twelve (12) months at any one time to any other Trustee or Trustees; provided that in no case shall fewer than two (2) Trustees personally exercise the powers granted to the Trustees under this Declaration of Trust except as otherwise expressly provided herein or by resolution of the Board. Except where applicable law may require a Trustee to be present in person, a Trustee represented by another Trustee pursuant to such power of attorney shall be deemed to be present for purposes of establishing a quorum and satisfying the voting requirements.
SECTION 16. DELEGATION OF POWER TO OFFICERS OF THE TRUST. The Board may delegate, either by resolution or by other provision in this Declaration, certain of its powers conferred by this Declaration to the Trust's officers.
SECTION 17. COMPENSATION. Trustees and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the Board. This Section shall not be construed to preclude any Trustee from serving the Trust in any other capacity as an officer, agent, employee, or otherwise and receiving compensation for those services. Nothing herein shall in any way
prevent the employment of any Trustee for advisory, management, legal, accounting, investment banking or other services and payment for the same by the Trust.
SECTION 18. PAYMENT OF EXPENSES BY THE TRUST. The Board is authorized to pay or cause to be paid out of the principal or income of the Trust, or partly out of the principal and partly out of income, as they deem fair, all expenses, fees, charges, taxes and liabilities incurred or arising in connection with the Trust, or in connection with the management thereof, including, but not limited to, the Trustees' compensation and such expenses and charges for the services of the Trust's officers, employees, Investment Adviser(s), principal underwriter, auditors, counsel, custodian, transfer agent, Shareholder servicing agent, and such other agents or independent contractors and such other expenses and charges as the Trustees may deem necessary or proper to incur.
SECTION 19. OWNERSHIP OF ASSETS OF THE TRUST. Title to all of the assets of the Trust shall at all times be considered as vested in the Trust, except that the Board shall have power to cause legal title to any Trust Property to be held by or in the name of one or more of the Trustees, or in the name of the Trust, or in the name of any other Person as nominee, on such terms as the Board may determine. The right, title and interest of the Trustees in the Trust Property shall vest automatically in each Person who may hereafter become a Trustee. Upon the resignation, removal or death of a Trustee he shall automatically cease to have any right, title or interest in any of the Trust Property, and the right, title and interest of such Trustee in the Trust Property shall vest automatically in the remaining Trustees. Such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered.
SECTION 20. SERVICE CONTRACTS.
(a) Investment Adviser(s). The Board may authorize the Trust to enter into one or more investment advisory contracts for the Trust or any Series of the Trust, providing for investment advisory services, statistical and research facilities and services, and other facilities and services to be furnished to the Trust or Series on terms and conditions acceptable to the Trustees. Any such contract may provide for the Investment Adviser(s) to effect purchases, sales or exchanges of portfolio securities or other Trust Property on behalf of the Board or may authorize any officer or agent of the Trust to effect such purchases, sales or exchanges pursuant to recommendations of the Investment Adviser(s). The contract may authorize the Investment Adviser(s) to employ one or more investment sub-advisers. The Shareholders of the Trust or any Series shall have the right to vote to approve investment advisory contracts to the extent such approval is required under the 1940 Act.
(b) Principal Underwriter. The Board may authorize the Trust to enter into one or more distribution contracts for the Trust or any Series or Class, providing for the distribution and sale of Shares to or by the other party, either directly or through selling agents or selected dealers, on terms and conditions acceptable to the Board. The Board may adopt a plan or plans of distribution with respect to Shares of any Series or Class and enter into any related agreements, whereby the Series or Class finances directly or indirectly any activity that is primarily intended to result in sales of its Shares, subject to the requirements of Section 12 of the 1940 Act, Rule 12b-1 thereunder, and other applicable rules and regulations.
(c) Transfer Agency, Accounting, Administration and Other Services. The Board may authorize the Trust, for the Trust or any Series or Class, to enter into one or more transfer agency, accounting, administration contracts and contracts for such other services necessary or
appropriate to carry out the business and affairs of the Trust with any party or parties on terms and conditions acceptable to the Board.
(d) Custodian. The Board shall at all times place and maintain the securities and similar investments of the Trust and of each Series in custody under arrangements that meet the requirements of Section 17(f) of the 1940 Act and the rules thereunder. The Board, on behalf of the Trust or any Series, may enter into one or more contracts with a custodian on terms and conditions acceptable to the Board, providing for the custodian, among other things, to (a) hold the securities owned by the Trust or any Series and deliver the same upon written order or oral order confirmed in writing, (b) receive and receipt for any moneys due to the Trust or any Series and deposit the same in its own banking department or elsewhere, (c) disburse such funds upon orders or vouchers, and (d) employ one or more sub-custodians.
(e) The fact that:
(i) any of the Shareholders, Trustees, or officers of the
Trust is a Shareholder, director, officer, partner, trustee, employee,
Investment Adviser, Principal Underwriter, distributor, or affiliate or agent of
or for any corporation, trust, association, or other organization, or for any
parent or affiliate of any organization with which an advisory, management or
administration contract, or Principal Underwriter's or distributor's contract,
or transfer, Shareholder servicing or other type of service contract may have
been or may hereafter be made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in the Trust, or that
(ii) any corporation, trust, association or other organization with which an
advisory, management or administration contract or Principal Underwriter's
contract, or transfer, Shareholder servicing or other type of service contract
may have been or may hereafter be made also has an advisory, management or
administration contract, or Principal Underwriter's contract, or transfer,
Shareholder servicing or other service contract with one or more other
corporations, trust, associations, or other organizations, or has other business
or interests, shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon or executing
the same, or create any liability or accountability to the Trust or its
Shareholders, provided approval of each such contract is made pursuant to the
requirements of the 1940 Act.
ARTICLE V
COMMITTEES
SECTION 1. COMMITTEES. To facilitate certain requirements under the 1940 Act, the Trust shall have a standing Audit Committee and a standing Nominating Committee (collectively, the "Standing Committees"). The Board shall determine the number of members of each committee, and may determine the quorum for each committee, and shall appoint its members. Either the Board or the committee may elect a chair. Each committee member shall serve as such at the pleasure of the Board. The Board may abolish any committee other than the Standing Committees, at any time. Each committee shall maintain records of its meetings and report its actions to the full Board. The Board may rescind any action of any committee, but such rescission shall not have retroactive effect except as agreed by the committee. The Board may delegate to any committee any of its powers, subject only to the express limitations of the 1940 Act.
SECTION 2. AUDIT COMMITTEE. The Audit Committee is responsible for (a) recommending independent accountants for selection by the Board, (b) reviewing the scope of audit, accounting and financial internal controls and the quality and adequacy of each Trust's accounting staff with the independent accountants and such other persons as may be deemed appropriate, (c) reviewing, as necessary, with the accounting staff and the independent accountants the compliance of transactions between each Trust and any affiliated persons of the Trust, (d) reviewing reports of the independent accountants, and (e) making themselves directly available to the independent accountants and responsible Officers of the Trust for consultation on audit, accounting and related financial matters. The Board may expand or clarify the responsibilities of the Audit Committee by adopting a committee charter or otherwise, but may not narrow the responsibilities set forth here without the consent of the Audit Committee.
SECTION 3. NOMINATING COMMITTEE. The Nominating Committee is responsible for recommending to the Board persons to be nominated for election as Trustees by the Shareholders at any required Shareholder meeting and a person to be appointed to fill any vacancy occurring on the Board. The nomination and selection of those Trustees who are not "interested persons" (as defined under the 1940 Act) shall be committed to the discretion of the disinterested Trustees so long as the Trust has in effect one or more plans pursuant to Rule 12b-1 under the 1940 Act. The Board may expand or clarify the responsibilities of the Nominating Committee by adopting a committee charter or otherwise, but may not narrow the responsibilities set forth here without the consent of the Nominating Committee.
SECTION 4. OTHER COMMITTEES OF TRUSTEES. The Board may by resolution adopted by a majority of the authorized number of Trustees designate one or more committees in addition to the Standing Committees, each consisting of two (2) or more Trustees, to serve at the pleasure of the Board. The Board may designate one or more Trustees as alternate members of any committee who may replace any absent member at any meeting of the committee. Any committee to the extent provided in the resolution of the Board, shall have the authority of the Board, except with respect to:
(a) the approval of any action which under applicable law also requires Shareholders' approval or approval of the outstanding shares, or requires approval by a majority of the entire Board or certain members of said Board;
(b) the filling of vacancies on the Board or on any committee;
(c) the fixing of compensation of the Trustees for serving on the Board or on any committee;
(d) the amendment or repeal of the Declaration of Trust;
(e) the amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable;
(f) the appointment of any other committees of the Board or the members of these committees.
SECTION 5. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by and held and taken in accordance with the provisions of Article IV of this Declaration of Trust, with such changes in the context thereof as are necessary to substitute the committee and its members for the Board and its members, except that the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee. Special meetings of committees may also be called by resolution of the Board. Alternate members shall be given notice of meetings of committees and shall have the right to attend all meetings of committees. The Board may adopt rules for the government of any committee not inconsistent with the provisions of this Declaration of Trust.
ARTICLE VI
OFFICERS
SECTION 1. OFFICERS. The officers of the Trust shall be a President, a Secretary, and a Treasurer. The Trust may also have, at the discretion of the Board, a Chairman of the Board, one or more Vice Presidents, one or more Assistant Secretaries, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of this Article VI. Any number of offices may be held by the same person.
SECTION 2. ELECTION OF OFFICERS. The officers of the Trust, except such officers as may be appointed in accordance with the provisions of this Article VI, shall be chosen by the Board, and each shall serve at the pleasure of the Board, subject to the rights, if any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board may appoint and may empower the President to appoint such other officers as the business of the Trust may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in this Declaration of Trust or as the Board may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board at any regular or special meeting of the Board or by the principal executive officer or by such other officer upon whom such power of removal may be conferred by the Board.
Any officer may resign at any time by giving written notice to the Trust. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Trust under any contract to which the officer is a party.
SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or other cause shall be filled in the manner prescribed in this Declaration of Trust for regular appointment to that office. The President may make temporary appointments to a vacant office pending ratification by the Board.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an officer is elected, shall if present preside at meetings of the Board and shall, subject to the control of the Board, have general supervision, direction and control of the business and the officers of the Trust and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board or prescribed by the Declaration of Trust.
SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may be vested in the Chairman of the Board, if there be such an officer, the President shall be the chief executive officer and chief operating officer of the Trust and shall, subject to the control of the Board and the Chairman, have general supervision, direction and control of the business and the officers of the Trust. He shall have the general powers and duties of management usually vested in the office of President of a corporation and shall have such other powers and duties as may be prescribed by the Board or this Declaration of Trust. A single person may occupy the positions of Chairman of the Board and President simultaneously.
Pursuant to Article IV, Section 16 of this Declaration, the Board hereby confers upon, and delegates to, the President of the Trust (concurrently with the Treasurer) all powers, duties and obligations conferred upon the Board by: Article III, Sections 5(a) and (b), Article IV, Section 18 and Article IX, Sections 1, 2 and 8; and (concurrently with the Secretary) all powers, duties and obligations conferred upon the Board by: Article IV, Sections 6 and 7, and Article XIII, Sections 3, 6, 7 and 11.
SECTION 8. VICE PRESIDENTS. In the absence or disability of the President, the Vice Presidents, if any, in order of their rank as fixed by the Board or if not ranked, the Executive Vice President (who shall be considered first ranked) and such other Vice Presidents as shall be designated by the Board, shall perform all the duties of the President and when so acting shall have all powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board or the President or the Chairman of the Board or by this Declaration of Trust.
SECTION 9. SECRETARY. The Secretary shall keep or cause to be kept at the principal executive office of the Trust, or such other place as the Board may direct, a book of minutes of all meetings and actions of the Board, committees of the Board and Shareholders with the time and place of holding, whether regular or special, and if special, how authorized, the notice given, the names of those present at Board meetings or committee meetings, the number of shares present or represented at Shareholders' meetings, and the proceedings.
The Secretary shall keep or cause to be kept at the principal executive office of the Trust or at the office of the Trust's transfer agent or registrar, a share register or a duplicate share register showing the names of all Shareholders and their addresses, the number (and Classes) of shares held by each, the number and date of certificates issued for the same and the number and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give or cause to be given notice of all meetings of the Shareholders and of the Board required to be given by this Declaration of Trust or by applicable law and shall have such other powers and perform such other duties as may be prescribed by the Board or by this Declaration of Trust.
Pursuant to Article IV, Section 16 of this Declaration, the Board hereby confers upon, and delegates to, the Secretary of the Trust all powers, duties and obligations conferred upon
the Board by: Article IV, Sections 6 and 7, and Article XIII, Sections 3, 6, 7 and 11.
SECTION 10. TREASURER. The Treasurer shall be the chief financial officer and chief accounting officer of the Trust and shall keep and maintain or cause to be kept and maintained adequate and correct books and records of accounts of the properties and business transactions of the Trust, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any Trustee.
The Treasurer shall deposit all monies and other valuables in the name and to the credit of the Trust with such depositaries as may be designated by the Board. He shall disburse the funds of the Trust, shall render to the President and Trustees, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the Trust and shall have other powers and perform such other duties as may be prescribed by the Board or this Declaration of Trust.
Pursuant to Article IV, Section 16 of this Declaration, the Board hereby confers upon, and delegates to, the Treasurer of the Trust all powers, duties and obligations conferred upon the Board by: Article III, Sections 5(a) and (b), Article IV, Section 18 and Article IX, Sections 1, 2 and 8.
SECTION 11. AUTHORITY TO EXECUTE AND FILE APPLICATIONS FOR EXEMPTIVE RELIEF. The officers of the Trust, including, without limitation, the President, Treasurer, any Assistant Treasurer, Secretary, any Assistant Secretary, or any of them are delegated the authority to prepare, execute and file with the Commission, any and all applications for exemptive orders, and any amendments or supplements thereto, that the officers or any of them believe are necessary, desirable or convenient.
ARTICLE VII
INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND OTHER AGENTS
SECTION 1. AGENTS, PROCEEDINGS AND EXPENSES. For the purpose of this Article, "agent" means any person who is or was a Trustee, officer, employee or other agent of this Trust or is or was serving at the request of this Trust as a Trustee, director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise or was a Trustee, director, officer, employee or agent of a foreign or domestic corporation which was a predecessor of another enterprise at the request of such predecessor entity; "proceeding" means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and "expenses" includes without limitation attorney's fees and any expenses of establishing a right to indemnification under this Article.
Notwithstanding any provision in the Article, neither the Investment Adviser, Principal Underwriter or other independent service providers, nor any officers, employees or other agents of such entities, shall be indemnified pursuant to this Article VII, unless such employees are dual officers, employees or other agents of the Trust and such entities, and such officer, employee or other agent was acting solely in his or her capacity as an officer, employee or agent of the Trust.
SECTION 2. ACTIONS OTHER THAN BY TRUST. This Trust shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of this Trust) by reason of the fact that such person is or was an agent of this Trust, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding, if it is determined that person acted in good faith and reasonably believed:
(a) in the case of conduct in his official capacity as a Trustee of the Trust, that his conduct was in the Trust's best interests, and
(b) in all other cases, that his conduct was at least not opposed to the Trust's best interests, and
(c) in the case of a criminal proceeding, that he had no reasonable cause to believe the conduct of that person was unlawful.
The termination of any proceeding by judgment, order, settlement, conviction or upon a plea of NOLO CONTENDERE or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of this Trust or that the person had reasonable cause to believe that the person's conduct was unlawful.
SECTION 3. ACTIONS BY THE TRUST. This Trust shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action by or in the right of this Trust to procure a judgment in its favor by reason of the fact that that person is or was an agent of this Trust, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of that action if that person acted in good faith, in a manner that person believed to be in the best interests of this Trust and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.
SECTION 4. EXCLUSION OF INDEMNIFICATION. Notwithstanding any provision to the contrary contained herein, there shall be no right to indemnification for any liability arising by reason of willful misfeasance, bad faith, negligence, or the reckless disregard of the duties involved in the conduct of the agent's office with this Trust.
No indemnification shall be made under Sections 2 or 3 of this Article:
(a) In respect of any claim, issue, or matter as to which that person shall have been adjudged to be liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity; or
(b) In respect of any claim, issue or matter as to which that person shall have been adjudged to be liable in the performance of that person's duty to this Trust, unless and only to the extent that the court in which
that action was brought shall determine upon application that in view of all the circumstances of the case, that person was not liable by reason of the disabling conduct set forth in the preceding paragraph and is fairly and reasonably entitled to indemnity for the expenses which the court shall determine; or
(c) of amounts paid in settling or otherwise disposing of a threatened or pending action, with or without court approval, or of expenses incurred in defending a threatened or pending action which is settled or otherwise disposed of without court approval, unless the required approval set forth in Section 6 of this Article is obtained.
SECTION 5. SUCCESSFUL DEFENSE BY AGENT. To the extent that an agent of this Trust has been successful on the merits in defense of any proceeding referred to in Sections 2 or 3 of this Article or in defense of any claim, issue or matter therein, before the court or other body before whom the proceeding was brought, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith, provided that the Board, including a majority who are disinterested, non-party Trustees, also determines that based upon a review of the facts, the agent was not liable by reason of the disabling conduct referred to in Section 4 of this Article.
SECTION 6. REQUIRED APPROVAL. Except as provided in Section 5 of this Article, any indemnification under this Article shall be made by the Trust only if authorized in the specific case on a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in Sections 2 or 3 of this Article and is not prohibited from indemnification because of the disabling conduct set forth in Section 4 of this Article, by:
(a) A majority vote of a quorum consisting of Trustees who are not parties to the proceeding and are not interested persons of the Trust (as defined in the 1940 Act); or
(b) A written opinion by legal counsel.
SECTION 7. ADVANCE OF EXPENSES. Expenses incurred in defending any proceeding may be advanced by this Trust before the final disposition of the proceeding upon a written undertaking by or on behalf of the agent, to repay the amount of the advance if it is ultimately determined that he or she is not entitled to indemnification, together with at least one of the following as a condition to the advance: (i) security for the undertaking; or (ii) the existence of insurance protecting the Trust against losses arising by reason of any lawful advances; or (iii) a determination by a majority of a quorum of Trustees who are not parties to the proceeding and are not interested persons of the Trust, or by an independent legal counsel, based on a review of readily available facts that there is reason to believe that the agent ultimately will be found entitled to indemnification. Determinations and authorizations of payments under this Section must be made in the manner specified in Section 6 of this Article for determining that the indemnification is permissible.
SECTION 8. OTHER CONTRACTUAL RIGHTS. Nothing contained in this Article shall affect any right to indemnification to which persons other than Trustees and officers of this Trust or any subsidiary hereof may be entitled by contract or otherwise.
SECTION 9. LIMITATIONS. No indemnification or advance shall be made under this Article, except as provided in Sections 5 or 6, in any circumstances where it appears:
(a) that it would be inconsistent with a provision of the Declaration of Trust, a resolution of the Shareholders, or an agreement in effect at the time of accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid which prohibits or otherwise limits indemnification; or
(b) that it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
SECTION 10. INSURANCE. Upon and in the event of a determination by the Board of this Trust to purchase such insurance, this Trust shall purchase and maintain insurance on behalf of any agent of this Trust against any liability asserted against or incurred by the agent in such capacity or arising out of the agent's status as such, but only to the extent that this Trust would have the power to indemnify the agent against that liability under the provisions of this Article and the Declaration of Trust.
SECTION 11. FIDUCIARIES OF EMPLOYEE BENEFIT PLAN. This Article does not apply to any proceeding against any Trustee, investment adviser or other fiduciary of an employee benefit plan in that person's capacity as such, even though that person may also be an agent of this Trust as defined in Section 1 of this Article. Nothing contained in this Article shall limit any right to indemnification to which such a Trustee, investment adviser, or other fiduciary may be entitled by contract or otherwise which shall be enforceable to the extent permitted by applicable law other than this Article.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 1. VOTING POWERS. The Shareholders shall have only the voting powers expressly granted under the 1940 Act or under the law of Delaware applicable to business trusts. This Declaration shall not confer any independent right to Shareholders to vote on any matter, including the creation, operation, dissolution, or termination of the Trust. The Shareholders shall have the right to vote on other matters only as the Board may consider desirable, and so authorize. To the extent that the 1940 Act or Delaware law is amended, modified or interpreted by rule, regulation, order, or no-action letter to eliminate or limit Shareholders' right to vote on any specific matter, the Shareholders' right to vote shall be deemed to be amended, modified or interpreted in accordance therewith without further approval by the Board or the Shareholders.
Currently, the 1940 Act requires that Shareholders have the right to vote, under certain circumstances, to: (a) elect Trustees; (b) approve investment advisory agreements and principal underwriting agreements; (c) approve a change in subclassification; (d) approve any change in fundamental investment policies; (e) approve a distribution plan under Rule 12b-1 of the 1940 Act; and (f) terminate the Trust's independent public accountant. The Shareholders may vote on any additional matter only as the Board may consider desirable, and so authorize. Shareholders have the right to call special meetings and vote to remove Trustees but only if and to the extent that the Commission staff takes the position by rule, interpretive or other public release, or by no-action letter, that Section 16(c) of the 1940 Act gives them such right.
On any matter that requires Shareholder approval under the 1940 Act, whether Shareholders are required to vote by Series or Class shall be determined by reference to the express requirements of the 1940 Act. On other matters submitted to a vote of the Shareholders in the discretion of the Trustees, or for which the 1940 Act does not expressly specify the voting procedure, all Shares shall be voted in the aggregate and not by Series or Class unless the Trustees determine otherwise. Each whole Share shall be entitled to one vote as to any matter on which it is entitled to vote, and each fractional Share shall be entitled to a proportionate fractional vote. There shall be no cumulative voting in the election of Trustees. Shares may be voted in person or by proxy or in any manner authorized by the Trustees. Unless the Trustees declare otherwise, proxies may be given by any electronic or telecommunications device, including telefacsimile, telephone or through the Internet, but if a proposal by anyone other than the officers or Trustees is submitted to a vote of the Shareholders of any Series or Class, or if there is a proxy contest or proxy solicitation or proposal in opposition to any proposal by the officers or Trustees, Shares may be voted only in person or by written proxy unless the Trustees specifically authorize other permissible methods of transmission. Until Shares of a Series are issued, as to that Series the Trustees may exercise all rights of Shareholders and may take any action required or permitted to be taken by Shareholders by law, or this Declaration of Trust.
SECTION 2. VOTING POWER AND MEETINGS. Meetings of the Shareholders may be called by the Trustees for the purpose of electing Trustees as provided in Article IV, Section 5 and for such other purposes as may be prescribed by law or by this Declaration of Trust.
SECTION 3. PLACE OF MEETINGS. Meetings of shareholders shall be held at any place designated by the Board. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the Trust.
SECTION 4. CALL OF MEETING. A meeting of the shareholders may be called at any time by the Board or by the Chairman of the Board or by the President.
SECTION 5. NOTICE OF SHAREHOLDERS' MEETING. All notices of meetings of
shareholders shall be sent or otherwise given in accordance with Section 4 of
this Article VIII not less than seven (7) nor more than one hundred and twenty
(120) days before the date of the meeting. The notice shall specify (i) the
place, date and hour of the meeting, and (ii) the general nature of the business
to be transacted. The notice of any meeting at which Trustees are to be elected
also shall include the name of any nominee or nominees whom at the time of the
notice are intended to be presented for election. Unless otherwise required by
the 1940 Act, the notice need not state the purpose for which the meeting is
being called.
SECTION 6. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally, or by telephone, first-class mail, express mail, overnight mail, telegram, electronic mail, telefacsimile, internet or other similar electronic medium, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the Trust or its transfer agent or given by the shareholder to the Trust for the purpose of notice. If no such address appears on the Trust's books or is given, notice shall be deemed to have been given if sent to that shareholder by telephone, first-class mail, express mail, overnight mail, telegram, electronic mail, telefacsimile, internet or other similar electronic medium to the Trust's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the Trust is returned to the Trust by the United States Postal Service marked to indicate that the Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the Trust for a period of one year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any shareholder's meeting shall be executed by the Secretary, Assistant Secretary or any transfer agent or other designated agent of the Trust giving the notice and shall be filed and maintained in the minute book of the Trust.
SECTION 7. ADJOURNED MEETING; NOTICE. Any shareholder's meeting, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares represented at that meeting, either in person or by proxy.
When any meeting of shareholders is adjourned to another time or place, notice need not be given of the adjourned meeting at which the adjournment is taken, unless a new record date of the adjourned meeting is fixed or unless the adjournment is for more than sixty (60) days from the date set for the original meeting, in which case the Board shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Sections 3 and 4 of this Article VIII. At any adjourned meeting, the Trust may transact any business which might have been transacted at the original meeting.
SECTION 8. VOTING PROCEDURE. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of the Declaration of Trust, as in effect at such time. The shareholders' vote may be by voice vote or by ballot, provided, however, that any election for Trustees must be by ballot if demanded by any shareholder before the voting has begun. The Trust shall be authorized to solicit, and a shareholder shall be entitled to submit a proxy ballot containing the voting instructions of such shareholder, in person, or by mail, telephone, electronic mail, overnight mail, express mail, telefacsimile, telegraph, internet or similar electronic or other medium, as permitted by law, and except that the Trustees or any appropriate officer of the Trust may limit or delineate the types of media and methods by which a shareholder may submit voting instructions in a proxy statement or in any voting instructions accompanying a proxy statement. On any matter other than elections of Trustees, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to the total shares that the shareholder is entitled to vote on such proposal.
SECTION 9. QUORUM AND REQUIRED VOTE. Except when a larger quorum is required by applicable law or by this Declaration of Trust, thirty-three and one-third percent (33 1/3%) of the Shares entitled to vote shall constitute a quorum at a Shareholders' meeting. When any one or more Series or Classes is to vote as a single Class separate from any other Shares, thirty-three and one-third percent (33 1/3%) of the Shares of each such Series or Classes entitled to vote shall constitute a quorum at a Shareholder's meeting of that Series. Any meeting of Shareholders may be adjourned from time to time by a majority of the votes properly cast upon the question of adjourning a meeting to another date and time, whether or not a quorum is present, and the meeting may be held as adjourned within a reasonable time after the date set for the original meeting without further notice. When a quorum is present at any meeting, a majority of the Shares represented at the meeting shall decide any questions and a plurality shall elect a Trustee, except when a larger vote is required by any provision of this Declaration of Trust or by applicable law.
SECTION 10. ACTION BY WRITTEN CONSENT. Any action taken by Shareholders may be taken without a meeting if Shareholders holding a majority of the Shares entitled to vote on the matter (or such larger proportion thereof as shall be required by any express provision of this Declaration of Trust) and holding a majority (or such larger proportion as aforesaid) of the Shares of any Series or Class entitled to vote separately on the matter consent to the action in writing and such written consents are filed with the records of the meetings of Shareholders. Such consent shall be treated for all purposes as a vote taken at a meeting of Shareholders.
SECTION 11. RECORD DATES. For the purpose of determining the Shareholders of any Series or Class who are entitled to vote or act at any meeting or any adjournment thereof, the Trustees may from time to time fix a time, which shall be not more than one-hundred and twenty (120) days before the date of any meeting of Shareholders, as the record date for determining the Shareholders of such Series or Class having the right to notice of and to vote at such meeting and any adjournment thereof, and in such case only Shareholders of record on such record date shall have such right, notwithstanding any transfer of shares on the books of the Trust after the record date. For the purpose of determining the Shareholders of any Series or Class who are entitled to receive payment of any dividend or of any other distribution, the Trustees may from time to time fix a date, which shall be before the date for the payment of such dividend or such other payment, as the record date for determining the Shareholders of
such Series or Class having the right to receive such dividend or distribution. Without fixing a record date the Trustees may for voting and/or distribution purposes close the register or transfer books for one or more Series for all or any part of the period between a record date and a meeting of Shareholders or the payment of a distribution. Nothing in this Section shall be construed as precluding the Trustees from setting different record dates for different Series or Classes.
SECTION 12. WAIVER OF NOTICE BY CONSENT OF ABSENT SHAREHOLDERS. The transactions of the meeting of shareholders, however called and noticed and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present either in person or by proxy and if either before or after the meeting, each person entitled to vote who was not present in person or by proxy signs a written waiver of notice or a consent to a holding of the meeting or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any meeting of shareholders.
Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the beginning of the meeting.
SECTION 13. PROXIES. Every person entitled to vote for Trustees or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Trust. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholder's attorney-in-fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it before the vote pursuant to that proxy by a writing delivered to the Trust stating that the proxy is revoked or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing that proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the Trust before the vote pursuant to that proxy is counted; provided however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy unless otherwise provided in the proxy.
SECTION 14. INSPECTORS OF ELECTION. Before any meeting of shareholders, the Board may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may and on the request of any shareholder or a shareholder's proxy, shall appoint a person to fill the vacancy.
These inspectors shall:
(a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies;
(b) Receive votes, ballots or consents;
(c) Hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) Count and tabulate all votes or consents;
(e) Determine when the polls shall close;
(f) Determine the result; and
(g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE IX
RECORDS AND REPORTS
SECTION 1. MAINTENANCE OF SHARE REGISTER. The Trust shall keep at its principal executive office or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the Board, a record of its shareholders, giving the names and addresses of all shareholders and the number and series of shares held by each shareholder.
SECTION 2. MAINTENANCE OF OTHER RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the Board and any committee or committees of the Board shall be kept at such place or places designated by the Board or in the absence of such designation, at the principal executive office of the Trust. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form or in any other form capable of being converted into written form.
ARTICLE X
MISCELLANEOUS
SECTION 1. TERMINATION OF TRUST OR SERIES. Unless terminated as provided herein, the Trust shall continue without limitation of time. The Trust may be terminated at any time by vote of a majority of the Shares of each Series entitled to vote, voting separately by Series, or by the Board with written notice to the Shareholders. Any Series may be terminated at any time by vote of a majority of the Shares of that Series or by the Trustees with written notice to the Shareholders of that Series.
Upon termination of the Trust (or any Series, as the case may be), after paying or otherwise providing for all charges, taxes, expenses and liabilities held, severally, with respect to each Series (or the applicable Series, as the case may be), whether due or accrued or anticipated as may be determined by the Trustees, the Trust shall, in accordance with such procedures as the Trustees consider appropriate, reduce the remaining assets held, severally, with respect to each Series (or the applicable Series, as the case may be), to distributable form in cash or shares or other securities, or any combination thereof, and distribute the proceeds held with respect to each Series (or the applicable Series, as the case may be), to the Shareholders of that Series, as a Series, ratably according to the number of Shares of that Series held by the several Shareholders on the date of termination.
SECTION 3. MERGER AND CONSOLIDATION. The Board may cause (i) the Trust to be merged into or consolidated with another trust or company; (ii) a Series of the Trust to be merged into another Series of the Trust or another series of another trust or company; (iii) convert a Class of a Series into another Class of the same Series; (iv) the Shares of the Trust or any Series to be converted into beneficial interests in another business trust (or series thereof), or (v) the Shares to be exchanged for shares in another trust or company under or pursuant to any state or federal statute to the extent permitted by law.
Except with respect to (iii) above, which in certain cases may be effected solely by adoption of appropriate resolution by the Board, such merger or consolidation, must be authorized by vote of a majority of the Shares that are represented at a meeting of the Trust, as a whole and voting in the aggregate, or of any affected Series, as may be applicable, provided that in all respects not governed by statute or applicable law, the Trustees shall have power to prescribe the procedure necessary or appropriate to accomplish a sale of assets, merger or consolidation.
SECTION 4. FILING OF COPIES, REFERENCES, HEADINGS. The original or a copy of this instrument and of each restatement and/or amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such restatements and/or amendments have been made and as to any matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such restatements and/or amendments. In this instrument and in any such restatements and/or amendment, references to this instrument, and all expressions like "herein", "hereof" and "hereunder", shall be deemed to refer to this instrument as amended or affected by any such restatements and/or amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this instrument. Whenever the singular number is used herein, the same shall include the plural; and the neuter, masculine and feminine genders shall include each other, as applicable. This instrument may be executed in any number of counterparts each of which shall be deemed an original.
SECTION 5. APPLICABLE LAW. This Declaration of Trust is created under and is to be governed by and construed and administered according to the laws of the State of Delaware and the Delaware Business Trust Act, as amended from time to time (the "Act"). The Trust shall be a Delaware business trust pursuant to such Act, and without limiting the provisions hereof, the Trust may exercise all powers which are ordinarily exercised by such a business trust.
SECTION 6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
(a) The provisions of the Declaration of Trust are severable, and if the Board determines, with the advice of counsel, that any of such provisions are in conflict with the 1940 Act, the regulated investment company provisions of the Internal Revenue Code or with other applicable laws and regulations, the conflicting provision shall be deemed never to have constituted a part of the Declaration of Trust; provided, however, that such determination shall not affect any of the remaining provisions of the Declaration of Trust or render invalid or improper any action taken or omitted prior to such determination.
(b) If any provision of the Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall attach only to such provision in such jurisdiction and shall not in any manner affect such provision in any other jurisdiction or any other provision of the Declaration of Trust in any jurisdiction.
SECTION 7. BUSINESS TRUST ONLY. It is the intention of the Trustees to create a business trust pursuant to the Delaware Business Trust Act, as amended from time to time (the "Act"), and thereby to create only the relationship of trustee and beneficial owners within the meaning of such Act between the Trustees and each Shareholder. It is not the intention of the Trustees to create a general partnership, limited partnership, joint stock association, corporation, bailment, or any form of legal relationship other than a business trust pursuant to such Act. Nothing in this Declaration of Trust shall be construed to make the Shareholders, either by themselves or with the Trustees, partners or members of a joint stock association.
SECTION 8. CHECKS, DRAFTS, EVIDENCE OF INDEBTEDNESS. All checks, drafts, or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable to the Trust shall be signed or endorsed in such manner and by such person or persons as shall be designated from time to time by the Board.
SECTION 9. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The Board may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Trust and this authority may be general or confined to specific instances; and unless so authorized or ratified by the Board or within the agency power of an officer, no officer, agent, or employee shall have any power or authority to bind the Trust by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
SECTION 10. FISCAL YEAR. The fiscal year of the Trust and of each Series shall be fixed and refixed or changed from time to time by resolution of the Trustees.
ARTICLE XI
AMENDMENT
SECTION 1. AMENDMENT. Because this Declaration does not confer any independent voting rights to Shareholders not expressly granted under Delaware law or the 1940 Act, this Declaration may be amended without Shareholder approval, and all Shareholders purchase Shares with notice that it may be so amended unless expressly required under Delaware law or the 1940 Act. The Trustees may, without any Shareholder vote, amend or otherwise supplement this Declaration by making an amendment, a trust instrument supplemental hereto or an amended and restated declaration of trust; provided, that
Shareholders shall have the right to vote on any amendment if expressly required under Delaware law or the 1940 Act, or submitted to them by the Trustees in their discretion.
IN WITNESS WHEREOF, the Trustees named below do hereby make and enter into this Declaration of Trust as of the 7th day of February, 2000.
/s/ A. Max Walker ------------------------- A. Max Walker /s/ Edmund L. Benson, III ------------------------- Edmund L. Benson, III /s/ James Ermer ------------------------- James Ermer /s/ William H. Grigg -------------------------- William H. Grigg /s/ Thomas F. Keller -------------------------- Thomas F. Keller /s/ Charles B. Walker -------------------------- Charles B. Walker /s/ Thomas S. Word, Jr. -------------------------- Thomas S. Word, Jr. /s/ Carl E. Mundy, Jr. -------------------------- Carl E. Mundy, Jr. /s/ James B. Sommers -------------------------- James B. Sommers /s/ Cornelius J. Pings -------------------------- Cornelius J. Pings /s/ William P. Carmichael ------------------------- William P. Carmichael |
DISTRIBUTION AGREEMENT
NATIONS FUNDS TRUST
Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter contained, the undersigned, Nations Funds Trust (the "Trust"), a Delaware business trust, has agreed that Stephens Inc. (the "Distributor") shall be, for the period of this Agreement, the exclusive distributor of the units of beneficial interest in all classes of shares ("Shares") of the investment portfolios of the Trust listed on Schedule I (individually, a "Fund" and collectively the "Funds"). Absent written notification to the contrary by either the Trust or the Distributor, each new investment portfolio established in the future shall automatically become a "Fund" for all purposes hereunder and shares of each new class established in the future shall automatically become "Shares" for all purposes hereunder as if set forth on Schedule I.
1. SERVICES AS DISTRIBUTOR.
1.1. The Distributor will act as agent for the distribution of Shares in accordance with the instructions of the Trust's Board of Trustees and the Trust's registration statement and prospectus then in effect under the Securities Act of 1933, as amended (the "1933 Act"), and will transmit promptly any orders received by it for the purchase or redemption of Shares to the Trust or its transfer agent.
1.2. The Distributor agrees to use appropriate efforts to solicit orders for the sale of Shares and will undertake such advertising and promotion as it believes appropriate in connection with such solicitation. The Trust understands that the Distributor is and may in the future be the distributor of shares of other investment company portfolios including portfolios having investment objectives similar to those of the Funds. The Trust further understands that existing and future investors in the Funds may invest in shares of such other portfolios. The Trust agrees that the Distributor's duties to such portfolios shall not be deemed in conflict with its duties to the Trust under this paragraph 1.2.
1.3. The Distributor shall, at its own expense, finance such activities as it deems reasonable and which are primarily intended to result in the sale of Shares, including, but not limited to, advertising, compensation of underwriters, dealers and sales personnel, the printing and mailing of prospectuses to other than current shareholders, and the printing and mailing of sales literature. The Distributor shall be responsible for reviewing and providing advice and counsel on all sales literature (E.G., advertisements, brochures and shareholder communications) with respect to each of the Funds. In addition, the Distributor will provide one or more persons, during normal business hours, to respond to telephone questions with respect to the Funds.
1.4. All activities by the Distributor and its agents and employees as distributor of Shares shall comply with all applicable laws, rules and regulations, including, without limitation, all rules and regulations made or adopted pursuant to the Investment Company Act of 1940, as amended (the "1940 Act") by the Securities and Exchange Commission (the "SEC") or any securities association registered under the Securities Exchange Act of 1934, as amended.
1.5. Whenever in their judgment such action is warranted by unusual market, economic or political conditions, or by other circumstances of any kind, the Trust's officers may decline to accept any orders for, or make any sales of Shares until such time as those officers deem it advisable to accept such orders and to make such sales.
1.6. The Trust agrees at its own expense to execute any and all documents and to furnish any and all information and otherwise to take all actions that may be reasonably necessary in connection with the registration or qualification of Shares for sale in such states as the Distributor may designate to the Trust and the Trust may approve, and the Trust shall pay all fees and other expenses incurred in connection with such registration or qualification.
1.7. The Trust shall furnish from time to time, for use in connection with the sale of Shares, such information with respect to the Funds and Shares as the Distributor may reasonably request; and the Trust warrants that the statements contained in any such information shall fairly show or represent what they purport to show or represent. The Trust shall also furnish the Distributor upon request with: (a) audited annual and unaudited semi-annual statements of the Trust's books and accounts with respect to each Fund, and (b) from time to time such additional information regarding the Funds' financial condition as the Distributor may reasonably request.
1.8. The Distributor may be reimbursed for all or a portion of the expenses described above to the extent permitted by a distribution plan adopted by the Trust on behalf of a Fund pursuant to Rule 12b-1 under the 1940 Act. No provision of this Agreement shall be deemed to prohibit any payments by a Fund to the Distributor or by a Fund or the Distributor to investment dealers, banks or other financial institutions through whom shares of the Fund are sold where such payments are made under a distribution plan adopted by the Trust on behalf of such Fund pursuant to Rule 12b-1 under the 1940 Act. In addition, the Distributor shall be entitled to retain any front-end sales charge imposed upon the sale of the Shares (and reallow a portion thereof) as specified in the Trust's registration statement and the Trust shall pay to the Distributor the proceeds from any contingent deferred sales charge imposed on the redemption of the shares as specified in the Trust's registration statement.
1.9. The Distributor will execute and deliver agreements with broker/dealers, financial institutions and other industry professionals based on the forms attached hereto or based on the additional forms of agreement approved from time to time by the Trust's Board of Trustees with respect to the various classes of shares of the Funds, including but not limited to forms of sales support agreements and shareholder servicing agreements approved in connection with a distribution plan and/or shareholder servicing plan approved in accordance with Rule 12b-1 under the 1940 Act.
2. REPRESENTATIONS; INDEMNIFICATION.
2.1. The Trust represents to the Distributor that all registration statements and prospectuses filed by the Trust with the SEC under the 1933 Act, with respect to Shares have been prepared in conformity with the requirements of the 1933 Act and rules and regulations of the SEC thereunder. As used in this Agreement, the terms "registration statement" and "prospectus" shall mean any registration statement and then current prospectus (together with any related then current statement of additional information) filed with the SEC with respect to Shares, and any amendments and supplements thereto which at any time shall have been filed therewith. The Trust represents and warrants to the Distributor that any registration statement and prospectus, when such registration statement becomes effective, will contain all statements required to be stated therein in conformity with the 1933 Act and the rules and regulations of the SEC; that all statements of fact contained in any such registration statement and prospectus will be true and correct when such registration statement and prospectus become effective; and that neither any registration statement nor any prospectus when any registration statement becomes effective will include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading to a purchaser of Shares. The Trust may, but shall not be obligated to, propose from time to time such amendment or amendments to any registration statement and such supplement or supplements to any prospectus which in light of future developments, may, in the opinion of the Trust's counsel, be necessary or advisable. The Trust shall promptly notify the Distributor of any advice given to it by the Trust's counsel regarding the necessity or advisability so to amend or supplement such registration statement or prospectus. If the Trust shall not propose such amendment or amendments and/or supplement or supplements within fifteen days after receipt by the Trust of a written request from the Distributor to do so, the Distributor may, at its option, terminate this Agreement. The Trust shall not file any amendment to any registration statement or supplement to any prospectus without giving the Distributor reasonable notice thereof in advance; provided, however, that nothing contained in this Agreement shall in any way limit the Trust's right to file at any time such amendments to any registration statement and/or supplements to any prospectus, of whatever character, as the Trust may deem advisable, such right being in all respects absolute and unconditional.
2.2. The Trust authorizes the Distributor and dealers to use any prospectus in the form furnished from time to time in connection with the sale of Shares and represented by the Trust as being the then current form of prospectus. The Trust agrees to indemnify, defend and hold the Distributor, its several officers and directors, and any person who controls the Distributor within the meaning of Section 15 of the 1933 Act free and harmless from and against any and all claims, demands, liabilities and expenses (including the cost of investigating or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Distributor, its officers and directors, or any such controlling person, may incur under the 1933 Act or under common law or otherwise, arising out of or based upon any untrue statement, or alleged untrue statement, of a material fact contained in any registration statement or any prospectus or arising out of or based upon any omission, or alleged omission, to state a material fact required to be stated in any registration statement or prospectus or necessary to make any statement in such documents not misleading; PROVIDED, HOWEVER, that the Trust's agreement to indemnify the Distributor, its officers or directors, and any such controlling person shall not be deemed to cover any claims, demands, liabilities or expenses arising out of any untrue statement or alleged untrue statement or omission or alleged omission made in any registration statement or prospectus or in any financial or other statements in reliance upon and in conformity with any information furnished to the Trust by the Distributor or any affiliate thereof and used in the preparation thereof; and FURTHER PROVIDED that the Trust's agreement to indemnify the Distributor and the Trust's representations and warranties herein set forth shall not be deemed to cover any liability to the Trust or its shareholders to which the Distributor would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of the Distributor's reckless disregard of its obligations and duties under this Agreement. The Trust's agreement to indemnify the Distributor, its officers and directors, and any such controlling person, as aforesaid, is expressly conditioned upon the Trust's being notified of any action brought against the Distributor, its officers or directors, or any such controlling person, such notification to be given by letter or by telegram or transmitted by similar telecommunications device, addressed to the Trust at its principal office and sent to the Trust by the person against whom such action is brought, within a reasonable period of time after the summons or other first legal process shall have been served. The failure to so notify the Trust of any such action shall not relieve the Trust from any liability which the Trust may have to the person against whom such action is brought by reason of any such untrue, or allegedly untrue, statement or omission, or alleged omission, otherwise than on account of the Trust's indemnity agreement contained in this paragraph 2.2. The Trust will be entitled to assume the defense of any suit brought to enforce any such claim, demand or liability, but, in such case, such defense shall be conducted by counsel of good standing chosen by the Trust and approved by the Distributor, which approval shall not unreasonably be withheld. In the event the Trust elects to assume the defense of any such suit and retain counsel of good standing approved by the Distributor, the defendant or defendants in such suit shall bear the fees and expenses of any additional counsel retained by any of them; but in case the Trust does not elect to assume the defense of any such suit, or in case the Distributor reasonably does not approve of counsel chosen by the Trust, the Trust will reimburse the Distributor, its officers and directors, or the controlling person or persons named as defendant or defendants in such suit, for the fees and expenses of any counsel retained by the Distributor or them. The Trust's indemnification agreement contained in this paragraph 2.2 and the Trust's representations and warranties in this Agreement shall remain operative and in full force and effect regardless of any investigation made by or on behalf of the Distributor, its officers and directors, or any controlling person, and shall survive the delivery of any Shares. This agreement of indemnity will inure exclusively to the Distributor's benefit, to the benefit of its several officers and directors, and their respective estates, and to the benefit of the controlling persons and their successors. The Trust agrees promptly to notify the Distributor of the commencement of any litigation or proceedings against the Trust or any of its officers or Trustees in connection with the issue and sale of any Shares.
2.3. The Distributor agrees to indemnify, defend and hold the Trust, its several officers and Trustees, and any person who controls the Trust within the meaning of Section 15 of the 1933 Act free and harmless from and against any and all claims, demands, liabilities and expenses (including the costs of investigation or defending such claims, demands or liabilities and any counsel fees incurred in connection therewith) which the Trust, its officers or Trustees or any such controlling person, may incur under the 1933 Act or under common law or otherwise, but only to the extent that such liability or expense incurred by the Trust, its officers or Trustees, or such controlling person resulting from such claims or demands, shall arise out of or be based upon any untrue, or alleged untrue, statement of a material fact contained in information furnished by the Distributor or any affiliate thereof to the Trust or its counsel and used in the Trust's registration statement or corresponding statements made in the prospectus, or shall arise out of or be based upon any omission, or alleged omission, to state a material fact in connection with such information furnished by the Distributor or any affiliate thereof to the Trust or its counsel required to be stated in such answers or necessary to make such information not misleading. The Distributor's agreement to indemnify the Trust, its officers and Trustees, and any such controlling person, as aforesaid, is expressly conditioned upon the Distributor's being notified of any action brought against the Trust, its officers or Trustees, or any such controlling person, such notification to be given by letter or telegram addressed to the Distributor at its principal office in Little Rock, Arkansas and sent to the Distributor by the person against whom such action is brought, within a reasonable period of time after the summons or other first legal process shall have been served. The Distributor shall have the right to control the defense of such action, with counsel of its own choosing, satisfactory to the Trust, if such action is based solely upon such alleged misstatement or omission on the Distributor's part or any affiliate thereof, and in any other event the Trust, its officers or Trustees or such controlling person shall each have the right to participate in the defense or preparation of the defense of any such action. The failure so to notify the Distributor of any such action shall not relieve the Distributor or any affiliate thereof from any liability which the Distributor or any affiliate thereof may have to the Trust, its officers or Trustees, or to such controlling person by reason of any such untrue or alleged untrue statement, or omission or alleged omission, otherwise than on account of the Distributor's indemnity agreement contained in this paragraph 2.3.
2.4. No Shares shall be offered by either the Distributor or the Trust under any of the provisions of this Agreement and no orders for the purchase or sale of Shares hereunder shall be accepted by the Trust if and so long as the effectiveness of the registration statement then in effect or any necessary amendments thereto shall be suspended under any of the provisions of the 1933 Act, or if and so long as a current prospectus, as required by Section 10(b) of the 1933 Act is not on file with the SEC; provided, however, that nothing contained in this paragraph 2.4 shall in any way restrict or have any application to or bearing upon the Trust's obligation to repurchase Shares from any shareholder in accordance with the provisions of the Trust's prospectus or Declaration of Trust.
2.5. The Trust agrees to advise the Distributor as soon as reasonably practicable:
(a) of any request by the SEC for amendments to the registration statement or prospectus then in effect;
(b) of the issuance by the SEC of any stop order suspending the effectiveness of the registration statement or prospectus then in effect or of the initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a material fact made in the registration statement or prospectus then in effect or which requires the making of a change in such registration statement or prospectus in order to make the statements therein not misleading;
(d) of all actions of the SEC with respect to any amendment to any registration statement or prospectus which may from time to time be filed with the SEC; and
(e) if a current prospectus is not on file with the SEC.
For purposes of this section, informal requests by or acts of the staff of the SEC shall not be deemed actions of or requests by the SEC.
3. CONFIDENTIALITY.
The Distributor agrees on behalf of itself and its employees to treat confidentially and as proprietary information of the Trust all records and other information relative to the Funds and/or the Trust and its prior, present or potential shareholders, and not to use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Trust, which approval shall not be unreasonably withheld and may not be withheld where the Distributor may be exposed to civil or criminal contempt proceedings for failure to comply, when requested to divulge such information by duly constituted authorities, or when so requested by the Trust.
4. LIMITATIONS OF LIABILITY.
Except as provided in paragraph 2.3, the Distributor shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust or any Fund in connection with matters to which this agreement relates, except a loss resulting from willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or from reckless disregard of its obligations and duties under this agreement.
5. TERM.
This agreement shall become effective on the date of its execution and, unless sooner terminated as provided herein, shall continue in effect for a period of two years from the date written below. This Agreement shall thereafter continue from year to year, provided such continuance is specifically approved at least annually by (i) the Trust's Board of Trustees, or (ii) by a vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of the Fund, PROVIDED that in either event the continuance is also approved by the majority of the Trust's Trustees who are not parties to this agreement or interested persons (as defined in the 1940 Act) of any such party, by vote cast in person at a meeting called for the purpose of voting on such approval. This agreement is not assignable and is terminable with respect to a Fund, without penalty, on not less than sixty (60) days' notice, by the Trust's Board of Trustees, by vote of a majority (as defined in the 1940 Act) of the outstanding voting securities of such Fund, or by the Distributor. This agreement will also terminate automatically in the event of its assignment (as defined in the 1940 Act).
6. MISCELLANEOUS.
6.1. No provision of this Agreement may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which an enforcement of the change, waiver, discharge or termination is sought.
6.2. This agreement shall be governed by the laws of the State of Arkansas.
7. COUNTERPARTS.
7.1. This Agreement may be executed in any manner of counterparts, each of which shall be deemed an original.
Please confirm that the foregoing is in accordance with your understanding by indicating your acceptance hereof at the place indicated below, whereupon it shall become a binding agreement between us.
Yours very truly,
NATIONS FUNDS TRUST
By: /s/ A. Max Walker
-----------------------------
A. Max Walker
President and Chairman of the
Board of Trustees
Accepted:
|
STEPHENS INC.
By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
Vice President
|
Dated as of February 14, 2000
SCHEDULE I
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
3. Nations MidCap Index Fund
Approved: December 9, 1999
Exhibit 99.F
FORM OF
NATIONS FUNDS
DEFERRED COMPENSATION PLAN FOR
ELIGIBLE DIRECTORS/TRUSTEES
The open-end investment companies advised by NationsBank, N.A. (Carolinas) or its affiliates (the "Nations Funds") have adopted THE NATIONS FUNDS DEFERRED COMPENSATION PLAN FOR ELIGIBLE DIRECTORS/TRUSTEES (the "Plan") for the benefit of each of the directors and trustees of each of the Nations Funds who is not an employee of any of the Nations Funds, or their distributor, administrator or advisor, or any of their affiliates. The terms and conditions of the Plan are set forth in the form of Deferred Compensation Agreement attached hereto, which each of the Nations Funds is authorized to enter into with each eligible director or trustee desiring to participate in the Plan.
Adopted as of January 25, 1995 by:
Nations Fund Portfolios, Inc.
Adopted as of January 26, 1995 by:
Nations Fund, Inc.
Nations Fund Trust
The Capitol Mutual Funds
Amended as of July 13, 1995 by:
Nations Fund, Inc.
Nations Fund Trust
The Capitol Mutual Funds
Nations Fund Portfolios, Inc.
Adopted as of February 24, 1999 by:
Nations Master Investment Trust
FORM OF
NATIONS FUNDS
DEFERRED COMPENSATION AGREEMENT
AGREEMENT, made on this ____ day of __________, 1999, by and between the registered open-end investment companies listed on Appendix A hereto (the "Funds"), and ________________ (the "Director") residing at ____________________________________________.
WHEREAS, the Director is serving as a director/trustee of the Funds for which he is entitled to receive directors' fees; and
WHEREAS, the Funds and the Director desire to enter into an agreement whereby the Funds will provide to the Director a vehicle under which the Director can defer receipt of directors' fees payable by the Funds;
NOW, THEREFORE, in consideration of the mutual covenants and obligations set forth in this Agreement, the Funds and the Director hereby agree as follows:
1. DEFINITION OF TERMS AND CONDITIONS
1.1 Definitions. Unless a different meaning is plainly implied by the context, the following terms as used in this Agreement shall have the following meanings:
(a) "Beneficiary" shall mean such person or persons designated pursuant to Section 4.3 hereof to receive benefits after the death of the Director.
(b) "Board of Directors" shall mean the Board of Directors of the Fund.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute.
(d) "Compensation" shall mean the amount of directors' fees paid by the Fund to the Director during a Deferral Year prior to reduction for Compensation Deferrals made under this Agreement.
(e) "Compensation Deferral" shall mean the amount or amounts of the Director's Compensation deferred under the provisions of Section 3 of this Agreement.
(f) "Deferral Account" shall mean the account maintained to reflect the Director's Compensation Deferrals made pursuant to Section 3 hereof and any other credits or debits thereto.
(g) "Deferral Year" shall mean each calendar year during which the Director makes, or is entitled to make, Compensation Deferrals under Section 3 hereof.
(h) "Retirement" shall have the meaning as set forth under the Retirement Plan.
(i) "Retirement Plan" shall mean the "Nations Funds Retirement Plan for Eligible Directors/Trustees."
(j) "Valuation Date" shall mean the last business day of each calendar year and any other day upon which the Fund makes a valuation of the Deferred Account.
1.2 Plurals and Gender. Where appearing in this Agreement the singular shall include the plural and the masculine shall include the feminine, and vice versa, unless the context clearly indicates a different meaning.
1.3 Directors and Trustees. Where appearing in this Agreement, "Director" shall also refer to "Trustee" and "Board of Directors" shall also refer to "Board of Trustees."
1.4 Headings. The headings and sub-headings in this Agreement are inserted for the convenience of reference only and are to be ignored in any construction of the provisions hereof.
1.5 Separate Agreement for Each Fund. This Agreement is drafted, and shall be construed, as a separate agreement between the Director and each of the Funds.
2. PERIOD DURING WHICH COMPENSATION DEFERRALS ARE PERMITTED
2.1 Commencement of Compensation Deferrals. The Director may elect, on a form provided by, and submitted to, the Secretary of the Fund, to commence Compensation Deferrals under Section 3 hereof for the period beginning on the later of (i) the date this Agreement is executed or (ii) the date such form is submitted to the Secretary of the Fund.
2.2 Termination of Deferrals. The Director shall not be eligible to make Compensation Deferrals after the earliest of the following dates:
(a) The date on which he ceases to serve as a Director of the Fund; or
(b) The effective date of the termination of this Agreement.
3. COMPENSATION DEFERRALS
(a) Except as provided below, an executed deferral election on the form described in Section 2.1 hereof, must be filed with the Secretary of the Fund prior to the first day of the Deferral Year to which it applies. The form shall set forth the amount of such Compensation Deferral (in whole percentage amounts). Such election shall continue in effect for all subsequent Deferral Years unless it is canceled or modified as provided below. Notwithstanding the foregoing, (i) any person who is elected to the Board during a fiscal year of the Fund may elect before becoming a Director or within 30 days after becoming a Director to defer any unpaid portion of the retainer of such fiscal year and the fees for any future meetings during such fiscal year by filing an election form with the Secretary of the Fund, and (ii) Directors may elect to defer any unpaid portion of the retainer for the fiscal year in which Deferred Compensation Agreements are first authorized by the Board and any unpaid fees for any future meetings during such fiscal year by submitting an election form to the Secretary of the Fund within 30 days of such authorization.
(b) Compensation Deferrals shall be withheld from each payment of Compensation by the Fund to the Director based upon the percentage amount elected by the Director under Section 3.1(a) hereof.
(c) The Director may cancel or modify the amount of his Compensation Deferrals on a prospective basis by submitting to the Secretary of the Fund a revised Compensation Deferral election form. Subject to the provisions of Section 4.2 hereof, such change will be effective as of the first day of the Deferral Year following the date such revision is submitted to the Secretary of the Fund.
(a) The Fund shall establish a bookkeeping Deferral Account to which will be credited an amount equal to the Director's Compensation Deferrals under this Agreement. Compensation Deferrals shall be allocated to the Deferral Account on the first business day following the date such Compensation Deferrals are withheld from the Director's Compensation and shall be deemed invested pursuant to Section 3.3, below, as of the end of the calendar quarter during which it is withheld. The Deferral Account shall be debited to reflect any distributions from such Account. Such debits shall be allocated to the Deferral Account as of the date such distributions are made.
(b) As of each Valuation Date, income, gain and loss equivalents
(determined as if the Deferral Account is invested in the manner set forth under
Section 3.3, below) attributable to the period following the next preceding
Valuation Date shall be credited to and/or deducted from the Director's Deferral
Account.
(a) (1) The Director may select, from various options made available by the Fund, the investment media in which all or part of his Deferral Account shall be deemed to be invested. The investment media available to the Director as of the date of this Agreement are listed on Appendix B hereto.
(2) The Director shall make an investment designation on a
form provided by the Secretary of the Fund which shall remain effective until
another valid designation has been made by the Director as herein provided. The
Director may amend his investment designation as of the end of each calendar
quarter by giving written direction to the Secretary of the Fund at least thirty
(30) days prior to the end of such calendar quarter. A timely change to a
Director's investment designation shall become effective on the first day of the
calendar quarter following receipt by the Secretary of the Fund.
(3) Any changes to the investment media to be made available to the Director, and any limitation on the maximum or minimum percentages of the Director's Deferral Account that may be invested in any particular medium, shall be communicated from time-to-time to the Director by the Secretary of the Fund.
(b) Except as provided below, the Director's Deferral Account shall be deemed to be invested in accordance with his investment designations, provided such designations conform to the provisions of this Section. If:
(1) the Director does not furnish the Secretary of the Fund with complete, written investment instructions, or
(2) the written investment instructions from the Director are unclear,
then the Director's election to make Compensation Deferrals hereunder shall be held in abeyance and have no force and effect, and he shall be deemed to have selected the Nations Treasury Fund until such time as the Director shall provide the Secretary of the Fund with complete investment instructions. Notwithstanding the above, the Board of Directors, in its sole discretion, may disregard the Director's election and determine that all Compensation Deferrals shall be deemed to be invested in a fund determined by the Board of Directors. In the event that any fund under which any portion of the Director's Deferral Account is deemed to be invested ceases to exist, such portion of the Deferral Account thereafter shall be held in the successor to such fund, subject to subsequent deemed investment elections.
The use of the returns on the investment media to determine the amount of the earnings credited to a Director's Deferral Account is subject to regulatory approval. Until such approval is received, the Compensation Deferrals of a Director under this Agreement shall be continuously credited with earnings in an amount determined by multiplying the balance credited to the Deferral Account by an interest rate equal to the yield on 90-day U.S. Treasury Bills.
The Fund shall provide an annual statement to the Director showing such information as is appropriate, including the aggregate amount in the Deferral Account, as of a reasonably current date.
4.1 In General. Distributions from the Director's Deferral Account shall
be paid in cash, in generally equal quarterly installments over a period of five
(5) years beginning on the date the Director's retirement benefits commence
under the Retirement Plan, except that the Board of Directors, in its sole
discretion, may accelerate or extend the distribution of such Deferral Account
after the Director's termination of service as a director of the Fund.
Notwithstanding the foregoing, in the event of the liquidation, dissolution or
winding up of the Fund or the distribution of all or substantially all of the
Fund's assets and property relating to one or more series of its shares to the
shareholders of such series (for this purpose a sale, conveyance or transfer of
the Fund's assets to a trust, partnership, association or corporation in
exchange for cash, shares or other securities with the transfer being made
subject to, or with the assumption by the transferee of, the liabilities of the
Fund shall not be deemed a termination of the Fund or such a distribution), all
unpaid amounts in the Deferral Account as of the effective date thereof shall be
paid in a lump sum on such effective date.
4.2 Termination of Agreement. The Director may elect to terminate this Agreement at any time and, at the time of termination of this Agreement, may elect to receive unpaid amounts in his Deferral Account in generally equal quarterly installments over a period of five (5) years commencing either at the time specified in Section 4.1 or commencing with the first calendar quarter beginning after the first anniversary of the date on which the election is filed with the Secretary of the Fund. A Director who elects to terminate a Deferred Compensation Agreement with the Fund pursuant to this Section 4.2 shall not be eligible to enter into a new Deferred Compensation Agreement with the Fund to be effective to defer Compensation earned from the Fund for the year in which the termination occurs or the next succeeding calendar year.
4.3 Death Prior to Complete Distribution of Deferral Account. Upon the death of the Director prior to the commencement of the distribution of the amounts credited to his Deferral Account, the balance of such Account shall be distributed to his Beneficiary in a lump sum as soon as practicable after the Director's death. In the event of the death of the Director after the commencement of such distribution, but prior to the complete distribution of his Deferral Account, the balance of the amounts credited to his Deferral Account shall be distributed to his Beneficiary over the remaining period during which such amounts were distributable to the Director under Section 4.1 hereof. Notwithstanding the above, the Board of Directors, in its sole discretion, may accelerate the distribution of the Deferral Account.
4.4 Designation of Beneficiary. For purposes of Section 4.3 hereof, the Director's Beneficiary shall be the person or persons so designated by the Director in a written instrument submitted to the Secretary of the Fund. In the event the Director fails to properly designate a Beneficiary, his Beneficiary shall be the person or persons in the first of the following classes of successive preference Beneficiaries surviving at the death of the Director: the Director's (1) surviving spouse or (2) estate.
5. AMENDMENT AND TERMINATION
5.1 The Board of Directors may at any time in its sole discretion amend or terminate this Plan; provided, however, that no such amendment or termination shall adversely affect the right of Directors to receive amounts previously credited to their Deferral Accounts.
6. MISCELLANEOUS
(a) This Agreement is unfunded. Neither the Director nor any other persons shall have any interest in any specific asset or assets of the Fund by reason of any Deferral Account hereunder, nor any rights to receive distribution of his Deferral Account except as and to the extent expressly provided hereunder. The Fund shall not be required to purchase, hold or dispose of any investments pursuant to this Agreement; however, if in order to cover its obligations hereunder the Fund elects to purchase any investments the same shall continue for all purposes to be a part of the general assets and property of the Fund, subject to the claims of its general creditors and no person other than the Fund shall by virtue of the provisions of this Agreement have any interest in such assets other than an interest as a general creditor.
(b) The rights of the Director and the Beneficiaries to the amounts held in the Deferral Account are unsecured and shall be subject to the creditors of the Fund. With respect to the payment of amounts held under the Deferral Account, the Director and his Beneficiaries have the status of unsecured creditors of the Fund. This Agreement is executed on behalf of the Fund by an officer of the Fund as such and not individually. Any obligation of the Fund hereunder shall be an unsecured obligation of the Fund and not of any other person.
6.2 Agents. The Fund may employ agents and provide for such clerical, legal, actuarial, accounting, advisory or other services as it deems necessary to perform its duties under this Agreement. The Fund shall bear the cost of such services and all other expenses it incurs in connection with the administration of this Agreement.
6.3 Liability and Indemnification. Except for its own gross negligence, willful misconduct or willful breach of this Agreement, the Fund shall be indemnified and held harmless by the Director against liability or losses occurring in connection with this Agreement by reason of any act or omission of the Fund or any other person.
6.4 Incapacity. If the Fund shall receive evidence satisfactory to it that the Director or any Beneficiary entitled to receive any benefit under this Agreement is, at the time when such benefit becomes payable, a minor, or is physically or mentally incompetent to give a valid release therefor, and that another person or an institution is then maintaining or has custody of the Director or Beneficiary and that no guardian, committee or other representative of the estate of the Director or Beneficiary shall have been duly appointed, the Fund may make payment of such benefit otherwise payable to the Director or Beneficiary to such other person or institution, including a custodian under a Uniform Gifts to Minors Act, or corresponding legislation (who shall be an adult, a guardian of the minor or a trust company), and the release of such other person or institution shall be a valid and complete discharge for the payment of such benefit.
6.5 Cooperation of Parties. All parties to this Agreement and any person claiming any interest hereunder agree to perform any and all acts and execute any and all documents and papers which are necessary or desirable for carrying out this Agreement or any of its provisions.
6.6 Governing Law. This Agreement is made and entered into in the State of North Carolina and all matters concerning its validity, construction and administration shall be governed by the laws of that State.
6.7 No Guarantee of Directorship. Nothing contained in this Agreement shall be construed as a guaranty or right of any Director to be continued as a Director of one or more of the Nations Funds (or of a right of a Director to any specific level of Compensation) or as a limitation of the right of any of the Nations Funds, by shareholder action or otherwise, to remove any of its directors.
6.8 Counsel. The Fund may consult with legal counsel with respect to the meaning or construction of this Agreement, its obligations or duties hereunder or with respect to any action or proceeding or any question of law, and it shall be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of legal counsel.
6.9 Spendthrift Provision. The Director's and Beneficiaries' interests in the Deferral Account shall not be subject to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charges and any attempt so to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void; nor shall any portion of any such right hereunder be in any manner payable to any assignee, receiver or trustee, or be liable for such person's debts, contracts, liabilities, engagements or torts, or be subject to any legal process to levy upon or attach.
6.10 Notices. For purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered personally or mailed by United States registered or certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight delivery service, addressed to the Director at the home address set forth in the Fund's records and to the Fund at its principal place of business, provided that all notices to the Fund shall be directed to the attention of the Secretary of the Fund or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
6.11 Entire Agreement. This Agreement contains the entire understanding between the Fund and the Director with respect to the payment of non-qualified elective deferred compensation by the Fund to the Director.
6.12 Interpretation of Agreement. Interpretation of, and determinations related to, this Agreement made by the Fund in good faith, including any determinations of the amounts of the Deferral Account, shall be conclusive and binding upon all parties; and the Fund shall not incur any liability to the Director for any such interpretation or determination so made or for any other action taken by it in connection with this Agreement in good faith.
6.13 Successors and Assigns. This Agreement shall be binding upon, and shall inure to the benefit of, the Fund and its successors and assigns and to the Director and his heirs, executors, administrators and personal representatives.
6.14 Severability. In the event any one or more provisions of this Agreement are held to be invalid or unenforceable, such illegality or unenforceability shall not affect the validity or enforceability of the other provisions hereof and such other provisions shall remain in full force and effect unaffected by such invalidity or unenforceability.
6.15 Execution of Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first above written.
NATIONS FUND TRUST
NATIONS FUND, INC.
THE CAPITOL MUTUAL FUNDS
NATIONS FUNDS PORTFOLIOS, INC.
NATIONS MASTER INVESTMENT TRUST
By: /s/ Richard H. Blank, Jr.
------------------------------------ -------------------------
Witness Name: Richard H. Blank, Jr.
Title: Secretary
|
APPENDIX A
LIST OF FUNDS
Nations Fund Trust
Nations Fund, Inc.
The Capitol Mutual Funds
Nations Funds Portfolios, Inc.
Nations Master Investment Trust
APPENDIX B
LIST OF ELIGIBLE INVESTMENT MEDIA
Nations Fund Trust
Nations Value Fund
Nations Capital Growth Fund
Nations Emerging Growth Fund
Nations Special Equity Fund
Nations Equity Index Fund
Nations Balanced Assets Fund
Nations Short-Intermediate Government Fund
Nations Managed Bond Fund
Nations Short-Term Income Fund
Nations Diversified Income Fund
Nations Strategic Fixed Income Fund
Nations Adjustable Rate Government Fund
Nations Mortgage-Backed Securities Fund
Nations Fund, Inc.
Nations Prime Fund
Nations Treasury Fund
Nations Equity Income Fund
Nations International Equity Fund
Nations Government Securities Fund
Nations Fund Portfolios, Inc.
Nations Global Income Fund
Nations Pacific Growth Fund
Nations Emerging Markets Fund
Nations Master Investment Trust
Nations Blue Chip Master Portfolio
Nations Intermediate Bond Master Portfolio
Nations Marsico Focused Equities Master Portfolio
Nations Marsico Growth & Income Master Portfolio
Nations International Equity Master Portfolio
DEFERRED COMPENSATION AGREEMENT
DEFERRAL ELECTION FORM
TO: Secretary of the Nations Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
|
"Agreement") dated as of _______________ __, 1999 by and between the undersigned and the Nations Funds, I hereby make the following election:
Deferral of Compensation
Starting with Compensation to be paid to me with respect to services provided by me to the Nations Funds after the date this election form is provided to the Nations Funds, and for all period thereafter (unless subsequently amended by way of a new election form), I hereby elect that _____ percent (_____%) of my Compensation (as defined under the Agreement) be deferred and that the Fund establish a bookkeeping account credited with amounts equal to the amount so deferred (the "Deferral Account"). The Deferral Account shall be further credited with income equivalents as provided under the Agreement. Each Compensation Deferral (as defined in the Agreement) shall be deemed invested as of the end of the calendar quarter during which such Compensation Deferral is withheld from my Compensation.
I understand that the amounts held in the Deferral Account shall remain the general assets of the Nations Funds and that, with respect to the payment of such amounts, I am merely a general creditor of the Nations Funds. I may not sell, encumber, pledge, assign or otherwise alienate the amounts held under the Deferral Account.
I hereby agree that the terms of the Agreement are incorporated herein and are made a part hereof. Dated as of the day and year first above written.
WITNESS: DIRECTOR:
------------------------------------ --------------------------
WITNESS: RECEIVED:
------------------------- --------------------------
NATIONS FUNDS
-------------------------
By: _______________________
Date: ______________________
|
DEFERRED COMPENSATION AGREEMENT
INVESTMENT DIRECTION FORM
TO: Secretary of the Nations Funds
FROM:
DATE:
With respect to the Deferred Compensation Agreement (the
|
"Agreement") dated as of _____________ ___, 1999 by and between the undersigned and the Nations Funds, I hereby elect that my Deferral Account under the Agreement be considered to be invested as follows (in multiples of 5%, with a minimum percentage allocation of 10% per designated Fund):
FUND NAME PERCENTAGE ALLOCATION
------------------------- ------%
------------------------- ------%
------------------------- ------%
------------------------- ------%
------------------------- ------%
|
TOTAL 100%
I acknowledge that I may amend this Investment Direction in the manner, and at such time, as permitted under the Agreement. Furthermore, I acknowledge that, pursuant to Section 3.3(b) of the Agreement, the Fund has reserved the right to disregard the elections made above to consider my Deferral Account to be deemed to be invested in a fund of its choosing and that each Compensation Deferral (as defined in the Agreement) shall be deemed invested as of
end of the calendar quarter during which such Compensation Deferral is withheld from my compensation.
WITNESS: DIRECTOR:
------------------------------------ --------------------------
WITNESS: RECEIVED:
------------------------- --------------------------
NATIONS FUNDS
-------------------------
By: _______________________
Date: ______________________
|
DEFERRED COMPENSATION AGREEMENT
BENEFICIARY DESIGNATION FORM
TO: Secretary of the Nations Funds
FROM:
DATE:
With respect to the Deferred Compensation agreement (the
|
"Agreement") dated as of ____________ ___, 1999 by and between the undersigned and the Nations Funds, I hereby make the following beneficiary designations:
I. Primary Beneficiary
I hereby appoint the following as my Primary Beneficiary(ies) to receive at my death the amounts held in my Deferral Account under the Agreement. In the event I am survived by more than one Primary Beneficiary, such Primary Beneficiaries shall share equally in such amounts unless I indicate otherwise on an attachment to this form:
II. Secondary Beneficiary
In the event I am not survived by any Primary Beneficiary, I hereby appoint the following as my Secondary Beneficiary(ies) to receive death benefits under the Agreement. In the event I am survived by more than one
Secondary Beneficiary, such Secondary Beneficiaries shall share equally unless I indicate otherwise on an attachment to this form:
City State Zip
I understand that I may revoke or amend the above designations at any time. I further understand that if I am not survived by a Primary or Secondary Beneficiary, my Beneficiary shall be as set forth under the Agreement.
WITNESS: DIRECTOR:
------------------------------------ --------------------------
WITNESS: RECEIVED:
------------------------- --------------------------
NATIONS FUNDS
-------------------------
By: _______________________
Date: ______________________
|
CUSTODY AGREEMENT
THIS AGREEMENT is made as of the 14th day of February, 2000 by and between The Bank of New York, a New York corporation authorized to do a banking business ("Custodian"), and Nations Funds Trust, a Delaware business trust (the "Trust").
WHEREAS, the Trust is a registered open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain Custodian to serve as custodian for the Trust, on behalf of its portfolios listed on Schedule I (individually a "Fund" and collectively the "Funds") and to provide the services described herein, and Custodian is willing to serve and to provide such services; and
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Trust and Custodian hereby agree as follows:
1. APPOINTMENT. The Trust hereby appoints Custodian to act as custodian of its portfolio securities, cash and other property on the terms set forth in this Agreement. Custodian accepts such appointment and agrees to furnish the services herein set forth in return for the compensation as provided in Paragraph 23 hereof. Custodian agrees to comply with all relevant provisions of the 1940 Act and applicable rules and regulations thereunder.
The Trust may from time to time issue separate series or classes, and classify and reclassify shares of any such series or class. The Trust shall promptly specify to Custodian in writing such series or classes, or any reclassification and thereafter Custodian shall identify to each such series or class Property, as hereinafter defined, belonging to such series or class, and such reports, confirmations and notices to the Trust as are called for under this Agreement shall identify the series or class to which such report, confirmation or notice pertains.
2. DELIVERY OF DOCUMENTS. The Trust has furnished Custodian with copies properly certified or authenticated of each of the following:
(a) votes of the Trust's Board of Trustees authorizing the appointment of Custodian as custodian of portfolio securities, cash and other property of the Trust, respectively, and approving and consenting to this Agreement;
(b) schedules identifying and containing the signatures of all of the Trust's officers and any other persons authorized to issue Oral Instructions and to sign Written Instructions, as hereinafter defined, on behalf of the Funds of the Trust;
(c) the Trust's current registration statement on Form N-1A (the "Registration Statement") under the Securities Act of 1933, as amended (the "1933 Act"), and under the 1940 Act (File Nos. 333-89661 and 811-09645), as filed with the Securities and Exchange Commission (the "SEC"), relating to the Funds' shares of beneficial interest, without par value (the "Shares");
(d) the current prospectus(es) and statement(s) of additional information of each of the Funds, including all amendments and supplements thereto (collectively the "Prospectuses"); and
(e) a copy of the opinion of counsel for the Trust, filed with the SEC as part of the Trust's current Registration Statement.
The Trust will furnish Custodian from time to time with copies, properly certified or authenticated, of all amendments of or supplements to any of the foregoing, if any.
(a) "Authorized Person". As used in this Agreement, the term "Authorized Person" means any of the Trust's officers, and any other person, whether or not any such person is an officer or employee of the Trust, duly authorized by the Board of Trustees of the Trust to give Oral and Written Instructions to Custodian on behalf of the Trust and listed on a schedule provided to Custodian pursuant to Section 2 of this Agreement. Authorized Persons duly authorized by the Board of Trustees of the Trust to buy and sell foreign currency on a spot and forward basis and options to buy and sell foreign currency are denoted by an asterisk thereon.
(b) "Book-Entry System". As used in this Agreement, the term "Book-Entry System" means the Federal Reserve/Treasury book-entry system for United States and federal agency securities, its successor or successors and its nominee or nominees and any book-entry system maintained by a clearing agency registered with the SEC under Section 17A of the Securities Exchange Act of 1934 (the "1934 Act").
(c) "Composite Currency Unit". Shall mean the European Currency Unit or any other composite unit consisting of the aggregate of specified amounts of specified Currencies as such unit may be constituted from time to time.
(d) "Currency". Shall mean money denominated in a lawful currency of any country or the European Currency Unit.
(e) "FX Transaction". Shall mean any transaction for the purchase by one party of an agreed amount in one Currency against the sale by it to the other party of an agreed amount in another Currency.
(f) "Instructions". Shall mean instruction communications transmitted by appropriately safeguarded (whether by password protection or other means) electronic or telecommunications media including but not limited to S.W.I.F.T., LASER, computer-to-computer interface, dedicated transmission line and tested telex.
(g) "Oral Instructions". As used in this Agreement, the term "Oral Instructions" means oral instructions actually received by Custodian from an Authorized Person or from a person reasonably believed by Custodian to be an Authorized Person.
(h) "Officer's Certificate". The term "Officer's Certificate"
as used in this Agreement means instructions delivered by hand, mail, tested
telegram, cable, telex, or facsimile sending device, and actually received by
Custodian signed or reasonably believed by Custodian to be signed by two
officers of the Trust listed on a schedule provided to Custodian pursuant to
Section 2 of this Agreement.
(i) "Property". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property of the Trust which the Trust may from time to time deliver to Custodian, as applicable, or which Custodian may from time to time hold for the Trust;
(ii) all income in respect of any securities or other property described in immediately preceding clause (i);
(iii) all proceeds of sales of any of such securities or other property described in preceding clause (i) actually received by Custodian; and
(iv) proceeds of the sale of Shares received by Custodian from time to time from or on behalf of the Trust.
(j) "Securities Depository". As used in this Agreement, the term "Securities Depository" shall mean The Depository Trust Company, a clearing agency registered with the SEC or its successor or successors and its nominee or nominees; and shall also mean any other registered clearing agency, its successor or successors specifically identified in a certified copy of a vote of the Trust's Board of Trustees approving deposits by Custodian therein.
(k) "Written Instructions". As used in this Agreement, "Written Instructions" means instructions delivered by hand, mail, tested telegram, cable, telex, or facsimile sending device, and actually received by Custodian, signed or reasonably believed by Custodian to be signed by an appropriate number of Authorized Person(s), and the term Written Instructions shall also include Instructions, except that Instructions need not be signed or reasonably believed to be signed by any Authorized Person(s) where such Instructions are transmitted by Software pursuant to Paragraph 26A. A fax receipt or comparable confirmation of transmission of any Written Instructions shall be deemed evidence of actual receipt by Custodian.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Trust shall deliver or cause to be delivered to Custodian all securities and all monies owned by the Funds, including cash received for the issuance of Shares, at any time during the period of this Agreement, except for securities and monies to be delivered to any sub-custodian appointed, with approval of the Trust, by Custodian pursuant to Paragraphs 7, 27, or 28(g) hereof. Custodian will not be responsible for such securities and such monies until actually received by it. All securities delivered to Custodian or any such sub-custodian (other than in bearer form) shall be registered in the name of the Fund or in the name of a nominee of a Fund or in the name of Custodian or any nominee of Custodian (with or without indication of fiduciary status) or in the name of any sub-custodian or any nominee of such sub-custodian appointed, with approval of the Trust, pursuant to Paragraphs 7, 27, or 28(g) hereof or shall be properly endorsed and in form for transfer satisfactory to Custodian.
5. VOTING AND OTHER RIGHTS. With respect to all securities, however registered, it is understood that the voting and other rights and powers shall be exercised by the Trust. Custodian's only duty with respect to such rights shall be to mail to the Trust within two (2) business days following receipt by Custodian any documents received by Custodian as custodian, including notices of corporate action, proxies, proxy soliciting materials and offering circulars, with any elections or proxies for securities registered in a nominee name executed by such nominee. In addition, Custodian shall provide notice of Custodian's receipt of such documents by electronic means (e.g., posting notice on LASER), as agreed between the parties. Where warrants, options, tenders or other securities have fixed expiration dates, the Trust understands that in order for Custodian to act, Custodian must receive the Trust's instructions at its offices in New York, addressed as Custodian may from time to time request, by no later than noon (New York City time) at least one (1) business day prior to the last scheduled date to act with respect thereto (or such earlier date or time as Custodian may reasonably notify the Trust). Absent Custodian's timely receipt of such instructions, such instructions will expire without liability to Custodian. Custodian shall have no duty to forward to the Trust any annual, quarterly or special reports issued by companies whose securities are held by Custodian hereunder.
6. RECEIPT AND DISBURSEMENT OF MONEY.
(a) Custodian shall open and maintain a custody account for each Fund of the Trust, subject only to draft or order by Custodian acting pursuant to the terms of this Agreement, and, subject to Paragraphs 7, 27, or 28(g) hereof, shall hold in such account, subject to the provisions hereof, all cash received by it from or for the Funds. Custodian shall make payments of cash to, or for the account of, each Fund from such cash only: (i) for the purchase of securities for the Funds as provided in Paragraph 14 hereof; (ii) upon receipt of an Officer's Certificate for the payment of dividends or other distributions on or with respect to Shares, or for the payment of interest, taxes, administration, distribution or advisory fees or expenses which are to be borne by the Funds under the terms of this Agreement and, with respect to each Fund, and under the terms of any investment advisory agreements, administration agreements or distribution agreements; (iii) upon receipt of Written Instructions for payments in connection with the conversion, exchange or surrender of securities owned or subscribed to by the Funds and held by or to be delivered to Custodian; (iv) to a sub-custodian pursuant to Paragraphs 7, 27, or 28(g) hereof; (v) for the redemption of Shares; or (vi) upon receipt of an Officer's Certificate for other corporate purposes.
(b) Custodian is hereby authorized to endorse and collect all checks, drafts or other orders for the payment of money received as Custodian for the Funds.
7. RECEIPT OF SECURITIES.
(a) Except as provided by Paragraphs 7(c), 8, 27, or 28(g)
hereof, and except as otherwise directed by Oral or Written Instructions
described in Paragraph 11 hereof, Custodian shall hold and physically segregate
in a separate account with respect to each Fund, identifiable from those of any
other person, all securities and non-cash property received by it for the Funds.
All such securities and non-cash property are to be held or disposed of by
Custodian for each Fund pursuant to the terms of this Agreement. In the absence
of Written Instructions accompanied by a certified vote authorizing the specific
transaction by the Trust's Board of Trustees, and subject to Paragraph 25
hereof, Custodian shall have no power or authority to withdraw, deliver, assign,
hypothecate, pledge or otherwise dispose of any such securities and investments,
except in accordance with the express terms provided for in this Agreement. In
no case may any Trustee, officer, employee or agent of the Trust withdraw any
securities. In connection with its duties under this Paragraph 7(a), Custodian
may enter into sub-custodian agreements with other banks or trust companies for
the receipt of certain securities and cash to be held by Custodian for the
account of a Fund pursuant to this Agreement, provided Custodian obtains the
prior written approval of the Trust to any such sub-custody arrangement.
Custodian will provide the Trust with a copy of each sub-custodian agreement it
executes pursuant to this Paragraph 7(a). Custodian shall be liable for acts or
omissions of any such sub-custodian selected by it pursuant to this Paragraph
7(a), under the standards of care provided for herein, except for any such
sub-custodian engaged at the specific direction of the Funds. Notwithstanding
anything herein to the contrary, this Paragraph 7(a) shall not apply to
Custodian's engagement of foreign sub-custodians, which shall instead be
governed by Paragraph 27 hereof.
(b) Promptly after the close of business on each day, Custodian shall furnish the Trust with confirmations and a summary of all transfers to or from the account of each Fund during said day. Where securities are transferred to the account of any Fund established at a Securities Depository or the Book Entry System pursuant to Paragraph 8 herein, Custodian shall also, by book-entry or otherwise, identify as belonging to such Fund the quantity of securities in a fungible bulk of securities registered in the name of Custodian (or its nominee) or shown in Custodian's account on the books of a Securities Depository or the Book-Entry System. At least monthly and from time to time, Custodian shall furnish the Trust with a detailed statement of the Property held for each Fund under this Agreement.
(c) Notwithstanding any provision elsewhere contained herein, Custodian shall not be required to obtain possession of any instrument or certificate representing any futures contract, any option, or any futures contract option until after it shall have determined, or shall have received an Officer's Certificate from the Trust stating that any such instruments or certificates are available. The Trust shall deliver to Custodian such an Officer's Certificate no later than the business day preceding the availability of any such instrument or certificate. Prior to such availability, Custodian shall comply with the 1940 Act in connection with the purchase, sale, settlement, closing out or writing of futures contracts, options, or futures contract options by making payments or deliveries specified in such Officer's Certificates or Written Instructions received by Custodian in connection with any such purchase, sale, writing, settlement or closing out upon its receipt from a broker, dealer, or futures commission merchant of a statement or confirmation reasonably believed by Custodian to be in the form customarily used by brokers, dealers, or future commission merchants with respect to such futures contracts, options, or futures contract options, as the case may be, confirming that the same is held by such broker, dealer or futures commission merchant, in book-entry form or otherwise, in the name of Custodian (or any nominee of Custodian) as Custodian for the Fund, provided, however, that notwithstanding the foregoing, and subject to Paragraph 13(b) hereof, payments to or deliveries from any margin account, and payments with respect to future contracts, options, or future contract options to which a margin account relates, shall be made in accordance with the terms and conditions of the Trust's relevant margin account agreement. Whenever any such instruments or certificates are available, Custodian shall, notwithstanding any provision in this Agreement to the contrary, make payment for any futures contract, option, or futures contract option for which such instruments or such certificates are available against the delivery to Custodian of such instrument or such certificate, and deliver any futures contract, option or futures contract option for which such instruments or such certificates are available only against receipt by Custodian of payment therefor. Any such instrument or certificate delivered to Custodian shall be held by Custodian hereunder in accordance with, and subject to, the provisions of this Agreement.
8. USE OF SECURITIES DEPOSITORY OR THE BOOK-ENTRY SYSTEM. The Trust shall deliver to Custodian a certified vote of the Board of Trustees of the Trust approving, authorizing and instructing Custodian on a continuous and ongoing basis until instructed to the contrary by Written Instructions: (i) to deposit in a Securities Depository or the Book-Entry System all securities of the Funds held hereunder eligible for deposit therein, and (ii) to utilize a Securities Depository or the Book-Entry System to the extent possible in connection with the performance of its duties hereunder, including without limitation, settlements of purchases and sales of securities by the Funds, and deliveries and returns of securities loaned, subject to repurchase agreements or used as collateral in connection with borrowings. Without limiting the generality of such use, the following provisions shall apply thereto:
(a) Securities and any cash of the Funds deposited by Custodian in a Securities Depository or the Book-Entry System will at all times be segregated from any assets and cash controlled by Custodian in other than a fiduciary or custodian capacity. Subject to Paragraph 28(m) hereof, Custodian and its sub-custodians, if any, will pay out money only upon receipt of securities and will deliver securities only upon receipt of money, absent Written Instructions to the contrary.
(b) All books and records maintained by Custodian that relate to the Funds' participation in a Securities Depository or the Book-Entry System will at all times during Custodian's regular business hours be open to inspection by the Trust's duly authorized employees or agents and the Trust's independent auditors in accordance with applicable regulations, it being understood, however, that such records may be kept in an off-site Custodian storage location and the Trust will be furnished with all information in respect of the services rendered to it as it may require.
(c) Custodian will provide the Trust with copies of any report obtained by Custodian on the system of internal accounting control of the Securities Depository or Book-Entry System promptly after receipt of such a report by Custodian. Custodian will also provide the Trust with such reports on its own system of internal control as the Trust may reasonably request from time to time.
9. INSTRUCTIONS CONSISTENT WITH THE CHARTER, ETC. Unless otherwise provided in this Agreement, Custodian shall act only upon Officer's Certificates, Oral Instructions and/or Written Instructions. Custodian may assume that any Officer's Certificate, Oral Instructions or Written Instructions received hereunder are not in any way inconsistent with any provision of the Declaration of Trust or any vote of the Trust's Board of Trustees, or any committee thereof. Custodian shall be entitled to rely upon any Oral Instructions or Written Instructions actually received by Custodian pursuant to this Agreement, and upon any certificate, oral instructions, or written instructions reasonably believed by Custodian to be an Officer's Certificate, Oral Instructions or Written Instructions. The Trust agrees to forward to Custodian, Written Instructions confirming Oral Instructions in such manner that the Written Instructions are received by Custodian at the close of business of the same day that such Oral Instructions are given to Custodian. The Trust agrees that the fact that such confirming Written Instructions are not received by Custodian shall in no way affect the validity of any of the transactions authorized by the Trust by giving Oral Instructions, and that Custodian's records with respect to the content of Oral Instructions shall be controlling.
10. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. Custodian is authorized to take the following action without Oral Instructions, Written Instructions, or an Officer's Certificate:
(a) Collection of Income and Other Payments. Custodian shall subject to Paragraph 28(f) hereof:
(i) Collect and receive for the account of any Fund, all income and other payments and distributions, including (without limitation) stock dividends, rights, warrants and similar items, included or to be included in the Property of any Fund, and promptly advise the Trust of such receipt and shall credit such income, as collected, to such Fund of the Trust. From time to time, Custodian may elect, but shall not be so obligated, to credit the account with interest, dividends or principal payments on the payable or contractual settlement date, in anticipation of receiving same from a payor, central depository, Securities Depository, broker or other agent employed by the Trust or Custodian. Any such crediting and posting shall be at the Trust's sole risk, and Custodian shall be authorized to reverse (A) any such advance posting in the event it does not receive good funds from any such payor, central depository, Securities Depository, broker or agent, and (B) any other payment or crediting, including, without limitation, payments made by check or draft, in the event it does not receive good funds or final payment;
(ii) With respect to securities of foreign issue, and subject to Paragraph 27 hereof, effect collection of dividends, interest and other income, and to promptly transmit to the Trust all reports, written information or notices actually received by Custodian as Custodian, including notices of any call for redemption, offer of exchange, right of subscription, reorganization, or other proceedings affecting such securities, or any default in payments due thereon. It is understood, however, that Custodian shall be under no responsibility for any failure or delay in effecting such collections or giving such notice with respect to securities of foreign issue, regardless of whether or not the relevant information is published in any financial service available to it unless such failure or delay is due to Custodian's own negligence. Collections of income in foreign currency are, to the extent possible, to be converted into United States dollars unless otherwise instructed in writing, and in effecting such conversion Custodian may use such methods or agencies as it may see fit, including the facilities of its own foreign division at customary rates. All risk and expenses incident to such collection and conversion are for the account of the Funds and Custodian shall have no responsibility for fluctuations in exchange rates affecting any such conversions;
(iii) Endorse and deposit for collection in the name of the Trust and each of its Funds, checks, drafts, or other orders for the payment of money on the same day as received;
(iv) Receive and hold for the account of each of the Fund's securities received by the Funds as a result of a stock dividend, share split-up or reorganization, recapitalization, readjustment or other rearrangement or distribution of rights or similar securities issued with respect to any portfolio securities of the Funds held by Custodian hereunder;
(v) Present for payment and collect the amount payable upon all securities which may mature or be called, redeemed or retired, or otherwise become payable on the date such securities become payable, but, with respect to calls, early redemptions, or early retirements, only if Custodian either: (i) receives a written notice of the same, or (ii) notice of the same appears in one or more of the publications then listed in Appendix A hereto, which Appendix may be amended to add other publications at any time by Custodian without prior notice to or consent from the Trust and which may be amended to delete a publication with the prior notice and consent from the Trust;
(vi) Subject to Paragraphs 28(e) and (f) hereof, take any action which may be necessary and proper in connection with the collection and receipt of such income and other payments and the endorsement for collection of checks, drafts and other negotiable instructions; and
(vii) With respect to domestic securities, to exchange securities in temporary form for securities in definitive form, to effect an exchange of the shares where the par value of stock is changed, and to surrender securities at maturity or when advised by the Trust or the investment adviser to the Trust of an earlier call for redemption, against payment therefor in accordance with accepted industry practice. When fractional shares of stock of a declaring corporation are received as a stock distribution, Custodian is authorized to sell the fraction received and credit the Trust's account. Unless specifically instructed to the contrary in writing, Custodian is authorized to exchange securities in bearer form for securities in registered form. If any Property registered in the name of a nominee of Custodian is called for partial redemption by the issuer of such Property, Custodian is authorized to allot the called portion to the respective beneficial holders of the Property in such manner deemed to be fair and equitable by Custodian in its reasonable discretion.
(b) Miscellaneous Transactions. Custodian is authorized to deliver or cause to be delivered Property against payment or other consideration or written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the Trust in accordance with street delivery custom;
(ii) for the exchange for interim receipts or temporary securities for definitive securities;
(iii) for transfer of securities into the name of the Funds or Custodian or a nominee of either, or for exchange of securities for a different number of bonds, certificates, or other evidence, representing the same aggregate face amount or number of units bearing the same interest rate, maturity date and call provisions, if any; provided that, in any such case, the new securities are to be delivered to Custodian.
11. TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral or Written Instructions, and not otherwise, Custodian, directly or through the use of a Securities Depository or the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in such Oral or Written Instructions, proxies, consents, authorizations, and any other instruments whereby the authority of the Funds as owners of any securities may be exercised;
(b) deliver any securities held for any Fund against receipt of other securities or cash issued or paid in connection with the liquidation, reorganization, refinancing, merger, consolidation or recapitalization of any corporation, or the exercise of any conversion privilege;
(c) deliver any securities held for any Fund to any protective committee, reorganization committee or other person in connection with the reorganization, refinancing, merger, consolidation, recapitalization or sale of assets of any corporation, against receipt of such certificates or deposit, interim receipts or other instruments or documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of any Fund and take such other steps as shall be stated in said instructions to be for the purposes of effectuating any duly authorized plan of liquidation, reorganization, merger, consolidation or recapitalization of the Funds;
(e) subject to Paragraph 25(b) hereof, release securities belonging to any Fund to any bank or trust company for the purpose of pledge or hypothecation to secure any loan incurred by such Fund; provided, however, that securities shall be released only upon payment to Custodian of the monies borrowed, except that in cases where additional collateral is required to secure a borrowing already made, subject to proper prior authorization, further securities may be released for that purpose; and pay such loan upon redelivery to it of the securities pledged or hypothecated therefor and upon surrender of the note or notes evidencing the loan;
(f) deliver any securities held for any Fund upon the exercise of a covered call option written by such Fund on such securities;
(g) release and deliver securities owned by a Fund in connection with any repurchase agreement entered into on behalf of such Fund, but subject to Paragraph 28(m) hereof, only on receipt of payment therefor; and pay out monies of such Fund in connection with such repurchase agreements, but only upon the delivery of the securities;
(h) otherwise transfer, exchange or deliver securities in accordance with Oral or Written Instructions specifying the purpose of such transfer, including without limitation, loans of securities, short sales, or reverse repurchase agreements, and subject to Paragraph 7(a) hereof.
12. SEGREGATED ACCOUNTS. Custodian shall upon receipt of Written or Oral Instructions establish and maintain a segregated account or accounts on its records for and on behalf of any Fund, into which account or accounts shall be credited, but only pursuant to an Officer's Certificate or Written Instructions specifying the particular securities and/or amount of cash, cash and/or securities, including securities in the Book-Entry System: (i) for the purposes of compliance by the Funds and the Trust with the procedures required by a securities or option exchange, (ii) for the purpose of compliance by the Funds and the Trust with the 1940 Act and Release No. 10666 or any subsequent release or releases of the SEC relating to the maintenance of segregated accounts by registered investment companies, and (iii) for other proper corporate purposes.
13. DIVIDENDS AND DISTRIBUTIONS.
(a) The Trust shall furnish Custodian with appropriate evidence of action by the Trust's Board of Trustees declaring and authorizing the payment of any dividends and distributions. Upon receipt by Custodian of an Officer's Certificate with respect to dividends and distributions declared by the Trust's Board of Trustees and payable to interestholders of any Fund who are entitled to receive cash for fractional shares and those who have elected in the proper manner to receive their distributions on dividends in cash, and in conformance with procedures mutually agreed upon by Custodian and the Trust, and the Trust's administrator or transfer agent, Custodian shall pay to the Fund's transfer agent, as agent for the interestholders, an amount equal to the amount indicated in said Officer's Certificate as payable by the Fund to such interestholders for distribution in cash by the transfer agent to such interestholders.
(b) Custodian may enter into separate custodial agreements with various futures commission merchants ("FCMs") that the Trust uses (each a "FCM Agreement"), pursuant to which the Funds' margin deposits in any transactions involving futures contracts and options on futures contracts will be held by Custodian in accounts (each a "FCM Account") subject to the disposition by the FCM involved in such contracts in accordance with the customer contract between the FCM and the Trust ("FCM Contract"), SEC rules governing such segregated accounts, Commodity Futures Trading Commission ("CFTC") rules and the rules of the applicable commodities exchange. Such FCM Agreements shall only be entered into by Custodian upon receipt by Custodian of Written Instructions from the Trust which state that: (i) an FCM Contract has been entered into; (ii) the Trust is in compliance with all the rules and regulations of the CFTC; and (iii) the FCM Agreement is acceptable to the Trust. Transfers of initial margin shall be made into a FCM Account only upon Written Instructions; transfers of premium and variation margin may be made into an FCM Account pursuant to Oral Instructions. Transfers of funds from a FCM Account to the FCM for which Custodian holds such an account may only occur in accordance with the terms of the FCM Agreement.
14. PURCHASE OF SECURITIES. Promptly after each purchase of securities by the Trust on behalf of any Fund, the Trust shall deliver to Custodian Oral or Written Instructions specifying with respect to each such purchase: (a) the name of the issuer and the title of the securities; (b) the number of shares of the principal amount purchased and accrued interest, if any; (c) the dates of purchase and settlement; (d) the purchase price per unit; (e) the total amount payable upon such purchase; (f) the name of the person from whom or the broker through whom the purchase was made; and (g) the Fund for which the purchase was made. Custodian shall upon receipt of securities purchased by or for the Trust pay out of the monies held for the account of the Trust the total amount payable to the person from whom or the broker through whom the purchase was made, provided that the same conforms to the total amount payable as set forth in such Oral or Written Instructions.
15. SALES OF SECURITIES. Promptly after each sale of securities by the
Funds, the Trust shall deliver to Custodian Oral or Written Instructions,
specifying with respect to each such sale: (a) the name of the issuer and the
title of the security; (b) the number of shares or principal amount sold, and
accrued interest, if any; (c) the dates of sale; (d) the sale price per unit;
(e) the total amount payable to the Trust upon such sale; (f) the name of the
broker through whom or the person to whom the sale was made; and (g) the Fund
for which the sale was made. Custodian shall, subject to Paragraph 28(m) hereof,
deliver the securities against payment of the total amount payable to the Trust
upon such sale, provided that the same conforms to the total amount payable as
set forth in such Oral and Written Instructions.
16. RECORDS. The books and records pertaining to the Funds and the Trust which are in the possession of Custodian shall be the property of the Trust. Such books and records shall be prepared and maintained as required by the 1940 Act and other applicable securities laws, rules and regulations. The SEC, the Trust, or the Trust's authorized representatives, shall have access to such books and records at all times during Custodian's normal business hours. Upon the reasonable request of the Trust, copies of any such books and records shall be provided by Custodian to the Trust or the Trust's authorized representative, and the Trust shall reimburse Custodian reasonable expenses for providing such copies. Upon reasonable request of the Trust, Custodian shall provide in hard copy, tape or on micro-film, or such other medium as agreed to among the Trust and Custodian, and any books and records maintained by Custodian.
17. REPORTS.
(a) Custodian shall furnish the Trust the following reports:
(i) such periodic and special reports as the Trust may reasonably request from time to time;
(ii) a monthly statement summarizing all transactions and entries for the account of each Fund;
(iii) a monthly report of portfolio securities belonging to each Fund showing the adjusted average cost of each issue and market value at the end of such month;
(iv) a monthly report of the cash account of each Fund showing disbursements;
(v) the reports to be furnished to the Trust pursuant to Rule 17f-4 under the 1940 Act; and
(vi) such other information as may be agreed upon from time to time between the Trust and Custodian.
(b) Subject to Paragraphs 5 and 27(g) hereof, Custodian shall transmit promptly to the Trust any proxy statement, proxy materials, notice of a call or conversion or similar communications actually received by Custodian as custodian of the Property.
(c) Custodian shall report as the market value at the end of each month the last closing bid, offer or sale price to the extent, and as the same, is furnished to Custodian by a pricing or similar service utilized or subscribed to by Custodian. Custodian shall not be responsible for, have any liability with respect to, or be under any duty to inquire into, nor deemed to make any assurances with respect to, the accuracy or completeness of such information, even if The Bank of New York in performing services for others, including services similar to those performed hereunder, receives different valuations of the same or different securities of the same issuer.
18. COOPERATION WITH ACCOUNTANTS. Custodian shall cooperate with the Trust's independent certified public accountants and shall take all reasonable action in the performance of its obligations under this Agreement, to assure that the necessary information is made available to such accountants.
19. CONFIDENTIALITY. Custodian agrees on behalf of itself and its employees to treat all record and other information relative to the Trust, its prior, present or potential interestholders, its service providers and its prior, present or potential customers, as confidential information, and to protect and safeguard the same to the extent required by applicable law, provided, however, that Custodian may make such disclosure as required by applicable law, regulation, court order, decrees or legal process and upon receipt of any of the foregoing requiring such disclosure, Custodian's only obligation shall be to notify the Trust thereof. Custodian further agrees not to otherwise use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Trust.
20. EQUIPMENT FAILURES. In the event of equipment failures beyond Custodian's control, Custodian shall take reasonable steps to minimize service interruptions but shall not have any further liability with respect thereto. Notwithstanding the foregoing, Custodian shall maintain sufficient back up electronic data processing equipment to enable Custodian to fulfill its obligations under this Agreement consistent with standard industry practices.
21. RIGHT TO RECEIVE ADVICE.
(a) Advice of Fund. If Custodian shall be in doubt as to any action to be taken or omitted by Custodian, it may request, and shall receive, from the Trust clarification or advice, including Oral or Written Instructions.
(b) Advice of Counsel. If Custodian shall be in doubt as to any question of law involved in any action to be taken or omitted by Custodian, it may request at its option advice from its own counsel, at its own expense, or advice from the Trust's counsel.
(c) Conflicting Advice. In case of conflict between directions, advice or Oral or Written Instructions received by Custodian pursuant to subparagraph (a) of this paragraph and advice received by Custodian pursuant to subparagraph (b) of this paragraph, Custodian shall be entitled to rely on and follow the advice received pursuant to subparagraph (b) alone.
(d) Protection of Custodian. Custodian shall be protected in any action or inaction which it takes or omits to take in reliance on any directions, advice or Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of this section which it, after receipt of any such directions, advice or Oral or Written Instructions, in good faith reasonably believes to be consistent with such directions, advice or Oral or Written Instructions, as the case may be. Nothing in this Paragraph 21 shall be construed as imposing upon Custodian any obligation: (i) to seek such directions, advice or Oral or Written Instructions, or (ii) to act in accordance with such directions, advice or Oral or Written Instructions when received, unless, under the terms or another provision of this Agreement, the same is a condition to Custodian's properly taking or omitting to take such action. Nothing in this Paragraph 21(d) shall excuse Custodian when an action or omission on the part of Custodian constitutes willful misfeasance or bad faith, or negligence or reckless disregard by Custodian of its duties under this Agreement.
22. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS. Custodian undertakes to comply with the laws, rules and regulations of governmental authorities having jurisdiction over Custodian and its express duties hereunder.
23. COMPENSATION. As compensation for the services rendered by Custodian during the term of this Agreement, the Trust shall pay to Custodian, in addition to reimbursement of its out-of-pocket expenses, such compensation as may be agreed upon from time to time in writing by the Trust and Custodian as set forth in Schedule III.
24. INDEMNIFICATION. The Trust agrees to indemnify Custodian against, and hold harmless from all taxes, charges, expenses (including reasonable fees and expenses of counsel), assessments, claims, losses, demands and liabilities whatsoever (including, without limitation, liabilities arising under the 1933 Act, the 1934 Act and the 1940 Act, and any state and foreign securities laws, all as currently in effect or as may be amended from time to time) and expenses, including without limitation, reasonable attorney's fees and disbursements, howsoever arising or incurred because of or in connection with this Agreement, except for such liability, claim, loss, demand, charge, expense, tax or assessment arising out of Custodian's, or such nominees', willful misconduct or negligence or reckless disregard of its duties under this Agreement. For the purposes of this Agreement, including, without limitation, for purposes of Paragraphs 24 and 28, neither Custodian's acceptance of Instructions in accordance with Paragraph 26A nor Custodian's use of Foreign Sub-Custodians pursuant to agreements that do not permit actual examination by independent public accountants, nor the denial of examination by any Foreign Sub-Custodian, as defined in Paragraph 27, shall, in and of itself, constitute, or be deemed to constitute, a breach by Custodian of this Agreement or negligence, willful misconduct, or reckless disregard of its duties by Custodian, provided the relevant agreement between Custodian and a Foreign Sub-Custodian satisfies the requirements of Rule 17f-5.
25. OVERDRAFTS OR INDEBTEDNESS.
(a) Custodian shall advance funds under this Agreement with respect to any Fund which results in an overdraft because the moneys held by Custodian in the separate account for such Fund shall be insufficient to pay the total amount payable upon a purchase of securities by such Fund, as set forth in an Officer's Certificate or Oral or Written Instructions, or which results in an overdraft in the separate account of such Fund for some other reason, or if the Trust is for any other reason indebted to Custodian, including any indebtedness to The Bank of New York under the Trust's Cash Management and Related Services Agreement, (except a borrowing for investment or for temporary or emergency purposes using securities as collateral pursuant to a separate agreement and subject to the provisions of Paragraph 25(b) hereof), such overdraft or indebtedness shall be deemed to be a loan made by Custodian to the Trust for such Fund payable on demand and shall bear interest from the date incurred at a rate per annum (based on a 360-day year for the actual number of days involved) equal to the overdraft rate specified in Schedule III to this Agreement. In addition, the Trust hereby agrees that to the extent of such overdraft or indebtedness, Custodian shall have a continuing lien, security entitlement and security interest in and to any property at any time held by it for the benefit of such Fund or in which the Fund may have an interest which is then in Custodian's possession or control or in possession or control of any third party acting on Custodian's behalf. The Trust authorizes Custodian, in its sole discretion, at any time to charge any such overdraft or indebtedness together with interest due thereon against any balance of account standing to such Fund's credit on Custodian's books. In addition, the Trust hereby covenants that on each Business Day on which either it intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a third party, or which next succeeds a Business Day on which at the close of business the Trust had outstanding a Reverse Repurchase Agreement or such a borrowing, it shall prior to 1:00 p.m., New York City time, advise Custodian, in writing, of each such borrowing, shall specify the Fund to which the same relates, and shall not incur any indebtedness not so specified other than from Custodian.
(b) The Trust will cause to be delivered to Custodian by any bank (including, if the borrowing is pursuant to a separate agreement, Custodian) from which it borrows money for investment or for temporary or emergency purposes using securities held by Custodian hereunder as collateral for such borrowings, a notice or undertaking in the form currently employed by such bank setting forth the amount which such bank will loan to the Trust against delivery of a stated amount of collateral. The Trust shall promptly deliver to Custodian Written Instructions specifying with respect to each such borrowing: (a) the Fund to which such borrowing relates; (b) the name of the bank; (c) the amount and terms of the borrowing, which may be set forth by incorporating by reference an attached promissory note, duly endorsed by the Fund, or other loan agreement; (d) the time and date, if known, on which the loan is to be entered into; (e) the date on which the loan becomes due and payable; (f) the total amount payable to the Fund on the borrowing date; (g) the market value of securities to be delivered as collateral for such loan, including the name of the issuer, the title and the number of shares or the principal amount of any particular securities and (h) a statement specifying whether such loan is for investment purposes or for temporary or emergency purposes and that such loan is in conformance with the 1940 Act and the Fund's prospectus. Custodian shall deliver on the borrowing date specified in Written Instructions the specified collateral and the executed promissory note, if any, against delivery by the lending bank of the total amount of the loan payable, provided that the same conforms to the total amount payable as set forth in such Written Instructions. Custodian may, at the option of the lending bank, keep such collateral in its possession, but such collateral shall be subject to all rights therein given the lending bank by virtue of any promissory note or loan agreement. Custodian shall deliver such securities as additional collateral as may be specified in Written Instructions to collateralize further any transaction described in this Paragraph 25(b). The Trust shall cause all securities released from collateral status to be returned directly to Custodian, and Custodian shall receive from time to time such return of collateral as may be tendered to it. In the event that the Trust fails to specify in Written Instructions the Fund, the name of the issuer, the title and number of shares or the principal amount of any particular securities to be delivered as collateral by Custodian, Custodian shall not be under any obligation to deliver any securities.
26A. INSTRUCTIONS.
(a) It is understood and agreed that Custodian may, from time to time, provide software to the Trust for purposes of enabling a Fund to transmit Instructions to Custodian (the "Software"). Such Software has been designed to include password protection or other features to restrict the use of the Software to Authorized Persons; provided, however, that the Custodian makes no warranty or representations of any kind with respect to such protections or features, express or implied, including, but not limited to, any implied warranties of merchantability or fitness for a particular purpose. The Trust and the Custodian shall use commercially reasonable efforts to develop other mechanisms (i) to enable the Trust to restrict the use of the Software to Authorized Persons, (ii) to identify transmissions from a terminal other than an authorized terminal, and (iii) for the prompt and accurate transmission of Instructions by Authorized Persons to Custodian. It is further understood and agreed that Custodian may provide specialized hardware or other equipment to enable the Trust and the Funds to utilize the Software. With respect to any such Software, Custodian grants to the Trust and its service providers a personal, nontransferable and nonexclusive license to use the Software solely for the purpose of transmitting Instructions to, and receiving communications from, Custodian in connection with its account(s). The Trust and its service providers agree not to sell, reproduce, lease or otherwise provide, directly or indirectly, the Software or any portion thereof to any third party without the prior written consent of Custodian. At no time shall the Trust be obligated to use the Software to transmit Instructions to Custodian.
(b) The Trust shall obtain and maintain at its own cost and expense all equipment and services, including but not limited to communications services, necessary for it to utilize the Software and transmit Instructions to Custodian; provided, however, that the parties acknowledge and agree that if any specialized equipment is necessary to enable the Trust to utilize the Software, Custodian shall, at its own expense, provide and maintain such equipment.
(c) The Trust acknowledges that the Software, all databases made available to the Trust by utilizing the Software (other than databases relating solely to the assets of the Funds and transactions with respect thereto), and any proprietary data, processes, information and documentation (other than those which are or become part of the public domain or are legally required to be made available to the public) (collectively, the "Information"), are the exclusive and confidential property of Custodian. The Trust shall keep the Information confidential by using the same care and discretion that the Trust uses with respect to its own confidential property and trade secrets and shall neither make nor permit any disclosure without the prior written consent of Custodian. Upon termination of this Agreement or the Software license granted hereunder for any reason, the Trust shall return to Custodian all copies of the Information which are in its possession or under its control or which the Trust distributed to third parties.
(d) Custodian reserves the right to modify the Software from time to time upon reasonable prior notice and the Trust shall, if it desires in its sole discretion to continue to use the Software, install new releases of the Software as Custodian may direct. The Trust agrees not to modify or attempt to modify the Software without Custodian's prior written consent. The Trust acknowledges that any modifications to the Software, whether by the Trust or Custodian and whether with or without Custodian's consent, shall become the property of Custodian.
(e) Where the method for transmitting Instructions by the Trust involves an automatic systems acknowledgment to the Trust by Custodian of its receipt of such Instructions, including any transmission of Instructions using the Software, then (i) if an acknowledgment is not actually received by the Trust, Custodian shall not be deemed to have received any such Instructions, and (ii) if an acknowledgment is actually received by the Trust, the Custodian shall be deemed to have received such Instructions and shall be responsible for any error, omission, interruption or delay in connection with the transmission of such Instructions; provided, however, that the Trust shall promptly review all acknowledgments actually received and notify the Custodian in the event of any apparent discrepancy.
(f) (i) The Trust agrees that where it delivers to Custodian Instructions hereunder using the Software, it shall be the Trust's sole responsibility to ensure that only persons duly authorized by the Trust and the correct number of such persons transmit such Instructions to Custodian and the Trust will cause all such persons to treat applicable use and authorization codes, passwords and authentication keys with extreme care, and authorizes Custodian to act in accordance with and rely upon Instructions received by it pursuant hereto using the Software. (ii) The Trust hereby represents, acknowledges and agrees that it is fully informed of the protections and risks associated with the various methods of transmitting Instructions to Custodian and that there may be more secure methods of transmitting Instructions to Custodian than the method(s) selected by the Trust. (iii) With respect to all Oral Instructions and all Written Instructions other than Instructions delivered to Custodian using the Software provided by Custodian, Custodian shall exercise all commercially reasonable efforts to form a reasonable belief that each such instruction has been given by an Authorized Person and, where required, signed by an appropriate number of Authorized Person(s).
(g) The Trust shall notify Custodian of any errors, omissions
or interruptions in, or delay or unavailability of, its ability to send
Instructions using the Software provided by Custodian as promptly as
practicable, and in any event within 24 hours after the earliest of (i)
discovery thereof, (ii) the business day on which discovery should have occurred
through the exercise of reasonable care and (iii) in the case of any error, the
date of actual receipt of the earliest notice which reflects such error, it
being agreed that discovery and receipt of notice may only occur on a business
day. Custodian shall, as promptly as practicable, and in any event within 24
hours after the earliest of (i) discovery thereof, (ii) the business day on
which discovery should have occurred through the exercise of reasonable care and
(iii) in the case of any error, the date of actual receipt of the earliest
notice which reflects such error, it being agreed that discovery and receipt of
notice may only occur on a business day, advise the Trust whenever Custodian
learns or reasonably should have learned, of any errors, omissions or
interruption in, or delay or unavailability of, the Trust's ability to send
Instructions using the Software provided by Custodian.
26B. FX TRANSACTIONS.
(a) Whenever a Fund shall enter into a FX Transaction, the
Fund shall promptly deliver to Custodian a Certificate or Oral Instructions
specifying with respect to such FX Transaction: (i) the Series to which such FX
Transaction is specifically allocated; (ii) the type and amount of Currency to
be purchased by the Fund; (iii) the type and amount of Currency to be sold by
the Fund; (iv) the date on which the Currency to be purchased is to be
delivered; (v) the date on which the Currency to be sold is to be delivered; and
(vi) the name of the person from whom or through whom such Currencies are to be
purchased and sold. Unless otherwise instructed by a Certificate or Oral
Instructions, Custodian shall deliver, or shall instruct a Foreign Sub-Custodian
to deliver, the Currency to be sold on the date on which such delivery is to be
made, as set forth in the Certificate, and shall receive, or instruct a Foreign
Sub-Custodian to receive, the Currency to be purchased on the date as set forth
in the Certificate.
(b) Where the Currency to be sold is to be delivered on the same day as the Currency to be purchased, as specified in the Certificate or Oral Instructions, Custodian or a Foreign Sub-Custodian may arrange for such deliveries and receipts to be made in accordance with the customs prevailing from time to time among brokers or dealers in Currencies, and such receipt and delivery may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with such receipts and deliveries, which responsibility and liability shall continue until the Currency to be received by the Fund has been received in full.
(c) Any foreign exchange transaction effected by Custodian in connection with this Agreement may be entered with Custodian, any office, branch or subsidiary of The Bank of New York, or any Foreign Sub-Custodian (as defined below) acting as principal or otherwise through customary banking channels. The Fund may issue a standing Certificate with respect to foreign exchange transactions but Custodian may establish rules or limitations concerning any foreign exchange facility made available to the Fund. The Fund shall bear all risks of investing in securities or holding Currency. Without limiting the foregoing, the Fund shall bear the risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign depositories, exchange controls, asset freezes or other laws, rules, regulations or orders shall prohibit or impose burdens or costs on the transfer to, by or for the account of the Fund of securities or any cash held outside the Fund's jurisdiction or denominated in Currency other than its home jurisdiction or the conversion of cash from one Currency into another Currency. Custodian shall not be obligated to substitute another Currency for a Currency (including a Currency that is a component of a Composite Currency Unit) whose transferability, convertibility or availability has been affected by such law, regulation, rule or procedure. Neither Custodian nor any Foreign Sub-Custodian shall be liable to the Fund for any loss resulting from any of the foregoing events.
27. DUTIES OF CUSTODIAN WITH RESPECT TO PROPERTY OF ANY FUND HELD OUTSIDE OF THE UNITED STATES.
(a) Custodian is authorized and instructed to employ, as sub-custodian for each Fund's foreign securities and other assets, the foreign banking institutions and foreign securities depositories and clearing agencies selected from time to time by Custodian as the Foreign Custody Manager appointed by the Trust's Board of Trustees ("Foreign Sub-Custodians") to carry out their respective responsibilities in accordance with the terms of the sub-custodian agreement between each such Foreign Sub-Custodian and Custodian (each such agreement, a "Foreign Sub-Custodian Agreement"). Upon receipt of an Officer's Certificate, the Trust may designate any additional foreign sub-custodian with which Custodian has an agreement for such entity to act as Custodian's agent, as its sub-custodian and any such additional foreign sub-custodian shall be deemed a Foreign Sub-Custodian hereunder. Upon receipt of an Officer's Certificate, Custodian shall cease using any one or more Foreign Sub-Custodians for the Fund's assets.
(b) Each Foreign Sub-Custodian Agreement shall be substantially in the form delivered to the Trust herewith and will not be amended in a way that materially or adversely affects the Trust without the Trust's prior written consent.
(c) Custodian shall identify on its books as belonging to each Fund the Foreign Securities of such Fund held by each Foreign Sub-Custodian. At the election of the Trust, it shall be entitled to be subrogated to any claims by the Trust or any Fund against a Foreign Sub-Custodian as a consequence of any loss, damage, cost, expense, liability or claim sustained or incurred by the Trust or any Fund if and to the extent that the Trust or such Fund has been made whole by Custodian for any such loss, damage, cost, expense, liability or claim.
(d) Upon request of the Trust, Custodian will, consistent with the terms of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts to arrange for the independent accountants of the Trust to be afforded access to the books and records of any Foreign Sub-Custodian insofar as such books and records relate to the performance of such Foreign Sub-Custodian under its agreement with Custodian on behalf of the Trust.
(e) Custodian will supply to the Trust from time to time, as mutually agreed upon, statements in respect of the securities and other assets of each Fund held by Foreign Sub-Custodians, including but not limited to, an identification of entities having possession of each Fund's Foreign Securities and other assets, and advises or notifications of any transfers of Foreign Securities to or from each custodial account maintained by a Foreign Sub-Custodian for Custodian on behalf of the Fund.
(f) Custodian agrees that it will use reasonable care in monitoring compliance by each Foreign Sub-Custodian with the terms of the relevant Foreign Sub-Custodian Agreement and that if it learns of any breach of such Foreign Sub-Custodian Agreement believed by Custodian to have a material adverse effect on the Trust or any Fund it will promptly notify the Trust in writing of such breach. Custodian also agrees to use reasonable and diligent efforts to enforce its rights under the relevant Foreign Sub-Custodian Agreement.
(g) Custodian shall transmit promptly to the Trust all notices, reports or other written information received pertaining to the Funds' Foreign Securities, including without limitation, notices of corporate action, proxies and proxy solicitation materials.
(h) Notwithstanding any provision of this Agreement to the contrary, settlement and payment for securities received for the account of the Trust or any Fund and delivery of securities maintained for the account of the Trust or any Fund may be effected in accordance with the customary or established securities trading or securities processing practices and procedures in the jurisdiction or market in which the transaction occurs, including, without limitation, delivery of securities to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) against a receipt with the expectation of receiving later payment for such securities from such purchaser or dealer.
(i) With respect to any losses or damages arising out of or relating to any actions or omissions of any Foreign Sub-Custodian, the sole responsibility and liability of Custodian shall be to take all appropriate and reasonable action at the Trust's expense to recover such loss or damage from the Foreign Sub-Custodian. It is expressly understood and agreed that Custodian's sole responsibility and liability shall be limited to amounts so recovered from the Foreign Sub-Custodian.
28. CONCERNING CUSTODIAN.
(a) (i) Custodian shall exercise care and diligence and act in good faith and use all commercially reasonable efforts in the performance of its duties hereunder. Custodian shall be responsible to the Trust for its own failure or the failure of any sub-custodian that it shall appoint (other than a foreign sub-custodian referred to in Paragraph 27 or a sub-custodian appointed by Custodian at the specific direction of the Trust) or that of its employees or agents, to perform its duties, obligations or responsibilities in accordance with this Agreement, but only to the extent that such failure results from acts or omissions that constitute willful misfeasance, bad faith or negligence on the part of Custodian, or on the part of its employees or agents, or reckless disregard of such duties, obligations and responsibilities.
(ii) Without limiting the generality of the foregoing or any other provision of this Agreement, in no event shall Custodian be liable to the Fund or any third party nor, except as otherwise provided in this subparagraph for special, indirect or consequential damages or lost profits or loss of business, arising under or in connection with this Agreement, even if previously informed of the possibility of such damages and regardless of the form of action. Custodian may, with respect to questions of law arising under any FCM Agreement, apply for and obtain the advice and opinion of counsel to the Trust at the expense of the Trust, or of its own counsel at its own expense, and shall be fully protected with respect to anything done or omitted by it in good faith in conformity with such advice or opinion. Custodian shall be liable to the Trust for any loss or damage resulting from the use of the Book-Entry System or any Securities Depository arising by reason of any negligence or willful misconduct on the part of Custodian or any of its employees or agents.
(iii) Custodian's liability pursuant to the last sentence of subparagraph (a)(i) shall include, but not be limited to, reimbursing the Trust for court-ordered damage awards, fines, penalties, and judicially-approved settlements (and attorney's fees and disbursements relating thereto) arising out of or in connection with the conduct giving rise to such liability.
(iv) If the Trust receives notice of the commencement of any action, suit, or proceeding (an "Action"), or notice that any Action may be commenced, for which Custodian may be liable to the Trust pursuant to this Paragraph 28, the Trust shall give notice to Custodian of the commencement of the Action or of the possibility that an Action will be commenced. Any omission to notify Custodian will not relieve Custodian from any liability which it may have under this Paragraph, except to the extent the failure to notify Custodian prejudices the rights of Custodian. Custodian will be entitled at its sole expense and liability, to exercise full control of the defense, compromise or settlement of any such Action, provided that Custodian: (1) notifies the Trust in writing of Custodian's intention to assume such defense; and (2) retains legal counsel reasonably satisfactory to the Trust to conduct the defense of such Action. If Custodian advises the Trust that it does not wish to exercise full control of any defense, compromise or settlement of any Action, Custodian shall be responsible for the fees and expenses of counsel selected by the Trust, in addition to any other amounts for which Custodian may be liable pursuant to this Paragraph 28. The other person will cooperate with the person assuming the defense, compromise or settlement of any Action in accordance with this Paragraph in any manner that such person reasonably may request. If Custodian so assumes the defense of any such Action, the Trust will have the right to employ a separate counsel and to participate in (but not control) the defense, compromise or settlement of the Action, but the fees and expenses of such counsel will be at the expense of the Trust unless: (a) Custodian has agreed to pay such fees and expenses, (b) any relief other than the payment of money damages is sought against the Trust, or (c) the Trust has been advised by its counsel that there may be one or more defenses available to it which are different from or additional to those available to Custodian and that a conflict of interest therefore exists, and in any such case that portion of the fees and expenses of such separate counsel that are reasonably related to matters for which Custodian is liable pursuant to this Paragraph will be paid by Custodian. The Trust will not settle or compromise any such Action for which Custodian is liable pursuant to this Paragraph without the prior written consent of Custodian, unless Custodian has failed, after reasonable notice, to undertake control of such Action in the manner provided in this Paragraph. Custodian will not settle or compromise any such Action in which any relief other than the payment of money damages is sought against the Trust without the consent of the Trust, such consent not to be unreasonably withheld. In the event that Custodian intends to settle or compromise any Action in which solely money damages are sought, Custodian shall give the Trust fifteen (15) business days prior written notice.
(b) Without limiting the generality of the foregoing, Custodian shall be under no obligation to inquire into, and shall not be liable for:
(i) the validity of the issue of any securities purchased, sold, or written by or for the Trust or any Fund, the legality of the purchase, sale or writing thereof, or the propriety of the amount paid or received therefor;
(ii) the legality of the sale or redemption of any Shares, or the propriety of the amount to be received or paid therefor;
(iii) the legality of the declaration or payment of any dividend by the Trust;
(iv) the legality of any borrowing by the Trust using securities as collateral;
(v) the legality of any loan of portfolio securities, or under any duty or obligation to see to it that any cash collateral delivered to it by a broker, dealer, or financial institution or held by it at any time as a result of such loan of portfolio securities is adequate collateral for or against any loss Custodian, the Trust or any Fund might sustain as a result of such loan. Custodian specifically, but not by way of limitation, shall not be under any duty or obligation periodically to check or notify the Trust or any Fund that the amount of such cash collateral held by Custodian for the Trust is sufficient collateral for the Trust, but such duty or obligation shall be the sole responsibility of the Trust. In addition, Custodian shall be under no duty or obligation to see that any broker, dealer or financial institution to which portfolio securities are lent makes payment to it of any dividends or interest which are payable to or for the account of the Trust during the period of such loan or at the termination of such loan, provided, however, that Custodian shall promptly notify the Trust in the event that such dividends or interest are not paid and received when due; or
(vi) the sufficiency or value of any amounts of money and/or securities held in any segregated account described in Paragraph 12(a) hereof in connection with transactions by the Funds, or whether such segregated account provides the compliance intended to be achieved. In addition, Custodian shall not be under any duty or obligation to see that any broker, dealer, FCM or Clearing Member makes payment to the Fund of any variation margin payment or similar payment which the Fund may be entitled to receive from such broker, dealer, FCM or Clearing Member, to see that any payment received by Custodian from any broker, dealer, FCM or Clearing Member is the amount the Trust is entitled to receive, or to notify the Trust or a Fund of Custodian's receipt or non-receipt of any such payment.
(c) Custodian shall not be liable for, or considered to be sub-custodian or custodian of, any money, whether or not represented by any check, draft, or other instrument for the payment of money, received by Custodian on behalf of the Trust until Custodian actually receives and collects such money directly or by the final crediting of the account representing the Fund's interest at the Book-Entry System or a Securities Depository.
(d) Custodian shall not have any responsibility or be liable for ascertaining or acting upon any calls, conversions, exchange offers, tenders, interest rate changes or similar matters relating to securities held in a Securities Depository, unless Custodian shall have actually received timely notice from such Securities Depository. In no event shall Custodian have any responsibility or liability for the failure of any Securities Depository to collect, or for the late collection or late crediting by a Securities Depository of any amount payable upon securities deposited in a Securities Depository which may mature or be redeemed, retired, called or otherwise become payable. Upon receipt of Written Instructions from the Trust of an overdue amount on securities held in a Securities Depository, Custodian shall make a claim against a Securities Depository on behalf of the Trust, except that Custodian shall not be under any obligation to appear in, prosecute or defend any action suit or proceeding in respect to any securities held by a Securities Depository which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense and liability be furnished as often as may be required.
(e) Custodian shall not be under any duty or obligation to take action to effect collection of any amount due to the Trust from a transfer agent of the Trust nor to take any action to effect payment or distribution by the transfer agent of the Trust of any amount paid by Custodian to the transfer agent of the Trust in accordance with this Agreement.
(f) Custodian shall not be under any duty or obligation to take action to effect collection of any amount, if the securities upon which such amount is payable are in default, or if payment is refused after due demand or presentation, unless and until: (i) it shall be directed to take such action by Written Instructions, and (ii) it shall be assured to its reasonable satisfaction of reimbursement of its costs and expenses in connection with any such action.
(g) Custodian may in addition to the employment of Foreign Sub-Custodians pursuant to Paragraphs 7 and 27, hereof appoint one or more banking institutions as Depository or Depositories, as a sub-custodian or as sub-custodians, or as a co-custodian or as co-custodians, including, but not limited to, banking institutions located in foreign countries, of securities and moneys at any time owned by the Funds, upon such terms and conditions as may be approved in an Officer's Certificate or contained in an agreement executed by Custodian and the Trust and the appointed institution.
(h) Custodian shall not be under any duty or obligation: (i) to ascertain whether any securities at any time delivered to, or held by it or by any Foreign Sub-Custodian, for the account of the Trust and specifically allocated to a Fund are such as properly may be held by the Trust or such Fund under the provisions of its Prospectus, or (ii) to ascertain whether any transactions by the Fund, whether or not involving Custodian, are such transactions as may properly be engaged in by the Fund.
(i) Custodian shall charge its compensation and any expenses with respect to the Funds of the Trust incurred by Custodian in the performance of its duties under this Agreement only against the money of the Fund or Funds of the Trust from which such compensation or expenses is actually due and payable, and under no circumstances shall any compensation or expenses due to Custodian be considered to be a joint, or joint and several, obligation of the Funds of the Trust. To the extent that Custodian is entitled to recover from the Trust any loss, damage, liability or expense (including counsel fees) under this Agreement, Custodian shall charge the amount due in respect of such loss, damage, liability or expense (including counsel fees) only against the money held by it for the Fund or Funds of the Trust that is/are identified by the Trust in an Officer's Certificate, unless and until the Trust instructs Custodian by an Officer's Certificate to charge against money held by it for the account of a Fund such Fund's pro rata share (based on such Fund's net asset value at the time of the charge in proportion to the aggregate net asset value of all Funds at that time) of the amount of such loss, damage, liability or expense (including counsel fees).
(j) Custodian shall be entitled to rely upon any Officer's Certificate, Written Instructions, notice or other instrument in writing received by Custodian and reasonably believed by Custodian, to be an Officer's Certificate or Written Instructions. Custodian shall be entitled to rely upon any Oral Instructions actually received by Custodian. The Trust agrees to forward to Custodian Written Instructions confirming such Oral Instructions in such manner so that such Written Instructions are received by Custodian, whether by hand delivery, telecopier or other similar device, or otherwise, by the close of business of the same day that such Oral Instructions are received by Custodian. The Trust agrees that the fact that such confirming instructions are not received, or that contrary instructions are received, by Custodian shall in no way affect the validity of the transactions or enforceability of the transactions hereby authorized by the Trust. The Trust agrees that Custodian shall not incur any liability to the Trust in acting upon Oral Instructions given to Custodian hereunder concerning such transactions provided such instructions reasonably appear to have been received from an Authorized Person.
(k) Custodian shall be entitled to rely upon any instrument, instruction or notice received by it and reasonably believed by it to be given in accordance with the terms and conditions of any FCM Agreement. Without limiting the generality of the foregoing, Custodian shall not be under any duty to inquire into, and Custodian shall not be liable for, the accuracy of any statements or representations contained in any such instrument or other notice including, without limitation, any specification of any amount to be paid to a broker, dealer, futures commission merchant or clearing member.
(l) Custodian shall provide the Trust with any report obtained by Custodian on the system of internal accounting control of the Book-Entry System, any Securities Depository utilized hereunder the Depository or the Options Clearing Corporation, and with such reports on its own systems of internal accounting control as the Trust may reasonably request from time to time.
(m) Subject to the foregoing provisions of this Agreement, including, without limitation, those contained in Paragraph 27 hereof, Custodian may deliver and receive securities, and receipts with respect to such securities, and arrange for payments to be made and received by Custodian in accordance with the customs prevailing from time to time among brokers or dealers in such securities. When Custodian is instructed to deliver securities against payment, delivery of such securities and receipt of payment therefor may not be completed simultaneously. The Fund assumes all responsibility and liability for all credit risks involved in connection with Custodian's delivery of securities pursuant to proper instructions of the Fund, which responsibility and liability shall continue until final payment in full has been received by Custodian.
(n) Custodian shall not have any duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against Custodian.
29. TERMINATION. Any of the parties hereto may terminate this Agreement by giving to the other parties a notice in writing specifying the date of such termination, which shall be not less than ninety (90) days after the date of giving of such notice. Upon the date set forth in such notice this Agreement shall terminate, and Custodian shall on that date deliver directly to the Trust or a successor custodian designated by the Trust all securities and moneys then owned by the Trust and held by Custodian, after deducting all fees, expenses and other amounts for the payment or reimbursement of which it shall then be entitled; provided, however, that transaction fees and expenses payable by the Trust in connection with a deconversion to a successor custodian shall be limited to Custodian's actual direct cost.
30. NOTICES. All notices and other communications (collectively referred to as "Notice" or "Notices" in this paragraph) hereunder shall be in writing or by confirm in telegram, cable, telex, or facsimile sending device. Notices shall be addressed: (a) if to Custodian, at Custodian's address, 90 Washington Street, 22nd Floor, New York, New York 10286, Attention: Frank Ajosa; (b) if to the Trust, at the address of the Trust's Secretary, 111 Center Street, Little Rock, Arkansas 72201, Attention: Richard H. Blank, Jr., Secretary; or (c) if to none of the foregoing, at such other address as shall have been notified to the sender of any such Notice or other communication. Notice shall be deemed to have been given when actually received by the other party. All postage, cable, telegram, telex and facsimile sending device charges arising from the sending of a Notice hereunder shall be paid by the sender.
31. FURTHER ACTIONS. Each party agrees to perform such further acts and execute such further documents as it deems necessary to effectuate the purposes hereof.
32. AMENDMENTS. This Agreement or any part hereof may be changed or waived only by an instrument in writing signed by the party against which enforcement of such change or waiver is sought.
33. MISCELLANEOUS.
(a) The Trust agrees that Custodian may be a counterparty in any purchase or sale of foreign currency by or for the Trust on a spot or forward basis, and on any option to buy or sell foreign currency.
(b) This Agreement embodies the entire Agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings relating to the subject matter hereof. The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. This Agreement shall be deemed to be a contract made in New York and governed by New York law. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement shall not be affected thereby. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors.
34. RELEASE. The names "Nations Funds Trust" and "Trustees of Nations Funds Trust" refer respectively to the Trust created and the Trustees, as trustees but not individually or personally, acting from time to time under a Declaration of Trust which is hereby referred to and a copy of which is on file at the principal office of the Trust. The obligations of "Nations Funds Trust" entered into in the name or on behalf thereof by any of the Trustees, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Interestholders, or representatives of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with any class of Shares of the Trust Property, and all persons dealing with any class of Shares of the Trust must look solely to the Trust Property belonging to such class for the enforcement of any claims against the Trust.
35. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their officers designated below as of the day and year first above written.
NATIONS FUNDS TRUST
By: /s/ James E. Banks, Jr.
------------------------
James E. Banks, Jr.
Assistant Secretary
|
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
------------------------
Stephen E. Grunston
Vice President
|
SCHEDULE I
The Custody Agreement between Nations Funds Trust and Sub-Custodian applies to the following Funds of the Trust:
Nations High Yield Bond Fund Nations Kansas Municipal Income Fund Nations MidCap Index Fund
Approved: December 9, 1999
SCHEDULE II
PUBLICATIONS
I, Ira Rosner, a Vice President with THE BANK OF NEW YORK do hereby designate the following publications:
The Bond Buyer Depository Trust Company Services Financial Daily Card Service JJ Kenney Municipal Bond Service London Financial Times New York Times Standard & Poor's Called Bond Record Wall Street Journal
SCHEDULE III
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
NATIONS FUNDS TRUST
MONEY MARKET FUNDS
SAFEKEEPING/INCOME COLLECTION/REPORTING DTC-ID
AFFIRMATION ALL SYSTEMS DEVELOPMENT AND USAGE CHARGES
1/2 of one basis point per annum on the aggregate net assets of all
Nations' Money Market Funds.
SECURITY TRANSACTION CHARGES
$ 7 DTC/FRB/PTC
$ 15 Physicals
$ 40 Euro C/D's
OTHER CHARGES
$ 5 Bank official checks
$ 2 Money transfers in/out of the Fund's custodian account not
related to securities transactions.
|
EARNINGS CREDITS ON BALANCES/INTEREST ON OVERDRAFTS
Earnings credits are provided to each Fund on 80% of the daily balance in the domestic custodian account computed at the 90-day T-bill rate on the day of the balance.
Overdrafts, excluding bank errors, will cause a reduction of earnings credits daily, computed at 1% above the average Federal Funds rate on the day of the overdraft.
Credits and debits will be accumulated daily and offset monthly against the Bank's domestic custodian fees. To the extent a net debit is accumulated, each Fund will be billed for the expense. To the extent a net earnings credit is generated, such excess earnings credit can be carried forward to the next succeeding month. However, no earnings credit will be carried forward after year-end.
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
NATIONS FUNDS TRUST
MONEY MARKET FUNDS
OUT-OF-POCKET EXPENSES
None.
BILLING CYCLE
The above fees are billed monthly.
NATIONS FUNDS TRUST THE BANK OF NEW YORK
------------------- --------------------
Approved by: Approved by:
------------------------ ----------------------
Title: Title:
------------------------ ----------------------
Date: Date:
------------------------ ----------------------
|
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
NATIONS FUNDS TRUST
NON-MONEY MARKET FUNDS
SAFEKEEPING/INCOME COLLECTION/REPORTING/DTC-ID AFFIRMATION ALL SYSTEMS DEVELOPMENT AND USAGE CHARGES
3/4ths of one basis point per annum on the aggregate net assets of all
Nations' Non-Money Market Funds up to $10 billion.
1/2 of a basis point on the excess.
|
SECURITY TRANSACTION CHARGES/PAYDOWNS
$ 5 Paydowns
$ 7 DTC/FRB/PTC
$ 15 Physicals, options, and futures
$ 40 Euro C/D's
OTHER CHARGES
$ 5 Bank official checks
$ 2 Money transfer in/out of the Fund's custodian account not
related to securities transactions.
|
EARNINGS CREDITS ON BALANCES/INTEREST ON OVERDRAFTS
Earnings credits are provided to each Fund on 80% of the daily balance in the
domestic custodian account computed at the 90-day T-bill rate on the day of the
balance. Overdrafts, excluding bank errors, will cause a reduction of earnings
credits daily, computed at 1% above the average Federal Funds rate on the day of
the overdraft.
Credits and debits will be accumulated daily and offset monthly against the
Bank's domestic custodian fees. To the extent a net debit is accumulated, each
Fund will be billed for the expense. To the extent a net earnings credit is
generated, such excess earnings credit can be carried forward to the next
succeeding month. However, no earnings credit will be carried forward after
year-end.
DOMESTIC CUSTODIAN FEE SCHEDULE
FOR
NATIONS FUNDS TRUST
NON-MONEY MARKET FUNDS
OUT-OF-POCKET EXPENSES
None.
BILLING CYCLE
The above fees are billed monthly.
NATIONS FUNDS TRUST THE BANK OF NEW YORK
------------------- --------------------
Approved by: Approved by:
------------------------ ----------------------
Title: Title:
------------------------ ----------------------
Date: Date:
------------------------ ----------------------
|
CUSTOMER CONTACT
Portfolio trades are coordinated by a dedicated administrative group reacting to instructions from your authorized persons.
The group consists of a senior officer in charge, administrators assigned based on activity and complexity and ample backup on hand to ensure responsiveness to your needs.
SAFEKEEPING OF SECURITIES
We are a direct member of all major depositor systems, i.e., Depository Trust Company, Federal Reserve Book Entry, Participants Trust Company, etc.
Agreements are in place with sub-custodians for book-entry municipal bond programs.
Arrangements have been completed for numerous multi-party repurchase transactions.
Vault Operations are constantly monitored via closed-circuit security systems.
OPTIONS/FUTURES
Issue escrow or depository receipts.
Collect premiums and effect closing purchase transactions for covered call options.
Issue guarantee letters for put options.
Agreements are in place with numerous Futures Commission Merchants (FCMs), to settle transactions and service maintenance margin requirements.
Segregated accounts are maintained to comply with collateral agreements with contra-brokers.
INCOME COLLECTION/PAYDOWNS
Dividends and interest due to the account are pre-posted on the payable date.
Proceeds from maturing securities are credited on the redemption date.
Paydowns on GNMA, FNMA, FHLMC, and CMOs are posted on payable date and credited in Federal Funds on the business day after payable date when the factor is available (95% of issues held).
Securities requiring registration are held in our nominee name to facilitate both sales and income collection.
REPORTS
The following reports are provided to allow your staff to monitor portfolio cash and security transactions:
Daily Custodian Account Journal includes portfolio and cash transactions of the previous business day.
Cash Balance Projection Report includes all trades reported to us that have not settled through the previous business day. Pending dividends, interest, maturities and called bonds are also listed on this report.
Daily report of affirmed/unaffirmed trades.
List of Assets reflects securities and cash held in the custodian account available daily, weekly, monthly, etc.
Monthly Cash Statement - summary of all Daily Custodian Account Journal activity for the previous month.
WORKSTATION
Our workstation will afford you the ability to review, edit, enter, and transmit all trade settlement instructions to the Bank for processing. Easily accessed via a PC, using a local telephone number, it increases your flexibility to input and retrieve information while significantly reducing your communication costs. The system is accessible 24 hours a day, 7 days a week.
Our Cash Management Report is another of our on-line systems capabilities providing real-time settlement data regarding the current day's activity in your account. The activity would include pending and settled trades, income, paydowns and maturity payments as well as cash balances. This information puts effective cash management in your hands.
Another of our dynamic on-line systems is called Q-TRAK. This on-line module of our system can be used to notify the bank of any inquiries regarding securities related problems. You can use Q-TRAK to route your inquiries directly to your Custody Administrative Team. Q-TRAK allows for prioritization of each inquiry and response, and permits you to monitor progress on each item as it is being researched. Many of the Bank's clients have found Q-TRAK to be an excellent tool in achieving timely resolutions to their questions.
GENERAL SERVICING
Prompt notification of corporate actions.
Corporate literature directly forwarded upon receipt.
Proxies for securities held in our nominee are executed and forwarded to the Fund for voting.
Payment of your authorized corporate expenses.
SCHEDULE IV
OVERDRAFT RATE
CO-ADMINISTRATION AGREEMENT
NATIONS FUNDS TRUST
This CO-ADMINISTRATION AGREEMENT (the "Agreement") is made as of
February 14, 2000 by and among STEPHENS INC. ("Stephens"), BANC OF AMERICA
ADVISORS, INC. ("BAAI") and NATIONS FUNDS TRUST (the "Trust").
WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain Stephens and BAAI to render certain administrative services for the investment portfolios of the Trust listed on Schedule I (individually, a "Fund" and collectively, the "Funds"), and Stephens and BAAI are willing to render such services.
NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed among the parties hereto as follows:
1. Appointment.
(a) The Trust hereby appoints Stephens to act as Co-Administrator of the Funds and Stephens hereby accepts such appointment and agrees to render such services and duties set forth in Paragraph 3, for the compensation and on the terms herein provided. Absent written notification to the contrary by the Trust, BAAI or Stephens, each new investment portfolio established in the future by the Trust shall automatically become a "Fund" for all purposes hereunder as if listed on Schedule I.
(b) The Trust also hereby appoints BAAI to act as Co-Administrator of the Funds, and BAAI hereby accepts such appointment and agrees to render such services and duties set forth in Paragraph 4, for the compensation and on the terms herein provided. Absent written notification to the contrary by either the Trust or BAAI, each new investment portfolio established in the future by the Trust shall automatically become a "Fund" for all purposes hereunder as if listed on Schedule I.
2. Delivery of Documents. The Trust has furnished Stephens and BAAI with copies properly certified or authenticated of each of the following:
(a) The Trust's registration statement on Form N-1A (the "Registration Statement") under the Securities Act of 1933, as amended, and under the 1940 Act (File Nos. 333-89661 and 811-09645), as filed with the Securities and Exchange Commission (the "SEC") relating to the Funds' shares of beneficial interest (the "Shares");
(b) The Funds' most recent prospectus(es); and
(c) The Funds' most recent statement(s) of additional information.
The Trust will furnish Stephens and BAAI from time to time with copies, properly certified or authenticated, of all amendments of or supplements to the foregoing. Furthermore, the Trust will provide Stephens and BAAI with any other documents that Stephens and BAAI may reasonably request and will notify Stephens and BAAI as soon as possible of any matter materially affecting either Stephens' or BAAI's performance of its services under this Agreement.
3. Duties as Co-Administrator. Subject to the supervision and direction of the Board of Trustees of the Trust, Stephens, as Co-Administrator, will assist in supervising various aspects of the Trust's administrative operations and undertakes to perform the following specific services from and after the effective date of this Agreement:
(a) Maintaining office facilities for the Trust (which may be in the offices of Stephens or a corporate affiliate);
(b) Furnishing clerical services, internal executive and administrative services and stationery and office supplies in connection with the foregoing;
(c) Assist in furnishing statistical and research data and data processing services in connection with the foregoing;
(d) Furnishing corporate secretarial services, including assisting in the coordination of the preparation and distribution of materials for Board of Trustees meetings;
(e) Providing the services of certain persons who may be appointed as officers of the Trust by the Trust's Board of Trustees;
(f) Assist in coordinating the provision of legal advice and counsel to the Trust with respect to regulatory matters, including monitoring regulatory and legislative developments which may affect the Trust and assisting in the strategic response to such developments, counseling and assisting the Trust in routine regulatory examinations or investigations of the Trust, and working closely with outside counsel to the Trust in connection with any litigation in which the Trust is involved;
(g) Assist in coordinating the preparation of reports to the Trust's shareholders of record and the SEC including, but not necessarily limited to, annual reports and semi-annual reports to shareholders and on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
(h) Coordinating with the Trust regarding the jurisdictions in which the Shares shall be registered or qualified for sale and, in connection therewith, being responsible for the registration or qualification and the maintenance of such registration or qualification of Shares for sale under the securities laws of any state. Payment of share registration fees and any fees for qualifying or continuing the qualification of the Trust or any Fund as a dealer or broker shall be made or reimbursed by the Trust or that Fund, respectively;
(i) Assisting in the preparation and filing on a timely basis of various reports, registration statements and post-effective amendments thereto, and other documents required by federal, state and other applicable laws and regulations, other than those filed or required to be filed by BAAI or the Funds' sub-advisers, transfer agent, sub-transfer agent or custodian;
(j) Performing certain compliance procedures for the Trust which will include, among other matters, monitoring compliance with personal trading guidelines by the Trust's Board of Trustees; and
(k) Generally assisting in all aspects of the Trust's operations.
In performing all services under this Agreement, Stephens shall (i) act in conformity with: the Trust's Declaration of Trust, the 1940 Act and the rules thereunder, and other applicable laws and regulations, as the same may be amended from time to time, and the Trust's Registration Statement, as such Registration Statement may be amended from time to time; (ii) consult and coordinate with the Trust, as necessary and appropriate; and (iii) advise and report to the Trust, as necessary or appropriate, with respect to any compliance matters that come to its attention.
In performing its services under this Agreement, Stephens shall cooperate and coordinate with BAAI as necessary and appropriate and shall provide such information as is reasonably necessary or appropriate for BAAI to perform its responsibilities to the Trust.
4. Duties as Co-Administrator. Subject to the supervision and direction of the Board of Trustees of the Trust, BAAI, as Co-Administrator, will assist in supervising various aspects of the Trust's administrative operations and undertakes to perform the following specific services, from and after the effective date of this Agreement:
(a) Providing accounting and bookkeeping services (including the maintenance for the periods prescribed by Rule 31a-2 under the 1940 Act of such accounts, books and records of the Trust as may be required by Section 31(a) of the 1940 Act and the rules thereunder). BAAI further agrees that all such records which it maintains for the Trust are the property of the Trust and further agrees to surrender promptly to the Trust any of such records upon the Trust's request;
(b) Valuing each Fund's assets and calculating the net asset value and the net income of the shares of each Fund in accordance with the Trust's current prospectus(es), applicable pricing procedures and votes of the Trust's Board of Trustees, provided, that in performing such services, BAAI shall obtain security market quotes from independent pricing services, or if such quotes are unavailable, obtain such prices from the Funds' sub-advisers;
(c) Accumulating information for reports to the Trust's shareholders of record and the SEC including, but not necessarily limited to, annual reports and semi-annual reports to shareholders and on Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act;
(d) Preparing and filing on a timely basis the Trust's tax returns and other tax filings;
(e) Monitoring the development and implementation of certain
compliance procedures for the Trust including, but not limited to, monitoring
(i) each Fund's status as a regulated investment company under Sub-Chapter M of
the Internal Revenue Code of 1986, as amended, including performing, on a
monthly basis and based upon information provided by the Fund's sub-advisers,
the 90% gross income and asset diversification tests derived from such
Sub-Chapter; and (ii) compliance by each Fund with its investment objective,
policies and restrictions, and applicable laws and regulations;
(f) Preparing and furnishing to the Trust monthly broker security transaction summaries and monthly security transaction listings and (at the Trust's request) performance information (including yield and total return information) calculated in accordance with applicable U.S. securities laws and reporting to external databases such information as may reasonably be requested;
(g) Assisting the Trust and its agents in their accumulation and preparation of materials for the Board of Trustees' meetings and for regulatory examinations and inspections of the Trust, to the extent such materials relate to the services being performed for the Trust by BAAI; and
(h) Coordinate the provisions of services to the Trust by other service providers to the Trust, including the transfer agent, sub-transfer agent and custodian.
In performing all services under this Agreement, BAAI shall (i) act in conformity with the Trust's Declaration of Trust, the 1940 Act and the rules thereunder, and other applicable laws and regulations, as the same may be amended from time to time, and the Trust's Registration Statement, as such Registration Statement may be amended from time to time; (ii) consult and coordinate with the Trust, as necessary and appropriate; and (iii) advise and report to the Trust, as necessary or appropriate, with respect to any compliance matters that come to its attention.
In connection with its duties under this Paragraph 4, it is understood and agreed that BAAI may, at its own expense, enter into sub-administration agreements with other service providers and the Fund(s), provided that each such service provider agrees with BAAI and the Fund(s) to comply with all relevant provisions of the 1940 Act and applicable rules and regulations thereunder. In addition, upon notice to the Board of Trustees of the Trust, the parties agree that BAAI may from time to time assume some or all of Stephens' duties set forth in Paragraph 3 above.
In performing its responsibilities under this Agreement, BAAI shall cooperate and coordinate with Stephens as necessary and appropriate and shall provide such information within its possession or control as is reasonably necessary or appropriate to Stephens to enable it to perform its responsibilities to the Trust.
5. Compensation.
(a) Stephens shall bear all expenses in connection with the performance of its services under this Agreement, except those enumerated in Paragraph 5(a)(2) below.
(1) Stephens will from time to time employ or associate with such person or persons as Stephens may believe to be particularly suited to assist it in performing services under this Agreement. Such person or persons may be officers and employees of both Stephens and the Trust. The compensation of such person or persons shall be paid by Stephens and no obligation shall be incurred on behalf of the Trust or BAAI in such respect.
(2) Stephens shall not be required to pay any of the following expenses incurred by the Trust: investment advisory expenses; costs of printing and mailing stock certificates, prospectuses, reports and notices; interest on borrowed money; brokerage fees and commissions; taxes and fees payable to federal, state and other governmental agencies; fees of Trustees of the Trust who are not affiliated with Stephens; outside auditing expenses; outside legal expenses; fees of any other service provider to the Trust; or other expenses not specified in this Section 5(a) which may be properly payable by the Trust and which are approved by the Trust's President or Treasurer.
(3) The Trust will compensate Stephens for its services rendered pursuant to this Agreement in accordance with Schedule A. In addition, the Trust shall reimburse Stephens for certain reasonable out-of-pocket distributions made in connection with fulfilling its obligations under the Agreement. The items eligible for reimbursement are set forth on Schedule A.
(b) BAAI shall bear all expenses in connection with the performance of its services under this Agreement, except those enumerated in 5(b)(2) below.
(1) BAAI will from time to time employ or associate with such person or persons as BAAI may believe to be particularly suited to assist it in performing services under this Agreement. Such person or persons may be officers and employees of both BAAI and the Trust. The compensation of such person or persons shall be paid by BAAI and no obligation shall be incurred on behalf of the Trust or Stephens in such respect.
(2) BAAI shall not be required to pay any of the following expenses incurred by the Trust: investment advisory expenses; costs of printing and mailing stock certificates, prospectuses, reports and notices; interest on borrowed money; brokerage fees and commissions; taxes and fees payable to federal, state and other governmental agencies; fees of Trustees of the Trust who are not affiliated with BAAI; outside auditing expenses; outside legal expenses; fees of independent pricing services utilized by BAAI to value each Fund's assets; fees of any other service provider to the Trust (other than a sub-administrator engaged pursuant to Paragraph 4); or other expenses not specified in this Section 5(b) which may be properly payable by the Trust and which are approved by the Trust's President or Treasurer.
(3) The Trust will compensate BAAI for its services rendered pursuant to this Agreement in accordance with Schedule A. In addition, the Trust shall reimburse BAAI for certain reasonable out-of pocket distributions made in connection with fulfilling its obligations under the Agreement. The items eligible for reimbursement are set forth on Schedule A.
6. Limitation of Liability; Indemnification.
(a) Stephens shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of its obligations and duties under this Agreement, except a loss resulting from Stephens' willful misfeasance, bad faith or gross negligence in the performance of such obligations and duties, or by reason of its reckless disregard thereof.
(b) BAAI shall not be liable for any error of judgment or mistake of law or for any loss suffered by the Trust in connection with the performance of its obligations and duties under this Agreement, except a loss resulting from BAAI's willful misfeasance, bad faith or gross negligence in the performance of such obligations and duties, or by reason of its reckless disregard thereof.
(c) The Trust, on behalf of each Fund, will indemnify Stephens
and/or BAAI against and hold each harmless from any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action or suit relating to the
particular Fund and not resulting from the willful misfeasance, bad faith or
gross negligence of Stephens and/or BAAI in the performance of such obligations
and duties or by reason of their reckless disregard thereof. Stephens and/or
BAAI will not confess any claim or settle or make any compromise in any instance
in which the Trust will be asked to provide indemnification, except with the
Trust's prior written consent. Any amounts payable by the Trust under this
Section 6(c) shall be satisfied only against the assets of the Fund involved in
the claim, demand, action or suit and not against the assets of any other
investment portfolio of the Trust.
7. Effective Date; Termination of Agreement.
(a) This Agreement shall become effective on the date of its execution. This Agreement shall remain in full force and effect with respect to such Fund(s) unless terminated pursuant to the provisions of Section 7(b).
(b) This Agreement may be terminated at any time without payment of any penalty, upon 60 days' written notice, by vote of the Board of Trustees of the Trust, by Stephens or by BAAI. Stephens and BAAI will each cooperate with and assist the Trust, its agents and any successor administrator or administrators in the substitution/conversion process.
(c) Sections 6 and 9 shall survive this Agreement's termination.
8. Amendments. No provision of this Agreement may be changed, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, discharge or termination is sought.
9. Confidentiality. All books, records, information and data pertaining to the business of the Trust, its prior, present or potential shareholders and BAAI's customers that are exchanged or received pursuant to the performance of Stephens' and/or BAAI's duties under this Agreement shall remain confidential and shall not be disclosed to any other person, except as specifically authorized by the Trust or as may be required by law, and shall not be used for any purpose other than performance of Stephens' and BAAI's responsibilities and duties hereunder.
10. Service to Other Companies or Accounts. The Trust acknowledges that both Stephens and BAAI now act, will continue to act and may act in the future as investment adviser to fiduciary and other managed accounts, and as investment adviser, investment sub-adviser and/or administrator to other investment companies or series of investment companies, and the Trust has no objection to either Stephens or BAAI so acting. The Trust further acknowledges that the persons employed by both Stephens and BAAI to assist in the performance of their duties under this Agreement may not devote their full time to such service and nothing contained in this Agreement shall be deemed to limit or restrict the right of Stephens or BAAI or any affiliate of either to engage in and devote time and attention to other businesses or to render services of whatever kind or nature.
11. Miscellaneous.
(a) Any notice or other instrument authorized or required by this Agreement to be given in writing to the Trust, Stephens or BAAI shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing.
To the Trust:
Nations Funds Trust
111 Center Street, Suite 3000
Little Rock, Arkansas 72201
Attention: Secretary
To Stephens:
Stephens Inc.
111 Center Street, Suite 3000
Little Rock, Arkansas 72201
Attention: Richard H. Blank, Jr.
To BAAI:
Banc of America Advisors, Inc.
One Bank of America Plaza
33rd Floor
Charlotte, NC 28255
Attention: Edward D. Bedard
(b) 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 without the written consent of the other parties.
(c) This Agreement shall be construed in accordance with the laws of the State of Delaware.
(d) This Agreement may be executed in any number of counterparts each of which shall be deemed to be an original and which collectively shall be deemed to constitute only one instrument.
(e) The captions of this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
(f) This Agreement constitutes the entire agreement between the parties hereto with respect to the matters described herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed and delivered by their duly authorized officers as of the date first written above.
STEPHENS INC.
By: /s/ Richard H. Blank, Jr.
-------------------------
Richard H. Blank, Jr.
Senior Vice President
|
BANC OF AMERICA ADVISORS, INC.
By: /s/ Edward D. Bedard
-------------------------
Edward D. Bedard
Senior Vice President and
Chief Operating Officer
|
NATIONS FUNDS TRUST
By: /s/ James E. Banks, Jr.
-------------------------
James E. Banks, Jr.
Assistant Secretary
|
SCHEDULE I
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
3. Nations MidCap Index Fund
Approved: December 9, 1999
SCHEDULE A
For services rendered pursuant to this Agreement, the Trust will pay Stephens and BAAI, in the aggregate, an administration fee, computed daily and payable monthly, based on annual rate of each Fund's daily net assets as follows:
1. Money Market Funds: 0.10%
2. Fixed Income Funds (except Nations High Yield Bond 0.22%
Fund):
3. Nations High Yield Bond Fund: 0.18%
4. International Funds: 0.22%
5. Domestic Equity Funds: 0.23%
It is understood and agreed among the parties that the aggregate administration fee payable hereunder shall be divided by and between Stephens and BAAI, as they may agree from time to time.
In addition to the asset-based fee set forth above, the Trust shall reimburse Stephens, BAAI and any sub-administrator engaged pursuant to Paragraph 4 for certain reasonable out-of-pocket expenses incurred by them in connection with the performance of their respective duties hereunder.
Reimbursable out-of-pocket expenses shall include the following:
reasonable costs associated with postage (including overnight services),
telephone, telecommunications (including facsimiles), duplicating, pricing
services, and forms and supplies.
SUB-ADMINISTRATION AGREEMENT
NATIONS FUNDS TRUST
This SUB-ADMINISTRATION AGREEMENT (the "Agreement") is made as of
February 14, 2000 by and among THE BANK OF NEW YORK ("BNY"), BANC OF AMERICA
ADVISORS, INC. ("BAAI") and NATIONS FUNDS TRUST (the "Trust").
WHEREAS, the Trust is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, BAAI serves as the Co-Administrator for the investment portfolios of the Trust pursuant to a separate Co-Administration Agreement; and
WHEREAS, BAAI desires to retain BNY to render certain sub-administrative services to the Trust and to BAAI, as Co-Administrator of the Trust, and BNY is willing to render such services.
NOW, THEREFORE, in consideration of the promises and mutual covenants herein contained, it is agreed among the parties hereto as follows:
(a) BAAI hereby appoints BNY to act as Sub-Administrator of the Trust and to render sub-administrative services for each portfolio of the Trust listed on Schedule I (individually, a "Fund" and collectively, the "Funds") and BNY hereby accepts such appointment and agrees to render the services and duties set forth in Schedule II as it may be amended from time to time, for the compensation and on the terms herein provided. Each new investment portfolio established in the future by the Trust or BAAI will become a "Fund" for all purposes hereunder when BNY receives a revised Schedule I from BAAI or the Trust that includes such new portfolio.
(b) Subject to the other provisions of this Section 1, in performing all services under this Agreement, BNY shall (i) act in conformity with the Trust's Declaration of Trust, the 1940 Act and the rules thereunder, including but not limited to Rules 31a-1 to 31a-3, and other applicable laws and regulations, as the same may be amended from time to time, and the Trust's Registration Statement (defined below) as such Registration Statement may be amended from time to time; (ii) consult and coordinate with BAAI and the Trust, as necessary and appropriate; and (iii) advise and report to BAAI and the Trust, as necessary or appropriate, with respect to any compliance matters that come to its attention. In performing all services under this Agreement BNY shall meet the minimum quality of service standards set forth on Schedule III.
(c) The Trust has furnished BNY and BAAI with copies properly certified
or authenticated of each of the following: (i) the Trust's Declaration of Trust
or other organizational document and all amendments thereto (the "Declaration");
(ii) votes of the Trust's Board of Trustees or other governing body (the
"Board") authorizing the execution, delivery and performance of this Agreement
by the Trust; (iii) the Trust's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933, as amended, and
under the 1940 Act (File Nos. 333-89661 and 881-09645), as filed with the
Securities and Exchange Commission (the "SEC") relating to the Funds' shares of
beneficial interest (the "Shares"); (iv) the Funds' current prospectus(es); (v)
the Funds' current statement(s) of additional information; and (v) the pricing
procedures applicable to the calculation of the Funds' net asset values as
approved by the Trust's Board (the "Pricing Procedures"). It is solely the
Trust's responsibility to furnish BNY from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, and BNY will not be held to have knowledge of any such amendments or
supplements until the same are actually received by BNY. Furthermore, the Trust
will provide BNY with any other documents that BNY and BAAI may reasonably
request and will notify BNY and BAAI as soon as possible of any matter
materially affecting either BNY's or BAAI's performance of its services under
this Agreement.
(d) Subject to the direction and approval of the Trust's Board and appropriate officers and the provisions of this Agreement, BNY shall provide to each Fund the administrative services set forth on Schedule II attached hereto. In performing such services hereunder, BNY shall provide, at its expense, office space, facilities, equipment and personnel. BNY shall not provide any services relating to the management, investment advisory or sub-advisory functions of any Fund, distribution of shares of any Fund, maintenance of any Fund's financial records (except as otherwise agreed by the parties) or any services normally performed by the Funds' counsel or independent accountants. Upon receipt of the Trust's prior written consent, BNY may delegate any of its duties and obligations hereunder to any delegee or agent whenever and on such terms and conditions as it deems necessary or appropriate. Unless expressly agreed in writing, BNY shall not be relieved of liability or responsibility for the performance of any duties or obligations delegated to a delegee or agent, provided that BNY shall have no liability for duties or obligations that are delegated to a delegee or agent at the instruction of the Trust or BAAI. The Trust and BAAI shall cause their respective officers, and shall use reasonable efforts to cause the Trust's or BAAI's legal counsel, independent accountants, and transfer agent to cooperate with BNY and to provide BNY, upon BNY's reasonable written request, such information, documents and advice relating to such Fund as is within the possession or knowledge of such persons, in order to enable BNY to perform its duties hereunder. Such cooperation or provision of information, documents or advice shall be at no cost to BNY, provided BNY's request is reasonable and BAAI shall have been notified of the request. In connection with its duties hereunder, BNY shall be entitled to reasonably rely upon any documents relating to a Fund provided to BNY by any of the aforementioned persons. BNY may apply to the Trust or BAAI for written instructions with respect to any matter arising in connection with BNY's performance hereunder. If, after a reasonable period of time, BNY receives no response to any such application, BNY may then notify the Trust or BAAI of reasonable action that BNY shall take if written instructions are not received within a stated period of time after such notice, and then BNY shall not be liable for taking such reasonable action as if written instructions had been provided. BNY is entitled to reasonably rely and act in accordance with written instructions believed to have been given by authorized persons and shall incur no costs for such reasonable reliance. BNY shall have no duties or responsibilities whatsoever except such duties and responsibilities as are specifically set forth in this Agreement and Schedule II hereto, and no covenant or obligation shall be implied against BNY in connection with this Agreement.
(e) The Trust and BAAI, for itself and not for the others, hereby
represents and warrants to BNY, which representations and warranties shall be
deemed to be continuing, that: (i) it is duly organized and existing under the
laws of the jurisdiction of its organization, with full power to carry on its
business as now conducted, to enter into this Agreement and to perform its
obligations hereunder; (ii) this Agreement has been duly authorized, executed
and delivered by it in accordance with all requisite action and constitutes a
valid and legally binding obligation, enforceable in accordance with its terms;
(iii) it is conducting its business substantially in compliance with all
applicable laws and regulations, both state and federal, and has obtained all
regulatory licenses, approvals and consents necessary to carry on its business
as now conducted; (iv) there is no statute, regulation, rule, order or judgment
binding on it and no provision of its Declaration, nor of any mortgage,
indenture, credit agreement or other contract binding on it or affecting its
property which would prohibit its execution or performance of this Agreement;
and (v) the Trust and BAAI will use reasonable efforts to promptly notify BNY of
any errors or omissions contained in any reports, calculations, valuations and
other items of information, provided that any failure by the Trust or BAAI to
detect any such errors or omissions shall not relieve BNY of any resulting
liability therefrom. To the extent that BAAI has actual knowledge of any such
error or omission and fails to use reasonable efforts to promptly notify BNY,
BNY shall be relieved of any liability that BNY may have mitigated had BAAI
provided notice of such error or omission to BNY.
(f) BNY hereby represents and warrants to the Trust and BAAI, which representations and warranties shall be deemed to be continuing, that: (i) it is duly organized and existing under the laws of the jurisdiction of its organization, with full power to carry on its business as now conducted, to enter into this Agreement and to perform its obligations hereunder; (ii) this Agreement has been duly authorized, executed and delivered by it in accordance with all requisite action and constitutes a valid and legally binding obligation, enforceable in accordance with its terms; and (iii) it is conducting its business substantially in compliance with all applicable laws and regulations, both state and federal, and has obtained all regulatory licenses, approvals and consents necessary to carry on its business as now conducted; there is no statute, regulation, rule, order or judgment binding on it and no provision of its Charter, nor of any mortgage, indenture, credit agreement or other contract binding on it or affecting its property which would prohibit its execution or performance of this Agreement.
2. Compensation. For the services to be rendered, the facilities to be furnished and the compensation and other expenses to be borne by BNY, as provided for in this Agreement, BNY shall be entitled to receive a monthly fee from BAAI and reimbursement for out-of-pocket expenses as set forth in Schedule IV to this Agreement. It is understood that BAAI shall be responsible for BNY's monthly fee for its services hereunder, and BNY agrees that it shall have no claim against the Trust or the Funds with respect to compensation under this Agreement.
3. Recordkeeping. BNY shall, as agent for the Trust, and subject to the direction and approval of the Trust's Board and the provisions of this Agreement, maintain and keep current the books, accounts and other documents, if any, pursuant to the services and duties provided by BNY as set forth in Schedule II of this Agreement, and preserve any such books, accounts and other documents in accordance with the applicable provisions of Rule 31a-2 of the 1940 Act. Such books, accounts and other documents shall be made available upon reasonable request for inspection by officers, employees and auditors of the Trust and BAAI during BNY's normal business hours. All records maintained and preserved by BNY pursuant to this Agreement which the Trust is required to maintain and preserve in accordance with Rule 31a-2 of the 1940 Act shall be and remain the property of the Trust and shall be surrendered to the Trust promptly upon request in the form in which such records have been maintained and preserved. Upon reasonable request of the Trust, BNY shall provide in data files or hard copy, whichever the Trust shall reasonably elect, any records included in any such delivery which are maintained by BNY on a computer disc, or are similarly maintained, and the Trust shall reimburse BNY for its expenses of providing such hard copy.
(a) BNY shall at all times act in good faith and agrees to use its best efforts to fulfill its obligations under this Agreement, but assumes no responsibility for loss or damage to the Trust unless such loss or damage is caused by BNY's own negligence, bad faith or willful misconduct or that of its directors, officers or employees. BNY shall be responsible hereunder for all direct damages resulting from its own negligence, bad faith or willful misconduct, provided however that it shall not be responsible for lost profits or lost business arising under or in connection with this Agreement. It is understood and agreed that for purposes of this Section 4(a), "direct damages" shall include, but shall not be limited to, all legal costs, penalties, reimbursement for excess distribution and redemption payments, repurchasing costs for servicing agents and reimbursement to the Funds for net asset value breaks (as calculated under the Pricing Procedures).
(b) The Trust, on behalf of each Fund, will indemnify BNY against and
hold it harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses of a defense against
any claim, demand, action or suit), relating to the particular Fund and arising
from any one or more of the following: (i) errors in records or instructions,
explanations, information, specifications or documentation of any kind, as the
case may be, supplied to BNY by any person described in Section 1 hereof or by
any third party described in Section 5; (ii) action or inaction taken or omitted
to be taken by BNY pursuant to written or oral instructions described in this
Agreement (or otherwise without bad faith, negligence or willful misconduct);
(iii) any action taken or omitted to be taken by BNY in good faith in accordance
with the advice or opinion of counsel for a Fund, the Trust, BAAI (obtained in
accordance with the procedures set forth in this Agreement) or its own counsel;
(iv) any improper use by the Fund, the Trust, BAAI or their respective agents,
of any valuations or computations supplied by BNY pursuant to this Agreement;
(v) the method of valuation of the securities and the method of computing a
Fund's net asset value or any other amount computed by BNY hereunder, provided
BNY has followed the Pricing Procedures; and (vi) any valuation of securities,
net asset value or other amount provided by a Fund or BAAI. BNY will not confess
any claim or settle or make any compromise in any instance in which the Trust
will be asked to provide indemnification, except with the Trust's prior written
consent. Any amounts payable by the Trust under this Section 4(b) shall be
satisfied only against the assets of the Fund involved in the claim, demand,
action or suit and not against the assets of any other investment portfolio of
the Trust.
(a) BNY, in performing the services required of it under the terms of this Agreement, shall be entitled to rely fully on the accuracy and validity of any and all instructions, explanations, information, specifications and documentation furnished to it by a Fund and shall have no duty or obligation to review the accuracy, validity or propriety of such instructions, explanations, information, specifications or documentation, including, without limitation, evaluations of securities; the amounts or formula for calculating the amounts and times of accrual of Fund's liabilities and expenses; the amounts receivable and the amounts payable on the sale or purchase of securities; and amounts receivable or amounts payable for the sale or redemption of Fund shares effected by or on behalf of the Fund. In the event BNY's computations hereunder rely, in whole or in part, upon information, including, without limitation, bid, offer or market values of securities or other assets, or accruals of interest or earnings thereon, from a pricing or similar service utilized, or subscribed to, by BNY which BNY in its judgment deems reliable, or any other third party pricing source designated by the Trust, BNY shall not be responsible for, under any duty to inquire into, or deemed to make any assurances with respect to, the accuracy or completeness of such information. BNY shall not be required to inquire into any valuation of securities or other assets by the Fund or any third party described in this Section, even though BNY in performing services similar to the services provided pursuant to this Agreement for others may receive different valuations of the same or different securities of the same issuers.
(b) Subject to the provisions of this Agreement and the direction and approval of the Trust's Board, BNY shall perform the computations described in Schedule II at such times and dates and in the manner specified or described in the then-current prospectus(es) of a Fund. To the extent valuation of securities or a computation specified or described in a Fund's Pricing Procedures or then-current effective prospectus(es) is at any time inconsistent with any applicable laws or regulations, the Trust or BAAI shall immediately so notify BNY in writing and thereafter shall furnish BNY at all appropriate times with the values of such securities and such Fund's net asset value or other amounts otherwise to be calculated by BNY, or, subject to the prior approval of BNY, instruct BNY in writing to value securities and make such computations in a manner which the Trust or BAAI then represents in writing to be consistent with all applicable laws and regulations. The Trust or BAAI may also from time to time, subject to the prior approval of BNY, instruct BNY in writing to make computations other than as specified in this Section of this Agreement. By giving such instruction, the Trust or BAAI shall be deemed to have represented that such instruction is consistent with all applicable laws and regulations and the then-current effective prospectus(es) of the particular Fund. The Trust or BAAI shall have sole responsibility for determining the method of valuation of securities and the method of computations, and all computations, valuation of securities and the method of computing each Fund's net asset value shall be subject to approval by the Trust and BAAI. BNY shall not be liable for relying on any price provided by any pricing service believed by BNY to be reliable, and the Trust or BAAI shall furnish values when the same are not available from a pricing service utilized by BNY, with such furnishing to constitute an instruction to BNY to rely on the provided values.
(c) BNY shall be responsible for determining and properly reflecting in
the computations made by it under this Agreement: (i) the taxable nature of any
distribution or amount received or deemed received by, or payable to, a Fund;
(ii) the taxable nature or effect on a Fund or its shareholders of any corporate
actions, class actions, tax reclaims, tax refunds, or similar events; (iii) the
taxable nature or taxable amount of any distribution or dividend paid, payable
or deemed paid, by a Fund to its shareholders; (iv) the effect under any
federal, state, or foreign income tax laws of a Fund making or not making any
distribution or dividend payment, or any election with respect thereto; or (v)
any tax accounting; provided, however, that if BNY is not certain of the taxable
nature, amount or effect of any such item, it may seek instructions regarding
the proper treatment of such item from the Trust or BAAI in accordance with the
procedures set forth in Section 1(e), above, and shall have no liability for
acting in reliance on such instructions.
(a) This Agreement shall become effective as of the date first set forth above and shall remain in full force and effect unless terminated pursuant to the provisions of Section 6(b).
(b) This Agreement may be terminated at any time without payment of any penalty, upon 60 days' written notice to BNY, by BAAI or by vote of the Board of the Trust, or upon 180 days' written notice to BAAI and the Trust, by BNY. Upon any such termination, BNY will cooperate with and assist the Trust, BAAI, their agents and any successor administrator(s) or sub-administrator(s) in the substitution/conversion process. In connection with any termination of this Agreement, unless BNY is in breach of this Agreement, the Funds and BAAI agree to pay BNY any compensation and reimbursement for out-of-pocket expenses as may then be due and payable, as well as agreed-upon out-of-pocket expenses incurred in connection with a termination. If BNY is in breach of this Agreement, the Funds and BAAI may offset any compensation or reimbursement amounts owed to BNY by the amount of damages, costs and expenses incurred as a result of BNY's breach, including costs, expenses and reasonable incremental fees for a period not to exceed one year incurred in connection with a conversion by the Trust and BAAI to a successor service provider. In the event of a dispute as to the amount of such damages, the Funds and BAAI agree to escrow the set-off amount.
(c) Sections 4 and 8 shall survive this Agreement's termination.
7. Amendments. Except as expressly provided in the first paragraph of
Section 1, no provision of this Agreement may be amended or modified orally, but
only by an instrument in writing signed by the party against which enforcement
of the amendment or modification is sought.
8. Confidentiality. All books, records, information and data pertaining
to the business of the Trust, or its prior, present or potential shareholders
that are exchanged or received in connection with the performance of BNY's
duties under this Agreement shall remain confidential and shall not be disclosed
to any other person, except as specifically authorized by the Trust or as may be
required by law, and shall not be used for any purpose other than performance of
its responsibilities and duties hereunder, and except that BNY retains the right
to disclose matters subject to confidentiality to its examiners, regulators,
internal or external auditors, its accountants, its internal and external
counsel, and to any other entity whenever it is advised by its internal or
external counsel that it is reasonably likely that BNY would be liable for a
failure to do so. BNY will endeavor to provide written notice to the Trust and
BAAI at least five business days prior to any disclosures pursuant to this
Section 8, but, provided it shall have provided as much notice as is reasonably
practicable under the circumstances, BNY shall have no liability for any failure
to do so.
9. Service to Other Companies. The Trust and BAAI acknowledge that BNY now provides, will continue to provide and may in the future provide administrative or other services to other investment companies or series of investment companies, and the Trust and BAAI have no objection to BNY so doing. The Trust and BAAI further acknowledge that the persons employed by BNY to assist in the performance of BNY's duties under this Agreement may not devote their full time to such service and nothing contained in this Agreement shall be deemed to limit or restrict the right of BNY or any affiliate of BNY to engage in and devote time and attention to other businesses or to render services of whatever kind or nature.
(a) This Agreement shall be construed in accordance with the laws of the State of New York, without regard to conflict of laws principles thereof. Each Fund, the Trust and BAAI hereby consent to the jurisdiction of a state or federal court situated in New York City, New York in connection with any dispute arising hereunder. To the extent that in any such jurisdiction any of the aforementioned persons may now or hereafter be entitled to claim, for itself or its assets, immunity from suit, execution, attachment (before or after judgment) or other legal process, each irrevocably agrees not to claim, and it hereby waives, such immunity.
(b) In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations shall not in any way be affected or impaired thereby, and if any provision is inapplicable to any person or circumstances, it shall nevertheless remain applicable to all other persons and circumstances.
(c) Each and every right granted to BNY, the Trust or BAAI hereunder or under any other document delivered hereunder or in connection herewith, or allowed it by law or equity, shall be cumulative and may be exercised from time to time. No failure on the part of BNY, the Trust or BAAI to exercise, and no delay in exercising, any right will operate as a waiver thereof, nor will any single or partial exercise by BNY, the Trust or BAAI of any right preclude any other or future exercise thereof or the exercise of any other right.
(d) BNY shall not be responsible for delays or errors that occur by reason of circumstances beyond its reasonable control in the performance of its duties under this Agreement, provided that reasonable back-up and disaster recovery systems are in place, including, without limitation, labor difficulties, mechanical breakdowns, computer breakdowns or malfunctions (hardware or software), flood or catastrophe, acts of God, failures of transportation, communication or power supply, or other similar circumstances. Nor shall BNY be responsible for delays or failures to supply the information or services specified in this Agreement where such delays or failures are caused by the failure of any person(s) other than BNY to supply any instructions, explanations, information, specifications or documentation deemed necessary by BNY in the performance of its duties under this Agreement.
(e) Any notice or other instrument authorized or required by this Agreement to be given in writing to the Trust, BNY and/or BAAI shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing.
To the Trust:
Nations Funds Trust
111 Center Street
Little Rock, Arkansas 72201
Attention: Richard H. Blank, Jr.
To BAAI:
Banc of America Advisors, Inc.
One Bank of America Plaza 101 South Tryon Street, NC1-002-33-31 Charlotte, NC 28255-0001 Attention: Edward D. Bedard
To BNY:
The Bank of New York
90 Washington Street
22nd Floor
New York, NY 10286
Attention: Stephen E. Grunston
(f) This Agreement shall extend to and shall be binding upon the parties hereto and their respective successors and assigns; provided, however, that this Agreement may not be assigned by BNY, nor may BNY delegate responsibility for the performance of any of its duties hereunder, without the written consent of the other parties hereto.
(g) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and which collectively shall be deemed to constitute only one instrument.
(h) The captions of this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
(i) This Agreement constitutes the entire agreement between the parties hereto with respect to the provision by BNY of sub-administrative services and the receipt of fees therefor, and supersedes all prior arrangements or understandings, written or oral, with respect to the provision by BNY of such services and the receipt of fees therefor.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed and delivered by their duly authorized officers as of the date first written above.
THE BANK OF NEW YORK
By: /s/ Stephen E. Grunston
--------------------------
Stephen E. Grunston
Vice President
|
BANC OF AMERICA ADVISORS, INC.
By: /s/ Edward D. Bedard
--------------------------
Edward D. Bedard
Senior Vice President and
Chief Operating Officer
|
NATIONS FUNDS TRUST
By: /s/ James E. Banks, Jr.
--------------------------
James E. Banks, Jr.
Assistant Secretary
|
SCHEDULE I
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
3. Nations MidCap Index Fund
Approved: December 9, 1999
SCHEDULE II
FUND ADMINISTRATION SERVICES
BNY shall perform the following sub-administrative services, in addition to any other services agreed to from time to time:
o Monitor and document compliance by the Funds with their policies and restrictions as delineated in their prospectuses and statements of additional information, including any supplements or amendments thereto, and with the rules and regulations under the 1940 Act utilizing Charles River Development's compliance monitoring system or by such other means as the parties may agree. BAAI shall be responsible for communicating such policies and restrictions, including any changes thereto, to BNY by such means as the parties agree.
o Provide income attribution summary schedules necessary for year-end tax reporting, including the attached examples. Provide a gross up for foreign taxes on a per share basis and the redesignation of income and capital gains on a per share basis.
o Prepare federal, state, excise and local income tax returns for the Funds and file such returns upon the approval of the Funds' independent accountants; monitor, report on and prepare periodic worksheet and tax provision packages with respect to Sub-Chapter M qualifications; prepare and file all Form 1099s with respect to the Funds' Trustees; monitor compliance with Section 4982 of the Internal Revenue Code; calculate and maintain records pertaining to original issue discount and premium amortization as required; identify wash sales and all other book/tax differences, and report results to the Funds' independent accountants and Funds management; and such other duties relating to federal and/or state tax compliance as the parties may agree. BNY shall be responsible for providing all pertinent tax information to the Funds' independent accountants.
o Prepare Return of Capital Statement of Position 93-2 adjustments.
o Support BAAI in its preparation of the schedules and provide BAAI unaudited quarterly and semi-annual and audited annual financial statements and schedules of Fund investments by providing, without limitation, each Funds' schedule of investments and general ledger in electronic format and/or hard copy, as required, and such other information as may be necessary to complete such financial reports.
o Prepare statistical reports for outside information services (referenced in Schedule V), and such other information services as the parties may agree, including the ICI expense survey.
o Prepare calculations for capital gains pursuant to IRS rules in conjunction with BAAI and the Funds' independent accountant.
o Attend Fund shareholder and Board of Trustees meetings as requested by BAAI, including making such presentations as are appropriate, and, with respect to the Fund administration services described herein, provide such periodic and special reports to the Trust and BAAI as the Trust and BAAI shall reasonably request.
II-1
FUND ACCOUNTING SERVICES
BNY shall provide all accounting and recordkeeping services necessary and appropriate for the business of the Funds, including but not limited to those set forth below.
Required Records; Ledgers and Journals
BNY shall keep current the following accounts and records relating to the business of the Funds, in such form as is required by the 1940 Act and the rules thereunder, and generally accepted accounting principles, to support all filings under applicable federal and state tax laws and regulations and as may be mutually agreed to among the Trust, BAAI and BNY, and shall make available to BAAI and/or the Trust upon request:
1. Cash Receipts Journal
2. Cash Disbursements Journal
3. Dividends Paid and Payable Schedule (book vs. tax basis)
4. Purchase and Sales Journals - Portfolio Securities
5. Realized/Unrealized Gain (Loss) Reports
6. Subscription and Redemption Journals
7. Security Ledgers - Transaction Report and Tax Lot Holdings Report
8. Broker Ledger - Commission Report
9. Daily Expense Accruals
10. Daily Interest Accruals
11. Daily Trial Balance
12. Portfolio Interest Receivable and Income Journal
13. Portfolio Dividend Receivable and Income Register
14. Listing of Portfolio Holdings - showing cost, market value and
percentage of portfolio comprised of each security
15. Aged Receivables (dividends, interest, tax reclaiming)
16. Portfolio Turnover Rate
17. Cash reconciliations
18. Position reconciliations
BNY will be responsible for maintaining, in accordance with Section 31 and the rules thereunder of the 1940 Act, all books and records so required and generated in the course of performing their duties under this agreement. Further, at a minimum, BNY shall maintain on-site the above referenced reports as of each month end for the most recent fiscal year-ended and the current fiscal year.
II-2
Daily Accounting Services
BNY shall perform the following services on each Business Day:
1. Calculate Net Asset Value (NAV), and Public Offering Price (POP) Per Share Pursuant to SEC formulas:
o Update the valuation of security positions held by each Fund's portfolio in accordance with the Fund's Pricing Procedures and any other appropriate procedures established by the Board and BAAI as BAAI shall provide BNY in writing
o When instructed by BAAI, enter manual prices supplied by broker and link to pricing procedures
o Calculate each Fund's NAV/POP in accordance with the applicable Pricing Procedures approved by the Trust's Board of Trustees and prepare NAV proof sheet. Review components of change in NAV for reasonableness based on the tolerance levels as BAAI shall direct BNY in writing
o Review variance reporting for price changes in individual securities using variance levels established by Fund and report to Fund portfolio managers and to BAAI
o Review for ex-dividend items indicated by pricing sources; trace to general ledger for agreement
o Communicate required pricing and yield information (NAV/POP), as appropriate, to BAAI, the Funds' transfer agent and sub-transfer agent and, electronically, to NASDAQ and to such other third parties as designated by the Funds with respect to its various distribution channels. In addition, provide Fund share activity to BAAI.
2. Dividend Rates/Yields/Dollar Weighted Average Maturity:
o Calculate, subject to the approval of BAAI, net investment income available for distribution daily as appropriate
o Calculate daily dividend rate, and 1, 7, 30-day yields/SEC yields
o Calculate dollar weighted average maturity
3. Determine and Report Cash Availability:
o Receive daily cash and transaction statements from the Funds' custodian
o Complete daily bank cash reconciliations (including documentation of any reconciling items) and notify the Funds' custodian
o Report investable cash to BAAI and Fund sub-advisers
4. Daily Expense Accruals:
o Accrue individual expenses on a daily basis based on Instructions provided by BAAI, except for those instances where such an adjustment would cause a full penny break in NAV, in which case such adjustment will be included in the calculation of NAV on the day received
o If applicable, accrue daily amortization of organization expense as instructed by BAAI
II-3
o If applicable, accrue daily Rule 12b-1 Plan expenses
o Adjust expense accruals as instructed by BAAI and provide reports as requested by BAAI
5. Verify and Record All Daily Income Accruals for Debt Issues:
o Track income and provide year end tax schedules
o Review and verify all interest and amortization reports
o Periodic tie-out of receivables
o Ensure security masters denote proper interest and amortization methods as per the fund set up sheets as instructed by BAAI
6. Monitor Securities:
o Review each Fund's portfolio holdings and current day's security trades for dividend activity
o Interface with Funds' custodian for timely collection and postings of corporate actions, dividends and interest pre-payments
7. Enter All Security Trades:
o Review verification of trade and interest calculations o Verify settlement through custodian statements
o Maintain security ledger transaction reporting
o Maintain tax lot holdings
o Determine realized gains or losses on security trades
o Provide broker commission information
8. Enter All Fund Share Transactions:
o Periodically reconcile dividend payable amounts with the Funds' transfer agent
o Process activity identified on transfer agent reports
o Verify settlement through custodian statements
o Reconcile to transfer agency report balances
o Process and track capital stock gain/loss activity
9. Prepare Daily Trial Balance:
o Post manual entries to general ledger
o Post custodian bank activity
o Require automated settled transactions between custody and activity records (prepare, clear and post)
o Post shareholder and security transactions
o Post and verify income and expense accruals and resolve differences
o Prepare general ledger
o Post corporate action activity
II-4
10. Review and Reconcile Custodian Statements:
o Verify all posted interest, dividends, expenses, and shareholder and security payments/receipts, etc. when requested
o Post all cash settlement activity to trial balance
o Reconcile to ending cash balance accounts
o Report to BAAI the status of past due items and failed trades with the custodian
o Reconcile cash exception Income items, tax reclaims and past due income items with custody area
11. Preparation of Accounting Reports:
o Price Variance Report
o Trial Balance
o Portfolio Valuation
o NAV Calculation Report
o Cash Availability
o Change in NAV
o Non-standard entries
o Stale Price Report
o Other such reports as may be reasonably requested by BAAI
Monthly/Quarterly Services
BNY shall provide the following services on a monthly or quarterly basis, within such timeframe as may be mutually agreed upon by BNY, the Trust and BAAI:
1. Submission of Monthly Accounting Reports as mutually agreed upon
2. Reconcile Asset Listing to Custodian Asset Listing
3. Provide Monthly Analysis and Reconciliation of Trial Balance Accounts
4. Prepare Documentation Supporting the Preparation of:
o SEC yield reporting
o Income by state reporting
o Standard Industry Code Valuation Report (please provide BAAI's industry code classifications/is there a standard for all Funds)
o Alternative Minimum Tax Income segregation schedule
II-5
5. Provide Upon Request Broker Commission and Net Trade Reports
Annual (and Semi-Annual) Accounting Services
BNY shall provide the following services on an annual and semi-annual basis:
1. Supply auditors InvestOne reports supporting securities and shareholder transactions, income and expense accruals, etc. during the year in accordance with standard audit assistance requirements
2. Provide BAAI with information to assist BAAI in the preparation of NSAR filings
Other Core Services
BNY shall provide the following services:
o Accrete discounts and amortize premiums to put and call events as directed by BAAI and in a manner acceptable under generally accepted accounting principles
o Process principal repayments on mortgage backed securities
o Update variable securities with current rates
o Process corporate action events through a primary vender feed, and monitor results via Reuters, Bloomberg, or other available sources as the parties may agree
o Perform automated portfolio pricing with a second vendor as requested by BAAI
o Produce documents and respond to inquiries during account and SEC examinations
Money Market Funds: Prepare daily mark to market reports and analysis in compliance with Rule 2a-7 including:
o Calculating the daily portfolio weighted average maturity
o Report portfolio diversification based on trade/security
information provided by BAAI by:
Country, State, Tier, Liquidity, Asset Backed Securities,
Industry, Letter of Credit
o Listing percentage of portfolio maturing in specified intervals
(I.E., number of days)
o Providing issuer and guarantor diversification exception reporting
International Funds: BNY shall provide the following services:
o Report in base and local currency
II-6
o Processing of tax liability on foreign income subject to approval of BAAI
o Daily variance analysis performed on FX rates for security position held
o Produce automated bifurcation reporting in compliance with IRC
Section 988
o Mark to market security receivables and payables on a daily basis
o Determine portfolio exposure by country and currency
In addition to the above, BNY will provide additional support as agreed upon from time to time (i.e., financial statement production).
II-7
SCHEDULE III
SERVICE LEVEL PERFORMANCE STANDARDS
------------------------------------------------------------ ---------------------------------------------------------------
SERVICE STANDARD
------------------------------------------------------------ ---------------------------------------------------------------
1. Daily Cash Availability |_| 100% accuracy and delivery by 9:00 a.m. EST for
Money Market Funds and 9:30 a.m. EST for all
others
|_| Compensation for univested cash at Nations Cash
Reserves' Mill rate
------------------------------------------------------------ ---------------------------------------------------------------
2. Calculation of daily NAVs |_| 100% accuracy by 5:00 p.m. EST including pricing,
expense accruals, cash activity, manual entries,
S/H activity. Delivery by 5:45 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
3. Review of daily NAVs |_| 100% review by 5:30 p.m. EST
|_| Review of NAV components for
reasonableness including analysis
of the change in the NAV and the
change in mill rates.
|_| Review of price variance report
|_| Review of manual proof
------------------------------------------------------------ ---------------------------------------------------------------
4. NASDAQ Reporting |_| 100% accuracy and communication by 5:45 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
5. Daily Pricing and Rate Report (DPRR) |_| 100% accuracy in nightly transmission of DPRRs
|_| Money Market Funds-5:30 p.m. EST
|_| All other Funds- 6:00 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
6. FundStation Report (SubM) |_| 100% accuracy and nightly transmission by
7:00 p.m. EST
------------------------------------------------------------ ---------------------------------------------------------------
7. Processing of trade tickets |_| 100% accuracy and processed by T+1 if received by
the following cut-off times:
|_| All Funds (except International) - 10:00 am (T+1)
|_| International - 12:00 p.m. (T+1)
|_| Same day settlements - 1:30 p.m.
------------------------------------------------------------ ---------------------------------------------------------------
III-1
|
8. Problem Resolution (general) |_| NAV impact analysis within 1 day
|_| Clear and timely communication of 100% of issues
|_| Ongoing Tracking
------------------------------------------------------------ ---------------------------------------------------------------
9. Cash reconciliations |_| Performed daily and sent daily to BAAI (Money Market
Funds) and sent weekly to BAAI (all other funds)
|_| Issues communicated to BAAI same day
|_| Outstanding items addressed within 1 business day
------------------------------------------------------------ ---------------------------------------------------------------
10. Position Reconciliations |_| Performed daily and sent weekly to BAAI
|_| Issues communicated to BAAI same day
|_| Open issues addressed within 2 business days
------------------------------------------------------------ ---------------------------------------------------------------
11. Tax reporting
|_| Federal, state, tax returns |_| Tax provision package prepared within time
parameters as set by BAAI/Independent tax
|_| Tax provision packages including personnel (PWC)
Sub-M and excise tax amounts/ distributions
|_| Estimates of tax requirements prepared as required
|_| Identification of all book/tax differences by BAAI for proper tax planning
|_| Capital gain estimate preparations
------------------------------------------------------------ ---------------------------------------------------------------
12. Statistical Reports |_| Filed within the time parameters as set forth by
each statistical service
------------------------------------------------------------ ---------------------------------------------------------------
13. Expense accruals/payments |_| Payments made on the business day written
instructions from an authorized signator received
|_| Expense accruals made with 100% accuracy based upon
written instructions from BAAI
------------------------------------------------------------ ---------------------------------------------------------------
14. Management Reports |_| Provided to BAAI within 10 business days of month end
------------------------------------------------------------ ---------------------------------------------------------------
III-2
|
15. Year end tax reports |_| Provided to BAAI within the time frame agreed to
------------------------------------------------------------ ---------------------------------------------------------------
16. Annual/Semi-Annual Reports |_| Provide Trial Balance within 5 business days after
annual/semi-annual period
|_| Provide additional financial statement support as
agreed to
------------------------------------------------------------ ---------------------------------------------------------------
17. Daily Reports |_| To be provided on the following day
|_| Provide detailed portfolio valuation
|_| Trial Balance
------------------------------------------------------------ ---------------------------------------------------------------
18. Daily Cash Sweep |_| 100% accuracy and communication by 2:00 p.m. EST
|_| AIM
|_| Nuveen
------------------------------------------------------------ ---------------------------------------------------------------
19. Post Dividends / Corporate Actions |_| 100% accuracy and posted on effective date
------------------------------------------------------------ ---------------------------------------------------------------
20. Monthly Reconciliations |_| Complete reconciliations within 10 business days
------------------------------------------------------------ ---------------------------------------------------------------
21. Reporting to Sub-Advisors |_| Provide nightly and other periodic reporting to
Nations Funds Sub-Advisors
------------------------------------------------------------ ---------------------------------------------------------------
22. Compliance |_| Provide compliance reports as requested by BAAI
------------------------------------------------------------ ---------------------------------------------------------------
|
III-3
SCHEDULE IV
(ATTACHED)
IV-1
SCHEDULE V
All Database Companies Quarterly List AMG Data Services Lipper Barron's Morningstar Bloomberg CDA Wiesenberger CDA Wiesenberger Investment Company Institute Commerce Clearing House (CCH) S&P Micropal Forbes Institute for Economic Research Institute for Economic Research Value Line Interactive Data Services Media General Financial Services Investment Company Institute LCG Associates LCG Associates Closed End Fund Digest (Closed End Only) Lipper Lipper - International (Closed End Only) Media General Moody's Investors Service Morningstar S&P Micropal Strategic Insights Value Line |
ADOPTION AGREEMENT AND
AMENDMENT TO TRANSFER AGENCY
AND SERVICES AGREEMENT
(With Facilities Management Arrangement)
This Adoption Agreement and Amendment, dated as of February 14, 2000 is made to the Transfer Agency and Services Agreement dated as of June 1, 1995, as amended (the "Agreement"), by and among NATIONS FUND, INC., NATIONS FUND TRUST, THE CAPITOL MUTUAL FUNDS, d/b/a NATIONS RESERVES, NATIONS LIFEGOAL FUNDS, INC. and NATIONS ANNUITY TRUST and each other party which may become a party thereto pursuant to the terms of the Agreement (individually, a "Fund," and collectively, the "Funds") and PFPC INC., formerly known as THE SHAREHOLDER SERVICES GROUP, INC. (the "Transfer Agent").
RECITALS
WHEREAS, the Transfer Agent serves as transfer agent, dividend disbursing agent and agent in connection with certain other services for the Funds pursuant to the Agreement; and
WHEREAS, Section 17.2 of the Agreement provides that, subsequent to the date of the Agreement, a registered investment company (a "New Fund") for which Bank of America, N.A., or any of its affiliates acts as investment adviser may become a party to the Agreement upon execution of a written adoption agreement (an "Adoption Agreement") by such New Fund pursuant to which such New Fund agrees to be bound by the terms of the Agreement; and
WHEREAS, the Board of Trustees of Nations Funds Trust (the "Trust") has approved the selection of the Transfer Agent to serve as the transfer and dividend disbursing agent for all classes of shares of the portfolios of the Trust; and
WHEREAS, the Trust is advised by Banc of America Advisors, Inc., an affiliate of Bank of America, N.A.;
AGREEMENT
NOW THEREFORE, in consideration of the promises and mutual covenants herein contained, the Funds and the Transfer Agent agree that the Agreement shall be amended as follows:
1. The Funds hereby authorize the addition of the Trust as a party to the Agreement effective upon the execution of this Adoption Agreement and Amendment to Transfer Agency and Services Agreement.
2. The Trust agrees to be bound by the terms of the Agreement.
3. The Trust is hereby deemed a Fund for all purposes of the Agreement and shall have all the rights, obligations and duties of a Fund under the Agreement.
4. Schedule G, attached hereto, is hereby attached to the Agreement as Schedule G and is deemed a part of the Agreement.
5. The terms and provisions of this Adoption Agreement and Amendment shall be deemed a part of the Agreement for all purposes. To the extent that any provisions of this Adoption Agreement and Amendment modify or are otherwise inconsistent with any provisions of the Agreement, the provisions of this Adoption Agreement and Amendment shall control. In all other respects, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Adoption Agreement and Amendment to be executed by their duly authorized officers, as of the day and year first above written.
PFPC INC., formerly, THE SHAREHOLDER
SERVICES GROUP, INC.
By: ______________________________
Name:
Title:
NATIONS FUND, INC.
By: /s/ A. Max Walker
A. Max Walker
President and Chairman of the
Board of Directors
|
NATIONS FUND TRUST
By: /s/ A. Max Walker
A. Max Walker
President and Chairman of the
Board of Trustees
|
THE CAPITOL MUTUAL FUNDS, d/b/a
NATIONS RESERVES
By: /s/ A. Max Walker
A. Max Walker
President and Chairman of the
Board of Trustees
|
NATIONS LIFEGOAL FUNDS, INC.
By: /s/ A. Max Walker
A. Max Walker
President and Chairman of the
Board of Directors
|
NATIONS ANNUITY TRUST
By: /s/ A. Max Walker
A. Max Walker
President and Chairman of the
Board of Trustees
|
NATIONS FUNDS TRUST
By: /s/ A. Max Walker
A. Max Walker
President and Chairman of the
Board of Trustees
|
SCHEDULE G
FUND PORTFOLIOS
NATIONS FUND TRUST:
1. Nations Government Money Market Fund
2. Nations Tax Exempt Fund
3. Nations Value Fund
4. Nations Strategic Growth Fund
5. Nations Capital Growth Fund
6. Nations Emerging Growth Fund
7. Nations Equity Index Fund
8. Nations Managed Index Fund
9. Nations Managed SmallCap Index Fund
10. Nations Managed Value Index Fund
11. Nations Managed SmallCap Value Index Fund
12. Nations Disciplined Equity Fund
13. Nations Balanced Assets Fund
14. Nations Short-Intermediate Government Fund
15. Nations Short-Term Income Fund
16. Nations Diversified Income Fund
17. Nations Strategic Fixed Income Fund
18. Nations Municipal Income Fund
19. Nations Short-Term Municipal Income Fund
20. Nations Intermediate Municipal Bond Fund
21. Nations Florida Intermediate Municipal Bond Fund
22. Nations Florida Municipal Bond Fund
23. Nations Georgia Intermediate Municipal Bond Fund
24. Nations Georgia Municipal Bond Fund
25. Nations Maryland Intermediate Municipal Bond Fund
26. Nations Maryland Municipal Bond Fund
27. Nations North Carolina Intermediate Municipal Bond Fund
28. Nations North Carolina Municipal Bond Fund
29. Nations South Carolina Intermediate Municipal Bond Fund
30. Nations South Carolina Municipal Bond Fund
31. Nations Tennessee Intermediate Municipal Bond Fund
32. Nations Tennessee Municipal Bond Fund
33. Nations Texas Intermediate Municipal Bond Fund
34. Nations Texas Municipal Bond Fund
35. Nations Virginia Intermediate Municipal Bond Fund
36. Nations Virginia Municipal Bond Fund
NATIONS FUND, INC.:
1. Nations Prime Fund
2. Nations Treasury Fund
3. Nations Equity Income Fund
4. Nations U.S. Government Bond Fund
5. Nations Small Company Growth Fund
6. Nations Government Securities Fund
7. Nations International Growth Fund
NATIONS RESERVES:
1. Nations Government Reserves
2. Nations Municipal Reserves
3. Nations Cash Reserves
4. Nations Treasury Reserves
5. Nations Money Market Reserves
6. Nations California Tax Exempt Reserves
7. Nations Asset Allocation Fund
8. Nations Capital Income Fund
9. Nations California Municipal Bond Fund
10. Nations Intermediate Bond Fund
11. Nations Blue Chip Fund
12. Nations Marsico Focused Equities Fund
13. Nations Marsico Growth & Income Fund
14. Nations International Equity Fund
15. Nations International Value Fund
16. Nations Emerging Markets Fund
NATIONS LIFEGOAL FUNDS, INC.
1. Nations LifeGoal Growth Portfolio
2. Nations LifeGoal Balanced Growth Portfolio
3. Nations LifeGoal Income and Growth Portfolio
NATIONS ANNUITY TRUST:
1. Nations Value Portfolio
2. Nations International Growth Portfolio
3. Nations Disciplined Equity Portfolio
4. Nations Marsico Focused Equities Portfolio
5. Nations Marsico Growth & Income Portfolio
6. Nations Managed Index Portfolio
7. Nations Managed SmallCap Index Portfolio
8. Nations Balanced Assets Portfolio
NATIONS FUNDS TRUST:
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
3. Nations MidCap Index Fund
CLOSED END FUNDS:
1. Nations Balanced Target Maturity Fund
2. Nations Government Income Term Trust 2003, Inc.
3. Nations Government Income Term Trust 2004, Inc.
Last Amended: February 14, 2000
TRANSFER AGENCY AND SERVICES AGREEMENT
(With Facilities Management Arrangement)
THIS AGREEMENT, dated as of this first day of June, 1995 between NATIONS FUND, INC., a Maryland corporation, NATIONS FUND TRUST, a Massachusetts business trust, THE CAPITOL MUTUAL FUNDS, a Massachusetts business trust, NATIONS FUND PORTFOLIOS, INC., a Maryland corporation, and each other investment company which may become a party hereto pursuant to the terms of this Agreement (individually a "Fund", and collectively, the "Funds"), each with its principal place of business at 111 Center Street, Little Rock, Arkansas 72201 and additional offices at 101 South Tryon Street, Charlotte, North Carolina 28255, and THE SHAREHOLDER SERVICES GROUP, INC. (the "Transfer Agent"), a Massachusetts corporation with principal offices at One Exchange Place, 53 State Street, Boston, Massachusetts 02109.
WITNESSETH
WHEREAS, each Fund desires to appoint the Transfer Agent as its transfer agent, dividend disbursing agent and agent in connection with certain other activities and the Transfer Agent desires to accept such appointment;
WHEREAS, each Fund may authorize the issuance of Shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets ("Portfolio");
WHEREAS, each Fund and each Portfolio of a Fund subject to this Agreement, including any investment company or Portfolio as may be added to this Agreement pursuant to Section 17, shall be identified in the attached Schedule G; and
WHEREAS, the Transfer Agent and NationsBank, N.A. (Carolinas) ("NationsBank") have entered into a Facilities Management Agreement ("Facilities Agreement") dated June 1, 1995 pursuant to which the Transfer Agent has established a servicing and processing center to provide transfer agent services on behalf of the Funds in Charlotte, North Carolina (the "Charlotte Facility").
NOW THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, the Funds and the Transfer Agent agree as follows:
Article 1 Definitions
1.1 Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of Incorporation, Declaration of Trust, or other similar organizational document as the case may be, of a Fund as the same may be amended from time to time.
(b) "Authorized Person" of a Fund shall be deemed to include (i) any authorized officer of the Fund; (ii) the members of the Joint Operations Board (as hereinafter defined); or (iii) any person, whether or not such person is an officer or employee of the Fund, duly authorized to give Oral Instructions or Written Instructions on behalf of the Fund as indicated in writing to the Transfer Agent from time to time.
(c) "Board of Directors" of a Fund shall mean the Board of Directors or Board of Trustees of the Fund, as the case may be.
(d) "Commission" shall mean the Securities and Exchange Commission.
(e) "Custodian" of a Fund refers to any custodian or subcustodian of securities and other property which the Fund may from time to time deposit, or cause to be deposited or held under the name or account of such a custodian pursuant to a Custodian Agreement.
(f) "Joint Operations Board" shall mean the joint board comprised of one senior representative from the Transfer Agent, one individual designated by the Funds jointly to represent their respective interests and the most senior Transfer Agent manager of the Charlotte Facility.
(g) "1940 Act" shall mean the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, all as amended from time to time.
(h) "Oral Instructions" shall mean instructions, other than Written Instructions, actually received by the Transfer Agent from a person reasonably believed by the Transfer Agent to be an Authorized Person;
(i) "Prospectus" of a Fund shall mean collectively the most recently dated Fund Prospectuses and Statements of Additional Information, including any supplements thereto, if any, with respect to each Portfolio of the Fund which have become effective under the Securities Act of 1933 and the 1940 Act.
(j) "Shares" of a Fund refers collectively to such shares of capital stock or beneficial interest, as the case may be, or class thereof, of the Fund as may be issued from time to time.
(k) "Shareholder" shall mean a record owner of Shares.
(l) "Written Instructions" shall mean a written communication signed by a person reasonably believed by the Transfer Agent to be an Authorized Person and actually received by the Transfer Agent. Written Instructions shall include manually executed originals and authorized electronic transmissions, including telefacsimile of a manually executed original or other process.
Article 2 Appointment of the Transfer Agent
2.1 Each Fund hereby appoints and constitutes the Transfer Agent as transfer agent and dividend disbursing agent for Shares of the Fund and the Transfer Agent hereby accepts such appointments and agrees to perform the duties hereinafter set forth.
Article 3 Duties of the Transfer Agent
3.1 The Transfer Agent shall be responsible for:
(a) Administering and performing the customary services of a transfer agent; agent in connection with dividend and distribution functions; and agent in connection with shareholder account and administrative functions in connection with the issuance, transfer and redemption or repurchase (including coordination with the Custodian) of Shares, as more fully described in the written schedule of Duties of the Transfer Agent annexed hereto as Schedule A and incorporated herein, and in accordance with the terms of each Fund's Prospectus, applicable law and the procedures established from time to time between the Transfer Agent and the Funds.
(b) Recording the issuance of Shares and maintaining pursuant to Commission Rule 17Ad-10(e) a record of the total number of Shares which are authorized, based upon data provided to it by each Fund, and issued and outstanding. The Transfer Agent shall provide each Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the legality or validity of the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund.
(c) Notwithstanding any of the foregoing provisions of this Agreement, the Transfer Agent shall be under no duty or obligation to inquire into, and shall not be liable for: (i) the legality of the issuance or sale of any Shares or the sufficiency of the amount to be received therefor; (ii) the legality of the redemption of any Shares, or the propriety of the amount to be paid therefor; (iii) the legality of the declaration of any dividend by the Board of Directors, or the legality of the issuance of any Shares in payment of any dividend; or (iv) the legality of any recapitalization or readjustment of the Shares.
3.2 In addition, each Fund shall verify the establishment of shares or share transactions for each State prior to activation on the Transfer Agent's system and thereafter monitor the daily activity of shares for each State based upon daily transactions recorded by the Transfer Agent and transmitted to the Fund or its designated agent. The responsibility of the Transfer Agent for a Fund's blue sky State registration status is solely limited to the initial establishment of shares or share transactions subject to blue sky compliance by the Fund and the reporting of such transactions to the Fund as provided above.
3.3 In addition to the duties set forth herein, the Transfer Agent shall perform such other duties and functions, and shall be paid such amounts therefor, as may from time to time be agreed upon in writing between the Funds and the Transfer Agent.
Article 4 Duties of the Joint Operations Board
4.1 The Joint Operations Board will be responsible for the following with respect to the services to be performed by the Transfer Agent under this Agreement (the "Services"):
(a) General oversight of the provision of Services by the Transfer Agent, including, but not limited to, the creation and quarterly review of quality standards governing the Services pursuant to Article 5 hereof, the establishment of strategic and/or operational goals with respect to the Services to be provided at the Charlotte Facility, and addressing such issues and concerns that may arise from time to time amongst the Funds and the Transfer Agent under this Agreement.
(b) Review and approval of, from a technical feasibility standpoint, imaging and other new technologies proposed to be used by the Transfer Agent in performing the Services at the Charlotte facility.
(c) Review and approval of the Charlotte Facility budget and expense statements, including those costs for which compensation is sought by the Transfer Agent pursuant to Article 8 hereof.
(d) Review of those costs incurred by the Transfer Agent, other than in connection with the Charlotte Facility, for which compensation is sought by the Transfer Agent pursuant to Article 8 hereof.
4.2 With respect to matters described in Section 4.1 above, the decision of the Funds' representative on the Joint Operations Board shall control.
4.3 On a monthly basis, the Transfer Agent shall provide to the Joint Operations Board a statement of the internal and external costs incurred by the Transfer Agent in connection with the provision of Services for which the Transfer Agent will seek reimbursement under Article 8 hereof.
Article 5 Quality Standards
5.1 The quality of service provided by the Transfer Agent hereunder shall be maintained at or above the levels set forth in Schedule B hereto. Such quality standards shall govern the Services provided by the Transfer Agent until a new set of quality standards is established pursuant to Section 5.2 hereof.
5.2 As soon as practicable after the first ninety (90) days of operation of the Charlotte Facility, the Joint Operations Board shall establish a new set of quality standards reasonably acceptable to the Funds and the Transfer Agent.
5.3 The Joint Operations Board shall review and update, if necessary, the quality standards on a semi-annual basis.
5.4 If, at any time during the term of this Agreement, 20% or more of the then-current quality standards (e.g., 2 or more out of 10 standards) are not met by the Transfer Agent during any month (as evidenced by monthly reports), the Funds shall promptly notify the Transfer Agent in writing of such failure and the details relating to such failure. If, any of the failed quality standards are not met by the Transfer Agent during the three month period commencing thirty (30) days after the Transfer Agent receives such notice, the Funds shall have the right to terminate this Agreement on thirty (30) days notice.
5.5 Notwithstanding the foregoing, the Funds shall not have the right to terminate this Agreement based on the failure by the Transfer Agent to have satisfied a quality standard if such failure was caused directly by the negative vote of the Funds' representative on the Joint Operations Board with respect to a commercially reasonable funding request of the Transfer Agent for the Charlotte Facility.
Article 6 Recordkeeping and Other Information
6.1 The Transfer Agent shall create and maintain all records required of it pursuant to its duties hereunder and as set forth in Schedule A in accordance with all applicable laws, rules and regulations, including records required by Section 31(a) of the 1940 Act. All records shall be available during regular business hours for inspection and use by the Funds. Where applicable, such records shall be maintained by the Transfer Agent for the periods and in the places required by Rule 31a-2 under the 1940 Act.
6.2 To the extent required by Section 31 of the 1940 Act, the Transfer Agent agrees that all such records prepared or maintained by the Transfer Agent relating to the Services are the property of the relevant Fund and will be preserved, maintained and made available in accordance with such section, and will be surrendered promptly to such Fund on and in accordance with the Fund's request.
6.3 In case of any requests or demands for the inspection of Shareholder records of a Fund, the Transfer Agent will endeavor to notify the Fund of such request and secure Written Instructions as to the handling of such request. The Transfer Agent reserves the right, upon prior notice to the Fund, 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 comply with such request.
6.4 Upon reasonable notice by a Fund, the Transfer Agent shall make available during regular business hours such of its facilities and premises employed in connection with the performance of its duties under this Agreement for reasonable visitation by the Fund, or any person retained by the Fund as may be necessary for the Fund to evaluate the quality of the Services performed by the Transfer Agent pursuant hereto.
Article 7 Fund Instructions
7.1 The Transfer Agent will have no liability when acting for a Fund in accordance with Written or Oral Instructions believed to have been executed or orally communicated by an Authorized Person of the Fund and will not be held to have any notice of any change of authority of any person until receipt of a Written Instruction thereof from the Fund. The Transfer Agent will also have no liability when processing Share certificates for a Fund which it reasonably believes to bear the proper manual or facsimile signatures of the officers of the Fund and the proper countersignature of the Transfer Agent.
7.2 The Transfer Agent may request Written Instructions from a Fund and may seek advice from legal counsel for the Fund with prior notice to the Fund, or its own legal counsel, with respect to any matter arising in connection with this Agreement, and it shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in accordance with the opinion of counsel for the Fund or for the Transfer Agent. Written Instructions requested by the Transfer Agent will be provided by the Fund within a reasonable period of time.
7.3 The Transfer Agent, its officers, agents or employees, shall accept Oral Instructions or Written Instructions given to them with respect to a Fund by any person representing or acting on behalf of the Fund only if said representative is an Authorized Person of the Fund. The Funds agree that all Oral Instructions shall be followed within one business day by confirming Written Instructions, and that the Funds' failure to so confirm shall not impair in any respect the Transfer Agent's right to reply on Oral Instructions.
Article 8 Compensation
8.1 The Funds shall reimburse the Transfer Agent for all the Transfer Agent's "Costs" incurred in connection with the provision of Services as set forth in the written Schedule of Costs annexed hereto as Schedule C and incorporated herein and in addition the Funds shall compensate the Transfer Agent for the following amounts (the "Margin");
(a) During the first 36 months of the Initial Term (as defined below), an amount equal to 15% of such Costs during each month.
(b) During the last 24 months of the Initial Term and during each Renewal Term (as defined below), an amount equal to 12.5% of such Costs during each month.
8.2 Notwithstanding the foregoing, the charges incurred by the Transfer Agent under the Facilities Agreement with NationsBank and such other expenses set forth in the written schedule of Non-Margin Expenses annexed hereto as Schedule D shall not be included as Costs in connection with the calculation of the Margin amounts set forth in Subsections 8.1(a) and (b).
8.3 In addition to the Costs and Margin described above, the Fund shall reimburse the Transfer Agent, and will be billed separately for, those out-of-pocket expenses incurred by the Transfer Agent in the performance of its duties hereunder as specified in the written schedule of out-of-pocket expenses annexed hereto as Schedule E and incorporated herein.
8.4 The Funds agree to pay all fees and out-of-pocket expenses within thirty (30) days following the receipt of the respective invoice. The Funds shall not be obligated to pay amounts that are reasonably in dispute until such dispute is resolved.
Article 9 Documents
9.1 In connection with the appointment of the Transfer Agent, each Fund shall, on or before the date this Agreement goes into effect, but in any case within a reasonable period of time for the Transfer Agent to prepare to perform its duties hereunder, deliver or cause to be delivered to the Transfer Agent the documents set forth in the written schedule of Fund Documents annexed hereto as Schedule F.
Article 10 Transfer Agent System
10.1 The Transfer Agent shall retain title to and ownership of any and all data bases, computer programs, screen formats, report formats, interactive design techniques, derivative works, inventions, discoveries, patentable or copyrightable matters, concepts, expertise, patents, copyrights, trade secrets, and other related legal rights utilized by the Transfer Agent in connection with the services provided by the Transfer Agent to the Fund herein (the "Transfer Agent System").
10.2 The Transfer Agent hereby grants to each Fund a limited license to the Transfer Agent System for the sole and limited purpose of having the Transfer Agent provide the services contemplated hereunder and nothing contained in this Agreement shall be construed or interpreted otherwise and such license shall immediately terminate upon the termination of this Agreement.
10.3 The Transfer Agent agrees to provide the Funds with full access to the Transfer Agent System and all enhancements thereto to the same extent that such is made available to other Transfer Agent clients.
10.4 In the event the Funds desire the Transfer Agent to develop any enhancements for the Transfer Agent System, the parties shall agree on the staffing requirements which will be subject to the approval of the Joint Operations Board.
10.5 In the event the Funds request an enhancement to the Transfer Agent System which is estimated to require 5,000 programming hours or more ("Enhancement Project") and the Funds agree to assume the cost of such Enhancement Project, the Funds and the Transfer Agent shall agree in writing on any restrictions imposed on the Transfer Agent with respect to the use of such enhancement prior to commencement of the Enhancement Project.
10.6 Each Fund reserves the right to review and examine "imaging" and significant other technological developments to be implemented with the Transfer Agent System from a technical feasibility standpoint.
Article 11 Representations and Warranties of the Transfer Agent
11.1 The Transfer Agent represents and warrants to each Fund that:
(a) It is a corporation duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts;
(b) It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement;
(c) All requisite corporate proceedings have been taken to authorize it to enter into this Agreement;
(d) It is duly registered with the appropriate regulatory agencies as a transfer agent and such registration will remain in effect for the duration of this Agreement;
(e) It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
Article 12 Representations and Warranties of the Funds
12.1 Each Fund represents and warrants to the Transfer Agent that:
(a) It is duly organized and existing and in good standing under the laws of the jurisdiction in which it is organized;
(b) It is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into this Agreement;
(c) All corporate proceedings required by said Articles of Incorporation, By-Laws and applicable laws have been taken to authorize it to enter into this Agreement;
(d) A registration statement under the Securities Act of 1933, as amended, is currently effective and will remain effective, and all appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale;
(e) All outstanding Shares are validly issued, fully paid and non-assessable and that, when Shares are hereafter issued in accordance with the terms of the Fund's Articles of Incorporation and its Prospectus, such Shares shall be validly issued, fully paid and non-assessable.
Article 13 Indemnification
13.1 The Transfer Agent shall not be responsible for and each Fund shall indemnify and hold the Transfer Agent harmless from and against any and all claims, costs, expenses (including reasonable attorneys' fees), losses, damages, charges, payments and liabilities of any sort or kind which may be asserted against the Transfer Agent or for which the Transfer Agent may be held to be liable (a "Claim") arising out of or attributable to any of the following:
(a) Any actions of the Transfer Agent required to be taken pursuant to this Agreement for the Fund unless such Claim resulted from a negligent act or failure to act or bad faith by the Transfer Agent in the performance of its duties hereunder.
(b) The Transfer Agent's reasonable reliance on, or reasonable use of information, data, records and documents (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) received by the Transfer Agent from the Fund, or any authorized third party acting on behalf of the Fund, including but not limited to the prior transfer agent for the Fund, in the performance of the Transfer Agent's duties and obligations hereunder.
(c) The reliance on, or the implementation of, any Written or Oral Instructions or any other instructions or requests of the Fund which are deemed to be provided by an Authorized Person of the Fund.
(d) The offer or sales of Shares by the Fund in violation of any requirement under 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 state with respect to the offer or sale of such Shares in such state.
(e) The Fund's refusal or failure to comply with the terms of this Agreement, or any Claim which arises out of the Fund's negligence or misconduct or the breach of any representation or warranty of the Fund made herein.
13.2 In any case in which a Fund may be asked to indemnify or hold the Transfer Agent harmless, the Transfer Agent will notify the Fund promptly after identifying any situation which it believes presents or appears likely to present a claim for indemnification against the Fund although the failure to do so shall not prevent recovery by the Transfer Agent, unless the Fund is actually prejudiced thereby, and the Transfer Agent shall keep the Fund advised with respect to all developments concerning such situation. The Fund shall have the option to defend the Transfer Agent against any Claim which may be the subject of this indemnification, and, in the event that the Fund so elects, such defense shall be conducted by counsel chosen by the Fund and satisfactory to the Transfer Agent, and thereupon the Fund shall take over complete defense of the Claim and the Transfer Agent shall sustain no further legal or other expenses in respect of such Claim. The Transfer Agent will not confess any Claim or make any compromise in any case in which the Fund will be asked to provide indemnification, except with the Fund's prior written consent. The obligations of the parties hereto under this Article shall survive the termination of this Agreement, so long as the Transfer Agent and the Fund act in good faith and are not negligent in their actions.
Article 14 Standard of Care
14.1 The Transfer Agent shall at all times act in good faith and agrees to use its best efforts within commercially reasonable limits to ensure the accuracy of all services performed under this Agreement, but assumes no responsibility for loss or damage to the Funds unless said errors are caused by the Transfer Agent's own negligence, bad faith or willful misconduct or that of its employees.
Article 15 Consequential Damages
15.1 In no event and under no circumstances shall either a Fund or the Transfer Agent be liable to another party for consequential or indirect loss of profits, reputation or business or any other special damages under any provision of this Agreement or for any act or failure to act hereunder.
Article 16 Term and Termination
16.1 This Agreement shall be effective on the date first written above and shall continue for a period of sixty (60) months (the "Initial Term"), unless earlier terminated pursuant to the terms of this Agreement. Thereafter, this Agreement shall automatically be renewed for successive terms of twenty-four (24) months ("Renewal Terms") each, unless terminated pursuant to this Agreement.
16.2 The Funds or the Transfer Agent may terminate this Agreement at the end of the Initial Term or at the end of any subsequent Renewal Term upon not less than nine (9) months prior written notice to the other parties.
16.3 Upon a minimum of nine (9) months prior written notice from the Boards of Directors of the Funds, the Funds may terminate this Agreement at the end of the thirty-sixth (36th) or forty-eighth (48th) month of the Initial Term.
16.4 The Funds shall have the right to terminate this Agreement immediately upon the insolvency or bankruptcy of the Transfer Agent or the appointment of a receiver for the Transfer Agent, or with respect to any of its assets, or any change in the financial condition of the Transfer Agent which impedes the ability of the Transfer Agent to perform any of its obligations hereunder which is not cured by the Transfer Agent within thirty (30) days of such occurrence. The Funds shall have the right to seek to renegotiate this Agreement and, if such negotiations are not successful within a reasonable period of time, not to exceed ninety (90) days, to terminate this Agreement upon the transfer of ownership of a controlling interest in the Transfer Agent by or to any person other than a person who was an affiliate of the Transfer Agent or its parent company immediately before the transfer.
16.5 In the event that the total number of combined Shareholder accounts for the Funds and any other open-end investment companies affiliated with the Funds by reason of having a common investment adviser exceeds three times the 1994 Shareholder account base of 130,000 due to merger or acquisition activity involving the investment adviser or any affiliates of the adviser, the Funds shall have the right to terminate this Agreement upon nine (9) months prior written notice to the Transfer Agent. As used in this Article 16, "affiliates of the adviser" shall mean (i) a direct or indirect owner of 50% or more of the outstanding common stock of the adviser (a "parent") or (ii) any company or association whose outstanding common stock is at least 50% owned, directly or indirectly, by the adviser or by a parent.
16.6 In the event this Agreement is terminated by the Funds pursuant to
Section 5.4, all expenses associated with the movement of records and materials
to a successor transfer agent will be borne by the Transfer Agent. In the event
of a termination pursuant to any other sections, all expenses associated with
conversion will be borne by the Funds. The Transfer Agent shall cooperate with
any such conversion to a successor transfer agent and shall use its best efforts
to mitigate the costs associated with such transfer.
16.7 If a party hereto is guilty of a material failure to perform its duties and obligations hereunder (a "Defaulting Party") the other party (the "Non-Defaulting Party") may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. If the Transfer Agent is the Non-Defaulting Party, its termination of this Agreement shall not constitute a waiver of any other rights or remedies of the Transfer Agent with respect to services performed prior to such termination or rights of the Transfer Agent to be reimbursed for out-of-pocket expenses incurred prior to such termination. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party. The Defaulting Party shall not be released from any liability with respect to such services performed prior to such termination.
16.8 In the event of termination of this Agreement by the Funds pursuant to Sections 16.3 or 16.5:
(a) Prior to the effective date of the termination, the Funds shall reimburse the Transfer Agent for all unamortized costs incurred by the Transfer Agent in establishing the Charlotte Facility.
(b) Prior to the effective date of the termination, the Funds shall assume any and all obligations that the Transfer Agent may have to third parties arising out of or in connection with the Transfer Agent's operations at the Charlotte Facility and that the Transfer Agent is not able to terminate prior to the effective date of the termination of this Agreement.
(c) Prior to the effective date of the termination, the Funds shall pay the Transfer Agent an amount equal to 80% of the cumulative Margin (as defined in Section 8.1) paid by the Funds to the Transfer Agent for the twelve months preceding the notice of termination, unless the Funds' investment adviser or any affiliate of the adviser has acquired an entity providing comparable transfer agency services to those provided under this Agreement.
(d) The Funds shall reimburse the Transfer Agent for all reasonable expenses (other than accrued vacation, sick or other leave) incurred by the Transfer Agent in connection with the termination of the Transfer Agent's employees located at the Charlotte Facility, or, at the option of the Funds, the transfer of such employees to another entity providing services to the Funds. The Transfer Agent shall be obligated to seek to minimize any such expenses to the extent commercially practicable.
(e) The Transfer Agent shall transfer to the Funds all physical assets located at the Charlotte Facility.
Article 17 Additional Portfolios and Funds
17.1 In the event that a Fund establishes one or more Portfolios in addition to those identified initially on Schedule G, with respect to which the Fund desires to have the Transfer Agent render services as transfer agent under the terms hereof, the Fund shall so notify the Transfer Agent in writing, and if the Transfer Agent agrees in writing to provide such services (such agreement not to be withheld unreasonably), Schedule G shall be amended to include such additional Portfolios.
17.2 Subsequent to the effective date of this Agreement, one or more registered investment companies (a "New Fund") for which NationsBank or any of its affiliates acts as investment adviser may become a party to this Agreement upon execution of a written adoption agreement by such New Fund pursuant to which such New Fund agrees to be bound by the terms of this Agreement (an "Adoption Agreement"). Following the execution of an Adoption Agreement by a New Fund, such New Fund shall be deemed a Fund for all purposes of this Agreement and shall have all the rights, obligations and duties of a Fund under this Agreement.
Article 18 Confidentiality
18.1 In connection with the services provided by the Transfer Agent hereunder, certain confidential and proprietary information regarding the Transfer Agent and the Fund may be disclosed to the other. In connection therewith, the parties agree as follows:
(a) "Confidential Information" shall mean:
(i) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finance, operations, customer relationships, customer profiles, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Transfer Agent or the Fund, their respective parent corporation, their respective subsidiaries and affiliated companies and the customers, clients and suppliers of any of the foregoing;
(ii) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Transfer Agent or the Fund a competitive advantage over its competitors; and
(iii) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, show-how and trade secrets, whether or not patentable or copyrightable.
(b) Confidential Information includes, without limitation, all documents, inventions, substances, engineering and laboratory notebooks, drawings, diagrams, specifications, bills of material, equipment, prototypes and models, and any other tangible manifestation of the foregoing which now exist or come into the control or possession of the party.
18.2 Except as expressly authorized by prior written consent of the disclosing party ("Discloser"), the party receiving Confidential Information ("Recipient") shall:
(a) limit access to Discloser's Confidential Information to Recipient's employees and agent who have a need-to-know in connection with the subject matter thereof;
(b) advise those employees and agents who have access to the Confidential Information of the proprietary nature thereof and of the obligations set forth in this Confidential Agreement;
(c) take appropriate action by instruction or agreement with the employees and agents having access to Discloser's Confidential Information to fulfill Recipient's obligations under this Confidentiality Agreement;
(d) safeguard all of Discloser's Confidential Information by using a reasonable degree of care, but not less than that degree of care used by Recipient in safeguarding its own similar confidential information or material;
(e) use all of Discloser's Confidential Information solely for purposes for which the Confidential Information was conveyed; and
(f) not disclose any of Discloser's Confidential Information, or information derived therefrom, to third parties.
18.3 Upon Discloser's request, Recipient shall surrender to Discloser all memoranda, notes, records, drawings, manuals, and other documents or materials (and all copies of same) relating to or containing Discloser's Confidential Information. When Recipient returns the materials, Recipient shall certify in writing that it has returned all materials containing or relating to the Confidential Information.
18.4 The obligations of confidentiality and restriction on use in this Article 18 shall not apply to any Confidential Information that Recipient proves:
(a) Was in the public domain prior to the date of this Agreement or subsequently came into the public domain through no fault of Recipient; or
(b) Was received by Recipient from a third party without Recipient's knowledge that the third party was not legally entitled to disclose such information; or
(c) Was already in Recipient's possession prior to receipt from Discloser; or
(d) Is required to be disclosed in a judicial or administrative proceeding after reasonable legal remedies for maintaining such information in confidence have been exhausted including, but not limited to, giving Discloser as much advance notice as practical of the possibility of disclosure to allow Discloser to take appropriate legal action to seek to prevent such disclosure; or
(e) Is subsequently and independently developed by Recipient's employees, consultants or agents without reference to Confidential Information.
18.5 The Funds and the Transfer Agent agree that money damages would not be a sufficient remedy to an injured party for breach of this Article 18. Accordingly, in addition to all other remedies that a party may have, a party shall be entitled to specific performance and injunctive or other equitable relief against another party as a remedy for any breach of the obligations set forth in this Article 18. The parties agree to waive any requirement for a bond in connection with any such injunctive or other equitable relief.
18.6 The rights and obligations established by this Article 18 shall survive the termination of this Agreement.
Article 19 Force Majeure
19.1 In the event a party is unable to perform its obligations under the terms of this Agreement because of acts of God or by reason of circumstances beyond its control, including war, national emergencies, strikes, labor difficulties, insurrection, riots or the failure or unavailability of transportation or communication services or power supplies, such party shall not be liable for damages incurred by any other party resulting from such failure to perform. The above in no way relieves the Transfer Agent or the Funds of responsibility for exercising all backup and contingency plans available and in effect at such time and does not affect any other remedies that a party may have under this Agreement.
Article 20 Amendments
20.1 This Agreement may only be amended or modified by a written instrument executed by all parties except that Schedule A may be amended in the manner set forth in Section 17.1.
Article 21 Subcontracting
21.1 Each Fund agrees that the Transfer Agent, in its discretion, may after notification to the Funds, subcontract for certain of the services to be provided by the Transfer Agent under this Agreement or the Schedules hereto; provided that the appointment of any such subcontractor shall not relieve the Transfer Agent of its responsibilities hereunder.
Article 22 Arbitration
22.1 Any claim or controversy arising out of or relating to this Agreement, or breach hereof, shall be settled by arbitration administered by the American Arbitration Association in Charlotte, North Carolina in accordance with its applicable rules, except that the Federal Rules of Evidence and the Federal Rules of Civil Procedure with respect to the discovery process shall apply.
22.2 The parties hereby agree that judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.
22.3 The parties acknowledge and agree that the performance of the obligations under this Agreement necessitates the use of instrumentalities of interstate commerce and, notwithstanding other general choice of law provisions in this Agreement, the parties agree that the Federal Arbitration Act shall govern and control with respect to the provisions of this Article 22.
Article 23 Notice
23.1 Any notice or other instrument authorized or required by this Agreement to be given in writing to a party, shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as such party may from time to time designate in writing.
To either of the Funds:
[Name of Applicable Fund]
111 Center Street
Little Rock, Arkansas 72201
Attention: Corporate Secretary
To the Transfer Agent:
The Shareholder Services Group
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to:
General Counsel (same address)
Article 24 Successors
24.1 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 assigned to any person other than a person controlling, controlled by or under common control with the assignor without the written consent of the other party, which consent shall not be unreasonably withheld.
Article 25 Governing Law
25.1 This Agreement shall be governed exclusively by the laws of the
Commonwealth of Massachusetts without reference to the choice of law provisions
thereof. Subject to Article 22 hereof, each party hereto hereby (i) consents to
the personal jurisdiction of the Commonwealth of Massachusetts courts over the
parties hereto, hereby waiving any defense of lack of personal jurisdiction; and
(ii) appoints the person to whom notices hereunder are to be sent as agent for
service of process.
Article 26 Counterparts
26.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument.
Article 27 Captions
27.1 The captions of this Agreement are included for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.
Article 28 Use of Transfer Agent/Fund Name
28.1 The Funds shall not use the name of the Transfer Agent in any Prospectus, Statement of Additional Information, Shareholders' report, sales literature or other material relating to the Fund in a manner not approved prior thereto in writing by the Transfer Agent; provided, that the Transfer Agent need only receive notice of all reasonable uses of its name which merely refer in accurate terms to its appointment hereunder or which are required by any government agency or applicable law or rule.
28.2 The Transfer Agent shall not use the name of a Fund or material relating to a Fund on any documents or forms for other than internal use in a manner not approved prior thereto in writing by such Fund; provided, that the Fund need only receive notice of all reasonable uses of its name which merely refer in accurate terms to the appointment of the Transfer Agent as transfer agent for the Fund or which are required by any government agency or applicable law or rule.
Article 29 Relationship of Parties
29.1 The parties agree that they are independent contractors and not partners or co-venturers and nothing contained herein shall be interpreted or construed otherwise.
29.2 The parties hereby acknowledge and agree that each Fund has
entered into this Agreement independently on behalf of itself and its Portfolios
which are now or may hereafter be identified on Schedule G. Notwithstanding
anything to the contrary contained in this Agreement, (i) each Fund individually
shall have the rights and obligations of a Fund as set forth in this Agreement,
(ii) any action by a Fund in violation of this Agreement shall not affect the
rights and obligations of any other Fund under this Agreement, and (iii) the
Transfer agent, in seeking to enforce any provisions of this Agreement with
respect to a Portfolio, shall look solely to the assets and revenues of such
Portfolio and that in no event shall the Transfer Agent in seeking to enforce
such obligation have recourse to the independent assets or revenues of any other
Portfolio.
Article 30 Entire Agreement; Severability
30.1 This Agreement and the Schedules attached hereto constitute the entire agreement of the parties hereto relating to the matters covered hereby and supersede any previous agreements. If any provision is held to be illegal, unenforceable or invalid for any reason, the remaining provisions shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, as of the day and year first above written.
NATIONS FUND, INC.
By: /s/ Richard H. Blank, Jr.
------------------------------
Title: Secretary
---------------------------
|
NATIONS FUND TRUST
By: /s/ Richard H. Blank, Jr.
------------------------------
Title: Secretary
---------------------------
|
THE CAPITOL MUTUAL FUNDS
By: /s/ Richard H. Blank, Jr.
------------------------------
Title: Secretary
---------------------------
|
NATIONS FUND PORTFOLIOS, INC.
By: /s/ Richard H. Blank, Jr.
------------------------------
Title: Secretary
---------------------------
|
THE SHAREHOLDER SERVICES
GROUP, INC.
By: /s/ (Illegible)
Title: (Illegible)
---------------------------
|
Schedule A
DUTIES OF THE TRANSFER AGENT
1. Shareholder Information. The Transfer Agent shall maintain a record of the number of Shares held by each Shareholder of record which shall include full registration information, including, but not limited to, name, address and taxpayer identification number and which shall indicate whether such Shares are held in certificated or uncertificated form.
2. Shareholder Services. The Transfer Agent shall respond as appropriate to all inquiries and communications from Shareholders relating to Shareholder accounts with respect to its duties hereunder and as may be from time to time mutually agreed upon between the Transfer Agent and the Funds.
3. Share Certificates.
(a) At the expense of the appropriate Fund, each Fund shall supply the Transfer Agent with adequate supply of blank share certificates to meet the Transfer Agent's requirements therefor. Such Share certificates shall be properly signed by facsimile. Each Fund agrees that, notwithstanding the death, resignation, or removal of any officer of the Fund whose signature appears on such certificates, the Transfer Agent or its agent may continue to countersign certificates which bear such signatures until otherwise directed by Written Instructions.
(b) The Transfer Agent shall issue replacement Share certificates in lieu of certificates which have been lost, stolen or destroyed, upon receipt by the Transfer Agent of properly executed affidavits and lost certificate bonds, in form satisfactory to the Transfer Agent, with the appropriate Fund and the Transfer Agent as obligees under the bond.
(c) The Transfer Agent shall also maintain a record of each certificate issued, the number of Shares represented thereby and the Shareholder of record. With respect to Shares held in open accounts or in uncertificated form (i.e., no certificate being issued with respect thereto) the Transfer Agent shall maintain comparable records of the Shareholders thereof, including their names, addresses and taxpayer identification number. The Transfer Agent shall further maintain a stop transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. The Transfer Agent will address and mail to Shareholders of the Funds, all reports to Shareholders, dividend and distribution notices and proxy material for the Funds' meetings of Shareholders. In connection with meetings of Shareholders, the Transfer Agent will prepare Shareholder lists, mail and certify as to the mailing of proxy materials, process and tabulate returned proxy cards, report on proxies voted prior to meetings, act as inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares
(a) The Transfer Agent shall not be required to issue any Shares of a Fund where it has received a Written Instruction from the Fund or official notice from any appropriate authority that the sale of the Shares of the Fund has been suspended or discontinued. The existence of such Written Instructions or such official notice shall be conclusive evidence of the right of the Transfer Agent to rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the payment of
money is returned unpaid for any reason, the Transfer Agent will endeavor to:
(i) give prompt notice of such return to the Fund or its designee; (ii) place a
stop transfer order against all Shares issued as a result of such check or
order; and (iii) take such actions as the Transfer Agent may from time to time
deem appropriate.
6. Transfer and Repurchase
(a) The Transfer Agent shall process all requests to transfer or redeem Shares in accordance with the transfer or repurchase procedures set forth in the Funds' Prospectus.
(b) The Transfer Agent will transfer or repurchase Shares upon receipt of Oral or Written Instructions or otherwise pursuant to the Prospectus and Share certificates, if any, properly endorsed for transfer or redemption, accompanied by such documents as the Transfer Agent reasonably may deem necessary.
(c) The Transfer Agent reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the endorsement on the instructions is valid and genuine. The Transfer Agent also reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the requested transfer or repurchase is legally authorized, and it shall incur no liability for the refusal, in good faith, to make transfers or repurchases which the Transfer Agent, in its good judgment, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer or repurchase.
(d) When Shares are redeemed, the Transfer Agent shall, upon receipt of the instructions and documents in proper form, deliver to the Custodian and the appropriate Fund or its designee a notification setting forth the number of Shares to be redeemed. Such redeemed Shares shall be reflected on appropriate accounts maintained by the Transfer Agent reflecting outstanding Shares of the Fund and Shares attributed to individual accounts.
(e) The Transfer Agent, upon receipt of the monies paid to it by the Custodian for the redemption of Shares, pay such monies as are received from the Custodian, all in accordance with the procedures described in the Written Instructions received by the Transfer Agent from the Funds.
(f) The Transfer Agent shall not process or effect any repurchase with respect to Shares of the Fund after receipt by the Transfer Agent or its agent of notification of the suspension of the determination of the net asset value of the Fund.
7. Dividends
(a) Upon the declaration of each dividend and each capital gains distribution by the Board of Directors of a Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be furnished to the Transfer Agent Written Instructions setting forth the date of the declaration of such dividend or distribution, the ex-dividend date, the date of payment thereof, the record date as of which Shareholders entitled to payment shall be determined, the amount payable per Share to the Shareholders of record as of that date, the total amount payable to the Transfer Agent on the payment date and whether such dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution of the Board of Directors, the Fund will pay to the Transfer Agent sufficient cash to make payment on such payment date to the Shareholders of record on the record date.
(c) If, prior to the payment date, the Transfer Agent does not receive sufficient cash from the Fund to make total dividend and/or distribution payments to all Shareholders of the Fund of the record date, the Transfer Agent will, upon notifying the Fund, withhold payment to all Shareholders of record as of the record date until sufficient cash is provided to the Transfer Agent.
8. In addition to and neither in lieu nor in contravention of the
services set forth above, the Transfer Agent shall: (i) perform all the
customary services of a transfer agent, registrar, dividend disbursing agent and
agent of the dividend reinvestment and cash purchase plan as described herein
consistent with those requirements in effect as at the date of this Agreement.
The detailed definition, frequency, limitations and associated costs (if any)
set out in the attached fee schedule, include but are not limited to:
maintaining all Shareholder accounts, preparing Shareholder meeting lists,
mailing proxies, tabulating proxies, mailing Shareholder reports to current
Shareholders, withholding taxes on U.S. resident and non-resident alien accounts
where applicable, 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.
Schedule B
Quality Standards
(Effective October 2, 1995 as updated on September 25, 1995)
For all funds, open-end and closed-end, serviced by TSSG, under the Transfer Agency and Services Agreement (with Facilities Management Arrangement) dated June 1, 1995, the following quality standards shall apply. This schedule shall replace the temporary quality standard Schedule B in the original agreement as referenced in Section 5.2.
Financials:
----------
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials:
--------------
Maintenances 98%
Transfers 98%
Correspondence 98%
Adjustments 98%
Telephone Calls 98%
New Accounts:
------------
New Account Set-ups 98%
--------------------------------------------------------------------------------
Performance Standards
--------------------------------------------------------------------------------
Telephone Performance Standards
================================================================================
Average speed of answer 20 seconds or less
----------------------------------- --------------------------------------------
Calls abandoned 2% of calls that wait 20 second or more
----------------------------------- --------------------------------------------
Service level* 80%
----------------------------------- --------------------------------------------
|
Article 1 ________________________
*Represents the percentage of calls answered within 20 seconds.
Schedule B
[List of Initial Quality Standards based on 1994 quarterly senior management reports]
Nations Fund
Financial Transactions
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials
Maintenance 98%
Transfers 98%
New Accounts 98%
% = minimum acceptable levels
Closed End Funds
Financials 98%
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials
Certificate Processing 98%
Maintenance 98%
Transfers 98%
New Accounts 98%
% = minimum acceptable levels
Capitol Funds
Financials
Subscriptions 98%
Redemptions 98%
Exchanges 98%
Non-Financials
Maintenance 98%
Transfers 98%
1
|
New Accounts 98% |
% = minimum acceptable levels
Schedule C
Schedule of Costs
1. For purposes of this Agreement, "Costs" shall mean all internal and external costs incurred by the Transfer Agent in connection with and properly allocated to the Services provided under the Agreement, including, but not limited to, the costs involved with the operation of the Charlotte Facility, those costs reasonably incurred by the Transfer Agent to achieve the quality standards imposed on it under the terms of this Agreement and the Transfer Agent's overhead, depreciation and amortization costs, excepting out-of-pocket expenses and such other costs agreed to in writing by the Transfer Agent and the Funds.
2. The Funds shall have the right to audit, at their own expense, the books and records of the Transfer Agent with respect to the Costs for which the Transfer Agent seeks reimbursement under Article 8 on an annual basis, or more frequently if the Funds have a reasonable basis to dispute any cost for which the Transfer Agent seeks reimbursement.
3. The Transfer Agent shall use its best efforts to minimize the costs incurred by it in connection with the provisions of services under this Agreement to the extent such action is commercially reasonable and consistent with the quality standards imposed under this Agreement.
Schedule D
Non-Margin Expenses
- Facilities related expenses as incurred by the Transfer Agent under the Facilities Management Agreement between the Transfer Agent and NationsBank
- Out-of-Pocket expenses
- Sub-Transfer Agent Fees and Expenses
- Any other expenses agreed to in writing by the Transfer Agent and the Funds
Schedule E
OUT-OF-POCKET EXPENSES
The Funds shall reimburse the Transfer Agent monthly for reasonable out-of-pocket expenses incurred in connection with the provision of Services under this Agreement, including, but not limited to the following items:
- Microfiche/microfilm production
- Magnetic media tapes and freight
- Printing costs, including certificates, envelopes, checks and
stationery
- Postage (bulk, pre-sort, ZIP+4, barcoding, first class) direct pass
through to the Funds
- Due diligence mailings
- Telephone and telecommunication costs, including all lease,
maintenance and line costs (excluding such telephone and
telecommunications costs provided by NationsBank pursuant to the
Facilities Agreement)
- Ad hoc reports
- Proxy solicitations, mailings and tabulations
- Daily & Distribution advice mailings (including all periodic
statements)
- Shipping, Certified and Overnight mail and insurance
- Year-end form production and mailings
- Terminals, communication lines, printers and other equipment and any
expenses incurred in connection with such terminals and lines
- Duplicating services
- Courier services
- Incoming and outgoing wire charges
- Federal Reserve charges for check clearance
- Overtime, as approved by the Funds
- Temporary staff, as approved by the Funds
- Travel and entertainment, as approved by the Funds
- Record retention, retrieval and destruction costs, including, but
not limited to exit fees charged by third party record keeping
vendors
- Third party audit reviews
- All conversion costs: including System start up costs
- Insurance
- Such other miscellaneous expenses reasonably incurred by the
Transfer Agent in performing its duties and responsibilities under
this Agreement.
- Systems Programming utilizing non-dedicated systems resources at
$100 per hour
The Funds agree that postage and mailing expenses will be paid on the day of or prior to mailing as agreed with the Transfer Agent. In addition, the Funds will promptly reimburse the Transfer Agent for any other unscheduled expenses incurred by the Transfer Agent whenever the Funds and the Transfer Agent mutually agree that such expenses are not otherwise properly borne by the Transfer Agent as part of its duties and obligations under the Agreement.
Schedule F
Fund Documents
- Certified copy of the Articles of Incorporation of the Fund, as amended
- Certified copy of the By-laws of the Fund, as amended
- Copy of the resolution of the Board of Directors authorizing the execution and delivery of this Agreement
- Specimens of the certificates for Shares of the Fund, if applicable, in the form approved by the Board of Directors of the Fund, with a certificate of the Secretary of the Fund as to such approval
- All account application forms and other documents relating to Shareholder accounts or to any plan, program or service offered by the Fund
- Certified list of Shareholders of the Fund with the name, address and taxpayer identification number of each Shareholder, and the number of Shares of the Fund held by each, certificate numbers and denominations (if any certificates have been issued), lists of any accounts against which stop transfer orders have been placed, together with the reasons therefore, and the number of Shares redeemed by the Fund.
- All notices issued by the Fund with respect to the Shares in accordance with and pursuant to the Articles of Incorporation or By-laws of the Fund or as required by law and shall perform such other specific duties as are set forth in the Articles of Incorporation including the giving of notice of any special or annual meetings of shareholders and any other notices required thereby.
SCHEDULE G
FUND PORTFOLIOS
NATIONS FUND TRUST:
1. Nations Government Money Market Fund
2. Nations Tax Exempt Fund
3. Nations Value Fund
4. Nations Strategic Growth Fund
5. Nations Capital Growth Fund
6. Nations Emerging Growth Fund
7. Nations Equity Index Fund
8. Nations Managed Index Fund
9. Nations Managed SmallCap Index Fund
10. Nations Managed Value Index Fund
11. Nations Managed SmallCap Value Index Fund
12. Nations Disciplined Equity Fund
13. Nations Balanced Assets Fund
14. Nations Short-Intermediate Government Fund
15. Nations Short-Term Income Fund
16. Nations Diversified Income Fund
17. Nations Strategic Fixed Income Fund
18. Nations Municipal Income Fund
19. Nations Short-Term Municipal Income Fund
20. Nations Intermediate Municipal Bond Fund
21. Nations Florida Intermediate Municipal Bond Fund
22. Nations Florida Municipal Bond Fund
23. Nations Georgia Intermediate Municipal Bond Fund
24. Nations Georgia Municipal Bond Fund
25. Nations Maryland Intermediate Municipal Bond Fund
26. Nations Maryland Municipal Bond Fund
27. Nations North Carolina Intermediate Municipal Bond Fund
28. Nations North Carolina Municipal Bond Fund
29. Nations South Carolina Intermediate Municipal Bond Fund
30. Nations South Carolina Municipal Bond Fund
31. Nations Tennessee Intermediate Municipal Bond Fund
32. Nations Tennessee Municipal Bond Fund
33. Nations Texas Intermediate Municipal Bond Fund
34. Nations Texas Municipal Bond Fund
35. Nations Virginia Intermediate Municipal Bond Fund
36. Nations Virginia Municipal Bond Fund
NATIONS FUND, INC.:
1. Nations Prime Fund
2. Nations Treasury Fund
3. Nations Equity Income Fund
4. Nations U.S. Government Bond Fund
5. Nations Small Company Growth Fund
6. Nations Government Securities Fund
7. Nations International Growth Fund
NATIONS RESERVES:
1. Nations Government Reserves
2. Nations Municipal Reserves
3. Nations Cash Reserves
4. Nations Treasury Reserves
5. Nations Money Market Reserves
6. Nations California Tax Exempt Reserves
7. Nations Asset Allocation Fund
8. Nations Capital Income Fund
9. Nations California Municipal Bond Fund
10. Nations Intermediate Bond Fund
11. Nations Blue Chip Fund
12. Nations Marsico Focused Equities Fund
13. Nations Marsico Growth & Income Fund
14. Nations International Equity Fund
15. Nations International Value Fund
16. Nations Emerging Markets Fund
NATIONS LIFEGOAL FUNDS, INC.
1. Nations LifeGoal Growth Portfolio
2. Nations LifeGoal Balanced Growth Portfolio
3. Nations LifeGoal Income and Growth Portfolio
NATIONS ANNUITY TRUST:
1. Nations Value Portfolio
2. Nations International Growth Portfolio
3. Nations Disciplined Equity Portfolio
4. Nations Marsico Focused Equities Portfolio
5. Nations Marsico Growth & Income Portfolio
6. Nations Managed Index Portfolio
7. Nations Managed SmallCap Index Portfolio
8. Nations Balanced Assets Portfolio
NATIONS FUNDS TRUST:
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
3. Nations MidCap Index Fund
CLOSED END FUNDS:
1. Nations Balanced Target Maturity Fund
2. Nations Government Income Term Trust 2003, Inc.
3. Nations Government Income Term Trust 2004, Inc.
Last Amended: February 14, 2000
SUB-TRANSFER AGENCY AND SERVICES AGREEMENT
THIS AGREEMENT, dated as of this 11th day of September, 1995, is by and between THE SHAREHOLDER SERVICES GROUP, INC. ("TSSG", also referred to as the "Transfer Agent"), a Massachusetts corporation and principal offices at One Exchange Place, 53 State Street, Boston, Massachusetts 02109 and NATIONSBANK OF TEXAS, N.A. ("NationsBank"), organized under the laws of Texas and having its principal place of business at 1401 Elm Street, 11th Floor, Dallas, TX 75202.
WITNESSETH
WHEREAS, TSSG has been appointed transfer agent for those open-end registered investment companies identified on the attached Schedule A (individually the "Fund" and collectively the "Funds") pursuant to the terms of the Transfer Agency and Services Agreement (the "Transfer Agent Agreement(s)") with each such Fund;
WHEREAS, the Funds are authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets ("Portfolio"). Each such Portfolio shall also be identified on Schedule A;
WHEREAS, each Portfolio is authorized to issue multiple classes of shares including Trust A Shares and, in many cases, Trust B Shares (the "Trust Shares"); and
WHEREAS, the Funds have authorized TSSG to subcontract with and appoint NationsBank as its agent to perform certain administrative and ministerial duties and obligations that the Transfer Agent has to the Funds with respect to the Trust Shares and NationsBank desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, TSSG and NationsBank agree as follows:
Article 1 Definitions
1.1 Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
(a) "Articles of Incorporation" shall mean the Articles of Incorporation, Declaration of Trust, or other similar organizational document as the case may be, of the Funds as the same may be amended from time to time;
(b) "Authorized Person" shall be deemed to include (i) any authorized Officer of the Fund; or (ii) any person, whether or not such person is an Officer or employee of the Fund, duly authorized to give Oral Instructions or Written Instructions on behalf of the Fund as indicated in writing to the Transfer Agent from time to time;
(c) "Board of Directors" shall mean the Board of Directors or Board of Trustees of the Fund, as the case may be;
(d) "Commission" shall mean the Securities and Exchange Commission;
(e) "Custodian" refers to any custodian or subcustodian of securities and other property which the Fund may from time to time deposit, or cause to be deposited or held under the name or account of such a custodian pursuant to a Custodian Agreement;
(f) "1940 Act" shall mean the Investment Company Act of 1940, and the rules and regulations promulgated thereunder, all as amended from time to time;
(g) "Oral Instructions" shall mean instructions, other than Written Instructions, actually received by NationsBank from a person reasonably believed by NationsBank to be an Authorized Person;
(h) "Prospectus" shall mean the most recently dated Fund Prospectuses and Statements of Additional Information, including supplements thereto if any, which have become effective under the Securities Act of 1933 and the 1940 Act;
(i) "Shares" refers collectively to such Trust Shares of the Portfolios as may be issued from time to time;
(j) "Shareholder" shall mean a record owner of Shares; and
(k) "Written Instructions" shall mean a written communication signed by a person reasonably believed by NationsBank to be an Authorized Person and actually received by the Transfer Agent. Written Instructions shall include manually executed originals and authorized electronic transmissions, including telefacsimile of a manually executed original or other process.
Article 2 Appointment of NationsBank
2.1 TSSG hereby appoints NationsBank as its subcontractor and agent to perform certain administrative and ministerial duties on behalf of the Funds, and NationsBank hereby accepts such appointment and agrees to perform the duties hereinafter set forth.
Article 3 Duties of NationsBank
3.1 NationsBank shall be responsible for administering and/or performing the customary services of a transfer agent; for performing the customary services of a service agent in connection with dividend and distribution functions; and for performing shareholder account and administrative agent functions in connection with the issuance, transfer and redemption or repurchase (including coordination with the Custodian) of Shares, as more fully described in the written Schedule of Duties of NationsBank annexed hereto as Schedule B and incorporated herein, and in accordance with the terms of the Prospectus, applicable law and the procedures established from time to time between NationsBank and the Transfer Agent and/or the Funds.
3.2 Notwithstanding any of the foregoing provisions of this Agreement,
NationsBank and the Transfer Agent shall be under no duty or obligation to
inquire into, and shall not be liable for: (i) the legality of the issuance or
sale of any Shares or the sufficiency of the amount to be received therefor;
(ii) the legality of the redemption of any Shares, or the propriety of the
amount to be paid therefor; (iii) the legality of the declaration of any
dividend by the Board of Directors, or the legality of the issuance of any
shares in payment of any dividend; or (iv) the legality of any recapitalization
or readjustment of the Shares. It being understood that such shall be the
responsibility of the Funds.
3.3 In addition, the Funds shall verify the establishment of transactions in Shares for each state on the system prior to activation and thereafter monitor the daily activity for each state. The responsibility of NationsBank for the Funds' blue sky state registration status is solely limited to the initial establishment of transactions in Shares subject to blue sky compliance by the Funds and the reporting of such transactions to the Funds as provided above.
Article 4 Recordkeeping and Other Information
4.1 NationsBank shall create and maintain all records required of it
pursuant to its duties hereunder and as set forth in Schedule B in accordance
with all applicable laws, rules and regulations, including records required by
Section 31(a) of the 1940 Act. All records shall be available during regular
business hours for inspection and use by the Transfer Agent and the Funds. Where
applicable, such records shall be maintained by NationsBank for the periods and
in the places required by Rule 31a-2 under the 1940 Act.
4.2 To the extent required by Section 31 of the 1940 Act, NationsBank agrees that all such records prepared or maintained by NationsBank relating to the services to be performed by NationsBank hereunder are the property of the Funds and will be preserved, maintained and made available in accordance with such section, and will be surrendered promptly to the Funds on and in accordance with the Funds' request.
4.3 In case of any requests or demands for the inspection of Shareholder records of the Funds, NationsBank will endeavor to notify the applicable Fund of such request and secure Written Instructions as to the handling of such request. NationsBank 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 comply with such request.
4.4 Upon reasonable notice by the applicable Fund, NationsBank shall make available during regular business hours such of its facilities and premises employed in connection with the performance of its duties under this Agreement for reasonable visitation by such Fund, or any person retained by the Fund as may be necessary for the Fund to evaluate the quality of the services performed by NationsBank pursuant hereto.
Article 5 Fund Instructions
5.1 NationsBank will have no liability when acting upon Written or Oral Instructions believed to have been executed or orally communicated by an Authorized Person and will not be held to have any notice of any change of authority of any person until it receives Written Instruction thereof from the Fund. NationsBank will also have no liability when processing Share certificates which it reasonably believes to bear the proper manual or facsimile signatures of the Officers of the Fund and the proper countersignature of the Transfer Agent.
5.2 At any time, NationsBank may request Written Instructions from the Fund and may seek advice from legal counsel for the Funds, or its own legal counsel, with respect to any matter arising in connection with this Agreement, and it shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in accordance with the opinion of counsel for the Funds or for NationsBank. Written Instructions requested by NationsBank will be provided by the Fund within a reasonable period of time.
5.3 NationsBank, its Officers, agents or employees, shall accept Oral Instructions or Written Instructions given to them by any person representing or acting on behalf of a Fund only if said representative is an Authorized Person. The Fund agrees that all Oral Instructions shall be followed, within one business day, by confirming Written Instructions, and that the Fund's failure to so confirm shall not impair in any respect NationsBank's right to reply on Oral Instructions.
Article 6 Compensation
6.1 Upon receipt of the appropriate payment from the Funds, the Transfer Agent will compensate NationsBank for the performance of its obligations hereunder in accordance with the fees set forth in the written Fee Schedule annexed hereto as Schedule C and incorporated herein. The Transfer Agent's responsibility under this Section 6.1 is conditioned upon receipt of such payment from the Funds.
Article 7 Representations and Warranties of NationsBank
7.1 NationsBank represents and warrants to the Transfer Agent that:
(a) it is a corporation duly organized and existing and in good standing under the laws of Texas;
(b) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws to enter into and perform this Agreement;
(c) all requisite corporate proceedings have been taken to authorize it to enter into this Agreement;
(d) it is duly registered with its appropriate regulatory agency as a transfer agent and such registration will remain in effect for the duration of this Agreement;
(e) it has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
Article 8 Representations and Warranties of the Transfer Agent
8.1 The Transfer Agent represents and warrants to NationsBank that:
(a) it is duly organized and existing and in good standing under the laws of the jurisdiction in which it is organized;
(b) it is empowered under applicable laws and by its Articles of Incorporation and By-Laws and the Transfer Agent Agreement to enter into this Agreement;
(c) all corporate proceedings required by said Articles of Incorporation, By-Laws and applicable laws have been taken to authorize it to enter into this Agreement.
Article 9 Indemnification
9.1 To, and only to, the extent the Transfer Agent is indemnified by the Funds pursuant to the terms of the Transfer Agent Agreements, NationsBank shall not be responsible for and the Transfer Agent shall indemnify and hold NationsBank harmless from and against any and all claims, costs, expenses (including reasonable attorneys' fees), losses, damages, charges, payments and liabilities of any sort or kind which may be asserted against NationsBank or for which NationsBank may be held to be liable (a "Claim") arising out of or attributable to any of the following:
(a) Any actions of NationsBank required to be taken pursuant to this Agreement unless such Claim resulted from a negligent act or omission to act or bad faith by NationsBank in the performance of its duties hereunder.
(b) NationsBank's reasonable reliance on, or reasonable use of information, data, records and documents (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) received by NationsBank from the Funds, or any authorized third party acting on behalf of the Funds, including but not limited to the Transfer Agent or any prior transfer agent for the Funds, in the performance of NationsBank's duties and obligations hereunder.
(c) The reliance on, or the implementation of, any Written or Oral Instructions or any other instructions or requests which are provided by an Authorized Person of the Fund.
(d) The offer or sale of shares by the Fund in violation of any requirement under 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 state with the respect to the offer or sale of such Shares in such state.
(e) The Transfer Agent's refusal or failure to comply with the terms of this Agreement, or any Claim which arises out of this Agreement, or any Claim which arises out of the Transfer Agent's negligence or misconduct or the breach of which any representation or warranty of the Transfer Agent made herein.
9.2 Notwithstanding the foregoing Section 9.1, the Transfer Agent shall be responsible for and indemnify and hold NationsBank harmless from and against any and all claims by third parties, including, costs, expenses (including reasonable attorneys' fees), losses, damages, charges, payments and liabilities of any sort or kind which may be asserted against NationsBank or for which NationsBank may be held to be liable arising out of or attributable to a negligent act or omission to act or bad faith by the Transfer Agent.
9.3 NationsBank shall indemnify and hold the Transfer Agent harmless from and against any and all claims, costs, expenses (including reasonable attorneys' fees), losses, damages, charges, payments and liabilities of any sort or kind which may be asserted against the Transfer Agent or for which the Transfer Agent may be held to be liable arising out of or attributable to any negligent act or failure to act or bad faith or willful misconduct on the part of NationsBank in connection with the performance of its duties under this Agreement.
9.4 In any case in which either party (the "Indemnifying Party") may be asked to indemnify or hold the other (the "Indemnified Party") harmless, the Indemnified Party will notify the Indemnifying Party promptly after identifying any situation which it believes presents or appears likely to present a claim for indemnification against the Indemnifying Party although the failure to do so shall not prevent recovery by the Indemnified Party and the Indemnified Party shall keep the Indemnifying Party advised with respect to all developments concerning such situation. The Indemnifying Party shall have the option to defend the Indemnified Party against any Claim which may be the subject of this indemnification, and, in the event that the Indemnifying Party so elects, such defense shall be conducted by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying Party shall take over complete defense of the Claim and the Indemnified Party shall sustain no further legal or other expenses in respect of such Claim. The Indemnified Party will not confess any Claim or make any compromise in any case in which the Indemnifying Party will be asked to provide indemnification, except with the Indemnifying Party's prior written consent.
9.5 The obligations of the parties hereto under this Article 9 shall survive the termination of this Agreement.
Article 10 Standard of Care
10.1 NationsBank shall at all times, act in good faith and agrees to use its best efforts within commercially reasonable limits to ensure the accuracy of all services performed under this Agreement, but assumes no responsibility for loss or damage to the Transfer Agent unless said errors are caused by NationsBank's own negligence, bad faith or willful misconduct or that of its employees.
Article 11 Consequential Damages
11.1 In no event and under no circumstances shall either party to this Agreement be liable to the other party for consequential or indirect loss of profits, reputation or business or any other special damages under any provision of this Agreement or for any act or failure to act hereunder.
Article 12 Term and Termination
12.1 This Agreement shall be effective on the date first written above and shall continue for a period of five (5) years (the "Initial Term"), unless earlier terminated pursuant to the terms of this Agreement. Thereafter, this Agreement shall automatically be renewed for successive terms of three (3) years ("Renewal Terms") each.
12.2 Either party may terminate this Agreement at the end of the Initial Term or any subsequent Renewal Term upon not less than ninety (90) days, or more than one-hundred eighty (180) days, prior written notice to the other party.
12.3 In the event a termination notice is given by the Transfer Agent, all expenses associated with movement of records and materials and conversion thereof to the Transfer Agent or to a successor subcontractor, will be borne by the Transfer Agent.
12.4 If a party hereto is guilty of a material failure to perform its duties and obligations hereunder (a "Defaulting Party") the other party (the "Non-Defaulting Party") may give written notice thereof to the Defaulting Party, and if such material breach shall not have been remedied within thirty (30) days after such written notice is given, then the Non-Defaulting Party may terminate this Agreement by giving thirty (30) days written notice of such termination to the Defaulting Party. If NationsBank is the Non-Defaulting Party, its termination of this Agreement shall not constitute a waiver of any other rights or remedies of NationsBank with respect to services performed prior to such termination of rights of NationsBank to be reimbursed for out-of-pocket expenses. In all cases, termination by the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting Party of any other rights it might have under this Agreement or otherwise against the Defaulting Party.
12.5 Notwithstanding any provision of this Article 12 to the contrary, this Agreement shall terminate simultaneously with any termination of the Transfer Agent Agreement.
Article 13 Confidentiality
13.1 In connection with the services provided by NationsBank hereunder, certain confidential and proprietary information regarding NationsBank and the Transfer Agent may be disclosed to the other. In connection therewith, the parties agree as follows:
(a) Confidential Information disclosed under this Agreement shall mean:
(i) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finance, operations, customer relationships, customer profiles, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of NationsBank, the Transfer Agent or the Funds, their respective parent corporations, their respective subsidiaries and affiliated companies and the customers, clients and suppliers of any of the foregoing;
(ii) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords NationsBank, the Transfer Agent or the Funds a competitive advantage over its competitors; and
(iii) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, show-how and trade secrets, whether or not patentable or copyrightable.
(b) Confidential Information also includes, without limitation, all documents, inventions, substances, engineering and laboratory notebooks, drawings, diagrams, specifications, bills of material, equipment, prototypes and models, and any other tangible manifestation of the foregoing which now exist or come into the control or possession of the party.
13.2 Except as expressly authorized by prior written consent of the disclosing party ("Discloser"), the party receiving Confidential Information ("Recipient") shall:
(a) limit access to Discloser's Confidential Information to Recipient's employees who have a need-to-know in connection with the subject matter thereof;
(b) advise those employees who have access to the Confidential Information of the proprietary nature thereof and of the obligations set forth in this Confidentiality Agreement;
(c) take appropriate action by instruction or agreement with the employees having access to Discloser's Confidential Information to fulfill Recipient's obligations under this Confidentiality Agreement;
(d) safeguard all of Discloser's Confidential Information by using a reasonable degree of care, but not less than that degree of care used by Recipient in safeguarding its own similar information or material;
(e) use all of Discloser's Confidential Information solely for purposes that it was intended;
(f) not disclose any of Discloser's Confidential Information to third parties.
13.3 Upon Discloser's request, Recipient shall surrender to Discloser all memoranda, notes, records, drawings, manuals, records, and other documents or materials (and all copies of same) relating to or containing Discloser's Confidential Information. When Recipient returns the materials, Recipient shall certify in writing that it has returned all materials containing or relating to the Confidential Information.
13.4 The obligations of confidentiality and restriction on use in this Article 13 shall not apply to any Confidential Information that Recipient proves:
(a) Was in the public domain prior to the date of this Agreement or subsequently came into the public domain through no fault of Recipient;
(b) Was lawfully received by Recipient from a third party free of any obligation of confidence to the third party;
(c) Was already in Recipient's possession prior to receipt from Discloser;
(d) Is required to be disclosed in a judicial or administrative proceeding after all reasonable legal remedies for maintaining such information in confidence have been exhausted including, but not limited to, giving Discloser as much advance notice as practical of the possibility of disclosure to allow Discloser to stop such disclosure or obtain a protective order concerning such disclosure; or
(e) Is subsequently and independently developed by Recipient's employees, consultants or agents without reference to Confidential Information.
13.5 NationsBank and the Transfer Agent agree that money damages would not be a sufficient remedy for breach of this Article 13. Accordingly, in addition to all other remedies that either party may have, a party shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any breach of this Agreement. The parties agree to waive any requirement for a bond in connection with any such injunctive or other equitable relief.
Article 14 Force Majeure
14.1 In the event either party is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, labor difficulties, mechanical breakdowns, 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.
Article 15 Amendments
15.1 This Agreement may only be amended or modified by a written instrument executed by both parties.
Article 16 Subcontracting
16.1 The Transfer Agent agrees that NationsBank may, in its discretion, subcontract for certain of the services described under this Agreement or the Schedules hereto; provided that the appointment of any such subcontractor shall not relieve NationsBank of its responsibilities hereunder.
Article 17 Arbitration
17.1 Any Claim or controversy arising out of or relating to this Agreement, or breach hereof, shall be settled by arbitration administered by the American Arbitration Association in Boston, Massachusetts in accordance with its applicable rules, except that the Federal Rules of Evidence and the Federal Rules of Civil Procedure with respect to the discovery process shall apply.
17.2 The parties hereby agree that judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction.
17.3 The parties acknowledge and agree that the performance of the obligations under this Agreement necessitates the use of instrumentalities of interstate commerce and, notwithstanding other general choice of law provisions in this Agreement, the parties agree that the Federal Arbitration Act shall govern and control with respect to the provisions of this Article 17.
Article 18 Notice
18.1 Any notice or other instrument authorized or required by this Agreement to be given in writing to NationsBank or the Transfer Agent, shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing.
To the Transfer Agent:
The Shareholder Services Group, Inc.
One Exchange Place
53 State Street
Boston, Massachusetts 02109
Attention: President
with a copy to TSSG's General Counsel
To: NationsBank
NationsBank
NationsBank Plaza
101 S. Tryon Street, NC1-002-33-31
Charlotte, North Carolina 28255
Attention: Ted Johnson
Article 19 Successors
19.1 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 assigned to any person other than a person controlling, controlled by or under common control with the assignor without the written consent of the other party, which consent shall not be unreasonably withheld.
Article 20 Governing Law
20.1 This Agreement shall be governed exclusively by the laws of the Commonwealth of Massachusetts without reference to the choice of law provisions thereof. Subject to Article 17, each party to this Agreement hereby (i) consents to the personal jurisdiction of the Commonwealth of Massachusetts courts over the parties hereto, hereby waiving any defense of lack of personal jurisdiction; and (ii) appoints the person to whom notices hereunder are to be sent as agent for service of process.
Article 21 Counterparts
21.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument.
Article 22 Captions
22.1 The captions included in this Agreement are for convenience of reference only and in no way define or limit any of the provisions hereof or otherwise affect their construction or effect.
Article 23 Relationship of Parties
23.1 The parties agree that they are independent contractors and not partners or co-venturers and nothing contained herein shall be interpreted or construed otherwise.
Article 24 Entire Agreement; Severability
24.1 This Agreement and the Schedules attached hereto constitute the entire agreement of the parties hereto relating to the matters covered hereby and supersede any previous agreements. If any provision is held to be illegal, unenforceable or invalid for any reason, the remaining provisions shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, as of the day and year written above.
THE SHAREHOLDER SERVICES
GROUP, INC.
By: /s/ Jack P. Kurt
----------------------------------
Title: Executive Vice President and Chief
Operating Officer
|
NATIONSBANK OF TEXAS, N.A.
By: /s/ Mark H. Williamson
----------------------------------
Title: Senior Vice President
|
SCHEDULE A
FUND PORTFOLIOS
NATIONS FUND TRUST:
1. Nations Government Money Market Fund
2. Nations Tax Exempt Fund
3. Nations Value Fund
4. Nations Strategic Growth Fund
5. Nations Capital Growth Fund
6. Nations Emerging Growth Fund
7. Nations Equity Index Fund
8. Nations Managed Index Fund
9. Nations Managed SmallCap Index Fund
10. Nations Managed Value Index Fund
11. Nations Managed SmallCap Value Index Fund
12. Nations Disciplined Equity Fund
13. Nations Balanced Assets Fund
14. Nations Short-Intermediate Government Fund
15. Nations Short-Term Income Fund
16. Nations Diversified Income Fund
17. Nations Strategic Fixed Income Fund
18. Nations Municipal Income Fund
19. Nations Short-Term Municipal Income Fund
20. Nations Intermediate Municipal Bond Fund
21. Nations Florida Intermediate Municipal Bond Fund
22. Nations Florida Municipal Bond Fund
23. Nations Georgia Intermediate Municipal Bond Fund
24. Nations Georgia Municipal Bond Fund
25. Nations Maryland Intermediate Municipal Bond Fund
26. Nations Maryland Municipal Bond Fund
27. Nations North Carolina Intermediate Municipal Bond Fund
28. Nations North Carolina Municipal Bond Fund
29. Nations South Carolina Intermediate Municipal Bond Fund
30. Nations South Carolina Municipal Bond Fund
31. Nations Tennessee Intermediate Municipal Bond Fund
32. Nations Tennessee Municipal Bond Fund
33. Nations Texas Intermediate Municipal Bond Fund
34. Nations Texas Municipal Bond Fund
35. Nations Virginia Intermediate Municipal Bond Fund
36. Nations Virginia Municipal Bond Fund
NATIONS FUND INC.
1. Nations Prime Fund
2. Nations Treasury Fund
3. Nations International Growth Fund
4. Nations Equity Income Fund
5. Nations U.S. Government Bond Fund
6. Nations Small Company Growth Fund
7. Nations Government Securities Fund
NATIONS RESERVES:
1. Nations Asset Allocation Fund
2. Nations Capital Income Fund
3. Nations California Municipal Bond Fund
4. Nations Intermediate Bond Fund
5. Nations Blue Chip Fund
6. Nations Marsico Focused Equities Fund
7. Nations Marsico Growth & Income Fund
8. Nations International Equity Fund
9. Nations International Value Fund
10. Nations Emerging Markets Fund
NATIONS LIFEGOAL FUNDS, INC.:
1. Nations LifeGoal Growth Portfolio
2. Nations LifeGoal Balanced Growth Portfolio
3. Nations LifeGoal Income and Growth Portfolio
NATIONS FUNDS TRUST:
1. Nations High Yield Bond Fund
2. Nations MidCap Index Fund
3. Nations Kansas Municipal Income Fund
Last Amended: February 14, 2000
IN WITNESS WHEREOF, the parties hereto have caused the amended Schedule A to be executed by their Officers designated below as of the 14th day of February, 2000.
PFPC Inc. (Formerly First Data Investor Services Group, Inc. f/k/a The Shareholder Services Group, Inc.)
By:____________________________ Name:
Title:
BANK OF AMERICA, N.A. (Formerly
NationsBank of Texas, N.A.)
By: /s/ Edward D. Bedard
----------------------------
Edward D. Bedard
Senior Vice President
|
Schedule B
DUTIES OF NATIONSBANK
1. Shareholder Information. NationsBank shall maintain a record of the number of Shares held by each Shareholder of record which shall include name, address, and taxpayer identification number and which shall indicate whether such Shares are held in certificates or uncertificated form.
2. Shareholder Services. NationsBank shall respond as appropriate to all inquiries and communications from Shareholders relating to Shareholder accounts with respect to its duties hereunder and as may be from time to time mutually agreed upon between NationsBank and the Transfer Agent (or the Funds as the case maybe).
3. Share Certificates.
(a) At the expense of the Funds, the Funds shall supply NationsBank with an adequate supply of blank share certificates to meet NationsBank's requirements therefor. Such Share certificates shall be properly signed by facsimile. Notwithstanding the death, resignation, or removal of any Officer of the Fund whose signature appears on such certificates, NationsBank or its agent may continue to countersign certificates which bear such signatures until otherwise directed by Written Instructions.
(b) NationsBank shall issue replacement Share certificates in lieu of certificates which have been lost, stolen or destroyed, upon receipt by NationsBank of properly executed affidavits and lost certificate bonds, in form satisfactory to NationsBank, with the applicable Fund and NationsBank as obligees under the bond.
(c) NationsBank shall also maintain a record of each certificate issued, the number of Shares represented thereby and the Shareholder of record. With respect to Shares held in open accounts or uncertificated form (i.e., no certificate being issued with respect thereto) the Transfer Agent shall maintain comparable records of the Shareholders thereof, including their names, addresses and taxpayer identification numbers. NationsBank shall further maintain a stop transfer record on lost and/or replaced certificates.
4. Mailing Communications to Shareholders; Proxy Materials. NationsBank will address and mail to Shareholders of the Funds, all reports to Shareholders, dividend and distribution notices and proxy material for the Funds' meetings of Shareholders. In connection with meetings of Shareholders, NationsBank will prepare Shareholder lists, mail and certify as to the mailing of proxy materials, process and tabulate returned proxy cards, report on proxies voted prior to meetings, act as inspector of election at meetings and certify Shares voted at meetings.
5. Sales of Shares.
(a) NationsBank shall not be required to issue any Shares of the Funds where it has received a Written Instruction from the applicable Fund or official notice from any appropriate authority that the sale of the Shares of such Fund has been suspended or discontinued. The existence of such Written Instructions or such official notice shall be conclusive evidence of the right of NationsBank to rely on such Written Instructions or official notice.
(b) In the event that any check or other order for the payment of money is returned unpaid for any reason, NationsBank will endeavor to: (i) give prompt notice of such return to the applicable Fund or its designee; (ii) place a stop transfer order against all Shares issued as a result of such check or order; and (iii) take such actions as NationsBank may from time to time deem appropriate.
6. Transfer and Repurchase.
(a) NationsBank shall process all requests to transfer or redeem Shares in accordance with the transfer or repurchase procedures set forth in the applicable Fund's Prospectus.
(b) NationsBank will transfer or repurchase Shares upon receipt of Oral or Written Instructions or otherwise pursuant to the Prospectus and Share certificates, if any, properly endorsed for transfer or redemption, accompanied by such documents as NationsBank reasonably may deem necessary.
(c) NationsBank reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the endorsement on the instructions is valid and genuine. NationsBank also reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the requested transfer or repurchase is legally authorized, and it shall incur no liability for the refusal, in good faith, to make transfers or repurchases which NationsBank, in its reasonable judgment, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer or repurchase.
(d) When Shares are redeemed, NationsBank shall, upon receipt of the instructions and documents in proper form, deliver to the Custodian and the applicable Fund or its designee a notification setting forth the number of Shares to be redeemed. Such redeemed Shares shall be reflected on appropriate accounts maintained by NationsBank reflecting outstanding Shares of the applicable Fund and Shares attributed to individual accounts.
(e) NationsBank shall, upon receipt of the monies paid to it by the Custodian for the redemption of Shares, pay such monies as are received from the Custodian, all in accordance with the procedures described in the Written Instructions received by NationsBank from the Funds.
(f) NationsBank shall not process or effect any repurchase with respect to Shares of any Fund after receipt by NationsBank or its agent of notification of the suspension of the determination of the net asset value of such Fund.
7. Dividends.
(a) Upon the declaration of each dividend and each capital gains distribution by the Board of Directors of the Funds with respect to Shares of the Funds, the Funds shall furnish or cause to be furnished to NationsBank Written Instructions setting forth the date of the declaration of such dividend or distribution, the ex-dividend date, the date of payment thereof, the record date as of which Shareholders entitled to payment shall be determined, the amount payable per Share to the Shareholders of record as of that date, the total amount payable to NationsBank on the payment date and whether such dividend or distribution is to be paid in Shares at net asset value.
(b) On or before the payment date specified in such resolution of the Board of Directors, the applicable Fund will pay to NationsBank sufficient cash to make payment on such payment date to the Shareholders of record on the record date.
(c) If, prior to the payment date, NationsBank does not receive sufficient cash from the applicable Fund to make total dividend and/or distribution payments to all Shareholders of record of such Fund as of the record date, NationsBank will, upon notifying such Fund, withhold payment to all Shareholders of record as of the record date until sufficient cash is provided to NationsBank.
8. Daily Activity. NationsBank will communicate via fax all "net" activity for the day to TSSG. TSSG shall update the transfer agent system and notify fund accounting of money movement based on such information.
9. In addition to and neither in lieu nor in contravention of the services set forth above, NationsBank shall: (i) perform all the customary services of a transfer agent, registrar, dividend disbursing agent and agent of the dividend reinvestment and cash purchase plan as described herein consistent with those requirements in effect as of the date of this Agreement. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, tabulating proxies, mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, 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.
Schedule C
Fee Schedule
Upon receipt of the appropriate payment from the Funds, the Transfer Agent will compensate NationsBank for the performance of its obligations hereunder in
accordance with a flat fee of $251,000 per year ($20,916.67 per month).
CROSS INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of the 14th day of February, 2000, by and among Nations Fund, Inc. (the "Company"), a Maryland corporation, Nations Fund Trust (the "Trust"), a Massachusetts business trust, Nations Reserves ("Reserves"), a Massachusetts business trust, Nations Master Investment Trust (the "Master Trust"), a Delaware business trust and Nations Funds Trust ("Funds Trust"), a Delaware business trust.
WHEREAS, the Company is an open-end management investment company registered as such under the Investment Company Act of 1940 (the "1940 Act"), currently consisting of seven operating investment portfolios, but which may from time to time consist of a greater or lesser number of investment portfolios; and
WHEREAS, the Trust is an open-end management investment company registered as such under the 1940 Act, currently consisting of thirty-six operating investment portfolios, but which may from time to time consist of a greater or lesser number of investment portfolios; and
WHEREAS, Reserves is an open-end management investment company registered as such under the 1940 Act, currently consisting of sixteen operating investment portfolios, but which may from time to time consist of a greater or lesser number of investment portfolios; and
WHEREAS, the Master Trust is an open-end management investment company registered as such under the 1940 Act, currently consisting of seven operating investment portfolios, but which may from time to time consist of a greater or lesser number of investment portfolios; and
WHEREAS, Funds Trust is an open-end management investment company registered as such under the Investment Company Act of 1940 (the "1940 Act"), currently consisting of three operating investment portfolios, but which may from time to time consist of a greater or lesser number of investment portfolios; and
WHEREAS, the Company, the Trust, Reserves and Funds Trust plan to offer, on a continuous basis, shares of common stock, units of beneficial interest, units of beneficial interests and units of beneficial interests, respectively, in their investment portfolios ("Securities") in a combined set of prospectuses ("Prospectuses") and/or preliminary prospectuses ("Preliminary Prospectuses") (such offering of Securities to be hereinafter referred to as the "Joint Offering") and plan to file, from time to time, such combined set of prospectuses and other materials with the Securities and Exchange Commission ("SEC") (such filings with the SEC to be referred to herein as the "Registration Statements");
WHEREAS, certain information relating to the Master Trust must be included in the prospectuses of Reserves and Funds Trust and therefore will be included in the Joint Offerings and Registration Statements;
NOW THEREFORE, the Company, the Trust, Reserves, the Master Trust and Funds Trust hereby agree as follows:
(1) (a) The Company will indemnify and hold harmless the Trust, Reserves, the Master Trust and Funds Trust against any losses, claims, damages or liabilities, to which the Trust, Reserves, the Master Trust or Funds Trust may become subject under the Securities Act of 1933 (the "Act"), the 1940 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Prospectuses, any Preliminary Prospectuses, the Registration Statements, any other Prospectuses relating to the Securities, or any amendments or supplements to the foregoing (hereinafter referred to collectively as the "Offering Documents"), or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Documents in reliance upon and in conformity with written information furnished to the Trust, Reserves, the Master Trust or Funds Trust by the Company expressly for use therein; and will reimburse the Trust, Reserves, the Master Trust and Funds Trust for any legal or other expenses reasonably incurred by the Trust, Reserves, the Master Trust or Funds Trust in connection with investigating or defending any such action or claim; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents in reliance upon and in conformity with written information furnished to the Company by the Trust, Reserves, the Master Trust or Funds Trust expressly for use in the Offering Documents.
(b) The Trust will indemnify and hold harmless the Company, Reserves, the Master Trust and Funds Trust against any losses, claims, damages or liabilities to which the Company, Reserves, the Master Trust or Funds Trust may become subject under the Act, the 1940 Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon and untrue statement or alleged untrue statement of a material fact contained in the Offering Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Documents in reliance upon and in conformity with written information furnished to the Company, Reserves, the Master Trust or Funds Trust by the Trust expressly for use therein; and will reimburse the Company, Reserves, the Master Trust and Funds Trust for any legal or other expenses reasonably incurred by the Company, Reserves, the Master Trust or Funds Trust in connection with investigating or defending any such action or claim; provided, however, that the Trust shall not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents in reliance upon and in conformity with written information furnished to the Trust by the Company, Reserves, the Master Trust or Funds Trust expressly for use in the Offering Documents.
(c) Reserves will indemnify and hold harmless the Company, the Trust, the Master Trust and Funds Trust against any losses, claims, damages or liabilities to which the Company, the Trust, the Master Trust or Funds Trust may become subject under the Act, the 1940 Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Documents in reliance upon and in conformity with written information furnished to the Company, the Trust, the Master Trust or Funds Trust by Reserves expressly for use therein; and will reimburse the Company, the Trust, the Master Trust and Funds Trust for any legal or other expenses reasonably incurred by the Company, the Trust, the Master Trust or Funds Trust in connection with investigating or defending any such action or claim; provided, however, that Reserves shall not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents in reliance upon and in conformity with written information furnished to Reserves by the Company, the Trust, the Master Trust or Funds Trust for use in the Offering Documents.
(d) The Master Trust will indemnify and hold harmless the Company, the Trust, Reserves and Funds Trust against any losses, claims, damages or liabilities to which the Company, the Trust, Reserves or Funds Trust may become subject under the Act, the 1940 Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Documents in reliance upon and in conformity with written information furnished to the Company, the Trust, Reserves or Funds Trust by the Master Trust expressly for use therein; and will reimburse the Company, the Trust, Reserves and Funds Trust for any legal or other expenses reasonably incurred by the Company, the Trust, Reserves or Funds Trust in connection with investigating or defending any such action or claim; provided, however, that the Master Trust shall not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents in reliance upon and in conformity with written information furnished to the Master Trust by the Company, the Trust, Reserves or Funds Trust for use in the Offering Documents.
(e) Funds Trust will indemnify and hold harmless the Company, the Trust, Reserves and the Master Trust against any losses, claims, damages or liabilities to which the Company, the Trust, Reserves or the Master Trust may become subject under the Act, the 1940 Act, or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Offering Documents or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Offering Documents in reliance upon and in conformity with written information furnished to the Company, the Trust, Reserves or the Master Trust by Funds Trust expressly for use therein; and will reimburse the Company, the Trust, Reserves and the Master Trust for any legal or other expenses reasonably incurred by the Company, the Trust, Reserves or the Master Trust in connection with investigating or defending any such action or claim; provided, however, that Reserves shall not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents in reliance upon and in conformity with written information furnished to Funds Trust by the Company, the Trust, Reserves or the Master Trust for use in the Offering Documents.
(f) Promptly after receipt by an indemnified party under subsection
(a), (b),(c), (d) or (e) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof
is to be made against an indemnifying party or parties under such
subsection, notify the indemnifying party or parties in writing of
the commencement thereof; but the omission to so notify the
indemnifying party or parties shall not relieve it or them from any
liability which it or they may have to any indemnified party
otherwise than under such subsection. In case any such action shall
be brought against any indemnified party and it shall notify the
indemnifying party or parties of the commencement thereof, the
indemnifying party or parties shall be entitled to participate
therein and, to the extent that either indemnifying party or both
shall wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and, after notice from the
indemnifying party or parties to such indemnified part of its or
their election so to assume the defense thereof, the indemnifying
party or parties shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or
any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other
than reasonable costs of investigation.
(2) This agreement may be executed simultaneously in five or more counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly executed by their authorized officers designated below as of the day and year first written above.
NATIONS FUND, INC.
By: /s/ A. Max Walker
----------------------------------
A. Max Walker
Chairman of the Board of Directors
|
NATIONS FUND TRUST
By: /s/ A. Max Walker
----------------------------------
A. Max Walker
Chairman of the Board of Trustees
|
NATIONS RESERVES
By: /s/ A. Max Walker
----------------------------------
A. Max Walker
Chairman of the Board of Trustees
|
NATIONS MASTER INVESTMENT TRUST
By: /s/ A. Max Walker
----------------------------------
A. Max Walker
Chairman of the Board of Trustees
|
NATIONS FUNDS TRUST
By: /s/ A. Max Walker
----------------------------------
A. Max Walker
Chairman of the Board of Trustees
|
NATIONS FUNDS TRUST
SHAREHOLDER SERVICING PLAN ("PLAN")
INVESTOR B SHARES
Section 1. Each of the proper officers of Nations Funds Trust (the "Trust") is authorized to execute and deliver, in the name and on behalf of the Trust, written agreements based substantially on the form attached hereto as Appendix A or any other form duly approved by the Trust's Board of Trustees ("Agreements") with broker/dealers, banks and other financial institutions that are dealers of record or holders of record or which have a servicing relationship ("Servicing Agents") with the beneficial owners of Investor B Shares in any of the Trust's Funds (collectively, "Shares") provided that any material modifications of services listed in the Agreement shall be presented for approval or ratification by the Trustees at the next regularly scheduled Board Meeting. Pursuant to such Agreements, Servicing Agents shall provide shareholder support services as set forth therein to their clients who beneficially own Shares of the portfolios listed on Exhibit I (the "Funds") in consideration of a fee, computed monthly in the manner set forth in the applicable Fund's then current prospectus, at an annual rate of up to 0.25% of the average daily net asset value of the Shares beneficially owned by or attributable to such clients. Affiliates of the Trust's distributor, administrator, co-administrator and adviser are eligible to become Servicing Agents and to receive fees under this Plan. All expenses incurred by a Fund in connection with the Agreements and the implementation of this Plan shall be borne either by the holders of the Shares of the particular Fund involved. If more than one Fund is involved and these expenses are not directly attributable to Shares of a particular Fund, then the expenses may be allocated between or among the Shares of the Funds in a fair and equitable manner.
Section 2. The Trust's administrator and/or co-administrator shall monitor the arrangements pertaining to the Trust's Agreements with Servicing Agents. The Trust's administrator and co-administrator shall not, however, be obligated by this Plan to recommend, and the Trust shall not be obligated to execute, any Agreement with any qualifying Servicing Agents.
Section 3. So long as this Plan is in effect, the Trust's distributor shall provide to the Trust's Board of Trustees, and the Trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue in effect for a period of one year from its date of execution and shall continue thereafter for successive annual periods, provided that such continuance is specifically approved by a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons," as defined in the Investment Company Act of 1940, of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any Agreement related to this Plan (the "Disinterested Trustees") cast in person at a meeting called for the purpose of voting on this Plan.
Section 5. This Plan may be amended at any time with respect to any Fund by the Trust's Board of Trustees, provided that any material amendment of the terms of this Plan (including a material increase of the fee payable hereunder) shall become effective only upon the approvals set forth in Section 4.
Section 6. This Plan is terminable at any time with respect to any Fund by vote of a majority of the Disinterested Trustees.
Section 7. While this Plan is in effect, the selection and nomination of the Disinterested Trustees shall be committed to the discretion of such Disinterested Trustees.
Section 8. The Trust will preserve copies of this Plan, Agreements, and any written reports regarding this Plan presented to the Board of Trustees for a period of not less than six years.
EXHIBIT I
NATIONS FUNDS TRUST
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
Last Amended: December 9, 1999
NATIONS FUNDS TRUST
SHAREHOLDER SERVICING PLAN ("PLAN")
INVESTOR C SHARES
Section 1. Each of the proper officers of Nations Funds Trust (the "Trust") is authorized to execute and deliver, in the name and on behalf of the Trust, written agreements based substantially on the form attached hereto as Appendix A or any other form duly approved by the Trust's Board of Trustees ("Agreements") with broker/dealers, banks and other financial institutions that are dealers of record or holders of record or which have a servicing relationship ("Servicing Agents") with the beneficial owners of Investor C Shares in any of the Trust's Funds (collectively, "Shares") provided that any material modifications of services listed in the Agreement shall be presented for approval or ratification by the Trustees at the next regularly scheduled Board Meeting. Pursuant to such Agreements, Servicing Agents shall provide shareholder support services as set forth therein to their clients who beneficially own Shares of the portfolios listed on Exhibit I (the "Funds") in consideration of a fee, computed monthly in the manner set forth in the applicable Fund's then current prospectus, at an annual rate of up to 0.25% of the average daily net asset value of the Shares beneficially owned by or attributable to such clients. Affiliates of the Trust's distributor, administrator, co-administrator and adviser are eligible to become Servicing Agents and to receive fees under this Plan. All expenses incurred by a Fund in connection with the Agreements and the implementation of this Plan shall be borne either by the holders of the Shares of the particular Fund involved. If more than one Fund is involved and these expenses are not directly attributable to Shares of a particular Fund, then the expenses may be allocated between or among the Shares of the Funds in a fair and equitable manner.
Section 2. The Trust's administrator and/or co-administrator shall monitor the arrangements pertaining to the Trust's Agreements with Servicing Agents. The Trust's administrator and co-administrator shall not, however, be obligated by this Plan to recommend, and the Trust shall not be obligated to execute, any Agreement with any qualifying Servicing Agents.
Section 3. So long as this Plan is in effect, the Trust's distributor shall provide to the Trust's Board of Trustees, and the Trustees shall review, at least quarterly, a written report of the amounts expended pursuant to this Plan and the purposes for which such expenditures were made.
Section 4. Unless sooner terminated, this Plan shall continue in effect for a period of one year from its date of execution and shall continue thereafter for successive annual periods, provided that such continuance is specifically approved by a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons," as defined in the Investment Company Act of 1940, of the Trust and have no direct or indirect financial interest in the operation of this Plan or in any Agreement related to this Plan (the "Disinterested Trustees") cast in person at a meeting called for the purpose of voting on this Plan.
Section 5. This Plan may be amended at any time with respect to any Fund by the Trust's Board of Trustees, provided that any material amendment of the terms of this Plan (including a material increase of the fee payable hereunder) shall become effective only upon the approvals set forth in Section 4.
Section 6. This Plan is terminable at any time with respect to any Fund by vote of a majority of the Disinterested Trustees.
Section 7. While this Plan is in effect, the selection and nomination of the Disinterested Trustees shall be committed to the discretion of such Disinterested Trustees.
Section 8. The Trust will preserve copies of this Plan, Agreements, and any written reports regarding this Plan presented to the Board of Trustees for a period of not less than six years.
EXHIBIT I
NATIONS FUNDS TRUST
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
Last Amended: December 9, 1999
February 7, 2000
Nations Funds Trust
111 Center Street
Little Rock, Arkansas 72201
Gentlemen:
With respect to our purchase from you of $100,000 in shares of beneficial interest in Nations Funds Trust (the "Trust"), consisting of $100,000 in shares of Nations High Yield Bond Fund, we hereby advise you that we are purchasing such shares with no intention to dispose of such shares either through resale to others or redemption by the Trust.
Very truly yours,
STEPHENS INC.
By: /s/Richard H. Blank, Jr.
----------------------------
Richard H. Blank, Jr.
Senior Vice President
|
NATIONS FUNDS TRUST
INVESTOR A SHAREHOLDER SERVICING
AND DISTRIBUTION PLAN
This Shareholder Servicing and Distribution Plan (the "Plan") for the Investor A shares of the series of Nations Funds Trust (the "Trust") listed on the schedule attached hereto (the "Funds"), has been adopted by the Board of Trustees of the Trust in conformance with Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
Section 1. Payments for Services. The Trust may compensate or reimburse its Distributor for any activities or expenses primarily intended to result in the sale of Investor A Shares of the Trust's Funds or servicing agents for providing services under this Plan. Payments by the Trust under the Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trust's Board of Trustees, provided that no rate set by the Board for any Fund may exceed, on an annual basis, 0.25% of the average daily net assets of a Fund's Investor A Shares.
Section 2. Expenses Covered by Plan.
(a) Distribution Expenses. The fees payable under Section 1 shall be
used primarily to compensate or reimburse the Distributor for distribution
services provided by it, and related expenses incurred, including payments by
the Distributor to compensate or reimburse banks, broker/dealers or other
financial institutions that have entered into a Sales Support Agreement (defined
below) with the Distributor ("Selling Agents"), for sales support services
provided, and related expenses incurred, by such Selling Agents. Payments under
Section 1 may be made with respect to: (i) preparation, printing and
distribution of prospectuses, sales literature and advertising materials by the
Distributor or, as applicable, Selling Agents, attributable to distribution or
sales support activities, respectively; (ii) commissions, incentive compensation
or other compensation to, and expenses of, account executives or other employees
of the Distributor or Selling Agents, attributable to distribution or sales
support activities, respectively; (iii) overhead and other office expenses of
the Distributor or Selling Agents, attributable to distribution or sales support
activities, respectively; (iv) opportunity costs relating to the foregoing
(which may be calculated as a carrying charge on the Distributor's or Selling
Agents' unreimbursed expenses incurred in connection with distribution or sales
support activities, respectively); and (v) any other costs and expenses relating
to distribution or sales support activities. The overhead and other office
expenses referenced in this Section may include, without limitation: (i) the
expenses of operating the Distributor's or Selling Agents' offices in connection
with the sale of Fund shares, including lease costs, the salaries and employee
benefit costs of administrative, operations and support personnel, utility
costs, communication costs and the costs of stationery and supplies; (ii) the
costs of client sales seminars and travel related to distribution and sales
support activities; and (iii) other expenses relating to distribution and sales
support activities.
(b) Shareholder Servicing Expenses. The shareholder servicing activities for which compensation may be received under this Plan may include, among other things: (i) aggregating and processing purchase and redemption requests and transmitting promptly net purchase and redemption orders to the Distributor or transfer agent; (ii) providing customers with a service that invests the assets of their accounts in Shares pursuant to specific or pre-authorized instructions; (iii) processing dividend and distribution payments; (iv) providing information periodically to customers showing their positions in Shares; (v) arranging for bank wires; (vi) responding to customers' inquiries concerning their investment in Shares; (vii) providing subaccounting with respect to Shares beneficially owned by customers or the information to the Trust necessary for subaccounting; (viii) if required by law, forwarding shareholder communications (such as proxies, shareholder reports, annual and semi-annual financial statements and dividend, distribution and tax notices) to customers; (ix) forwarding to customers proxy statements and proxies containing any proposals regarding the Shareholder Servicing Agreement; (x) general shareholder liaison services; and (xi) providing such other similar services as the Trust may reasonably request to the extent such firms are permitted to do so under applicable statutes, rules or regulations.
Section 3. Agreements.
(a) Distribution and Sales Support Agreements. Any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, a written agreement with the Distributor in a form duly approved from time to time by the Trust's Board of Trustees. Such agreement shall authorize the Distributor to enter into written Sales Support Agreements, in substantially the form attached hereto as Exhibit B ("Sales Support Agreements"), with Selling Agents.
(b) Shareholder Servicing Agreements. Any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, written agreements based substantially on the form attached hereto as Appendix C or any other form duly approved by the Trust's Board of Trustees ("Shareholder Servicing Agreements") with broker/dealers, banks and other financial institutions that are dealers of record or holders of record or which have a servicing relationship ("Servicing Agents") with the beneficial owners of Investor A Shares of the Funds of the Trust.
With respect to Investor A Shares, actual distribution expenses incurred by the Distributor (or sales support expenses incurred by Selling Agents) in a given year may exceed the sum of the fees received by the Distributor pursuant to this Plan and payments received by the Distributor pursuant to contingent deferred sales charges. Any such excess may be recovered by the Distributor, and retained by it or paid over to Selling Agents, as applicable, in future years as long as this Plan is in effect. If this Plan is terminated or not continued, the Trust shall not be obligated to pay the Distributor (or Selling Agents) for any expenses not previously reimbursed by the Trust or recovered through contingent deferred sales charges.
To the extent any payments made by a Fund pursuant to a Shareholder Servicing Agreement are deemed to be payments for the financing of any activity primarily intended to result in the sale of shares within the context of Rule 12b-1 under the 1940 Act, such payments shall be deemed to have been approved pursuant to the Plan.
Notwithstanding anything herein to the contrary, no Fund or class of shares shall make any payments under the Plan that exceed the maximum amounts payable under applicable Conduct Rules of the National Association of Securities Dealers, Inc.
Section 4. Reports of Distributor. So long as this Plan is in effect, the Distributor shall provide to the Trust's Officers and Board of Trustees, and the Trustees shall review at least quarterly, a written report of the amounts expended by it pursuant to the Distribution Agreement, or by Selling Agents pursuant to Sales Support Agreements, and the purposes for which such expenditures were made.
Section 5. Approval of Plan. This Plan will become effective immediately, as to any Fund's Investor A Shares, upon its approval by (a) a majority of the outstanding Investor A Shares of such Fund, and (b) a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of this Plan or in any agreements entered into in connection with this Plan, pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of the Plan.
Section 6. Continuance of Plan. The Plan shall continue in effect for so long as its continuance is specifically approved at least annually by the Trust's Board of Trustees in the manner described in Section 5.
Section 7. Amendments. This Plan may be amended at any time by the
Board of Trustees provided that (a) any amendment to increase materially the
costs which a Fund's Investor A Shares may bear for distribution pursuant to
this Plan shall be effective only upon approval by a vote of a majority of the
outstanding Investor A Shares of such Fund, and (b) any material amendments of
the terms of this Plan shall become effective only upon approval as provided in
Section 5 hereof.
Section 8. Termination. This Plan is terminable, as to a Fund's
Investor A Shares, without penalty at any time by (a) a vote of a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements entered into in connection with this Plan, or
(b) a vote of a majority of the outstanding Investor A Shares of such Fund.
Section 9. Limitation of Liability. The names "Nations Funds Trust" and "Trustees of Nations Funds Trust" refer respectively to the trust created and the Trustees, as Trustees but not individually or personally, acting from time to time under a Declaration of Trust which is hereby referred to and a copy of which is at the principal office of the Trust. The obligations of "Nations Funds Trust" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with a Fund's Investor A Shares of the Trust must look solely to the Trust property belonging to such Fund's Investor A Shares for the enforcement of any claims against the Trust.
Section 10. Records. The Trust will preserve copies of this Plan, and any Agreements and written reports related to this Plan presented to the Board of Trustees for a period of not less than six years.
Section 11. Miscellaneous. The captions in this Plan are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
EXHIBIT A
NATIONS FUNDS TRUST
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
3. Nations MidCap Index Fund
Last Amended: December 9, 1999
NATIONS FUNDS TRUST
INVESTOR B DISTRIBUTION PLAN
This Distribution Plan (the "Plan") for the Investor B shares of the series of Nations Funds Trust (the "Trust") listed on the schedule attached hereto (the "Funds"), has been adopted by the Board of Trustees of the Trust in conformance with Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
Section 1. Payments for Distribution-Related Services. The Trust may compensate or reimburse its Distributor for any activities or expenses primarily intended to result in the sale of Investor B Shares of the Trust's Funds. Payments by the Trust under this Section of the Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trust's Board of Trustees, provided that no rate set by the Board for any Fund may exceed, on an annual basis, 0.75% of the average daily net assets of a Fund's Investor B Shares.
Section 2. Expenses Covered by Plan. The fees payable under Section 1 shall be used primarily to compensate or reimburse the Distributor for distribution services provided by it, and related expenses incurred, including payments by the Distributor to compensate or reimburse banks, broker/dealers or other financial institutions that have entered into a Sales Support Agreement (defined below) with the Distributor ("Selling Agents"), for sales support services provided, and related expenses incurred, by such Selling Agents. Payments under Section 1 may be made with respect to: (i) preparation, printing and distribution of prospectuses, sales literature and advertising materials by the Distributor or, as applicable, Selling Agents, attributable to distribution or sales support activities, respectively; (ii) commissions, incentive compensation or other compensation to, and expenses of, account executives or other employees of the Distributor or Selling Agents, attributable to distribution or sales support activities, respectively; (iii) overhead and other office expenses of the Distributor or Selling Agents, attributable to distribution or sales support activities, respectively; (iv) opportunity costs relating to the foregoing (which may be calculated as a carrying charge on the Distributor's or Selling Agents' unreimbursed expenses incurred in connection with distribution or sales support activities, respectively); and (v) any other costs and expenses relating to distribution or sales support activities. The overhead and other office expenses referenced in this Section may include, without limitation: (i) the expenses of operating the Distributor's or Selling Agents' offices in connection with the sale of Fund shares, including lease costs, the salaries and employee benefit costs of administrative, operations and support personnel, utility costs, communication costs and the costs of stationery and supplies; (ii) the costs of client sales seminars and travel related to distribution and sales support activities; and (iii) other expenses relating to distribution and sales support activities.
Section 3. Distribution and Sales Support Agreements. Any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, a written agreement with the Distributor in a form duly approved from time to time by the Trust's Board of Trustees. Such agreement shall authorize the Distributor to enter into written Sales Support Agreements, in substantially the form attached hereto as Exhibit B ("Sales Support Agreements"), with Selling Agents.
Section 4. Limitations on Payments. Payment made by a particular Fund under Section 1 must be for distribution or sales support services rendered for or on behalf of such Fund. However, joint distribution or sales support financing with respect to the Funds (which financing may also involve other investment portfolios or companies that are affiliated persons of such a person, or affiliated persons of the Distributor) shall be permitted in accordance with applicable regulations of the Securities and Exchange Commission as in effect from time to time.
To the extent any payments made by a Fund pursuant to a Shareholder Servicing Plan and Servicing Agreement are deemed to be payments for the financing of any activity primarily intended to result in the sale of shares within the context of Rule 12b-1 under the 1940 Act, such payments shall be deemed to have been approved pursuant to the Plan.
With respect to Investor B Shares, actual distribution expenses incurred by the Distributor (or sales support expenses incurred by Selling Agents) in a given year may exceed the sum of the fees received by the Distributor pursuant to this Plan and payments received by the Distributor pursuant to contingent deferred sales charges. Any such excess may be recovered by the Distributor, and retained by it or paid over to Selling Agents, as applicable, in future years as long as this Plan is in effect. If this Plan is terminated or not continued, the Trust shall not be obligated to pay the Distributor (or Selling Agents) for any expenses not previously reimbursed by the Trust or recovered through contingent deferred sales charges.
Notwithstanding anything herein to the contrary, no Fund or class of shares shall make any payments under the Plan that exceed the maximum amounts payable under applicable Conduct Rules of the National Association of Securities Dealers, Inc.
Section 5. Reports of Distributor. So long as this Plan is in effect, the Distributor shall provide to the Trust's Officers and Board of Trustees, and the Trustees shall review at least quarterly, a written report of the amounts expended by it pursuant to the Distribution Agreement, or by Selling Agents pursuant to Sales Support Agreements, and the purposes for which such expenditures were made.
Section 6. Approval of Plan. This Plan will become effective immediately, as to any Fund's Investor B Shares, upon its approval by (a) a majority of the outstanding Investor B Shares of such Fund, and (b) a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of this Plan or in any agreements entered into in connection with this Plan, pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of the Plan.
Section 7. Continuance of Plan. The Plan shall continue in effect for so long as its continuance is specifically approved at least annually by the Trust's Board of Trustees in the manner described in Section 6.
Section 8. Amendments. This Plan may be amended at any time by the
Board of Trustees provided that (a) any amendment to increase materially the
costs which a Fund's Investor B Shares may bear for distribution pursuant to
this Plan shall be effective only upon approval by a vote of a majority of the
outstanding Investor B Shares of such Fund, and (b) any material amendments of
the terms of this Plan shall become effective only upon approval as provided in
Section 6 hereof.
Section 9. Termination. This Plan is terminable, as to a Fund's
Investor B Shares, without penalty at any time by (a) a vote of a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements entered into in connection with this Plan, or
(b) a vote of a majority of the outstanding Investor B Shares of such Fund.
Section 10. Limitation of Liability. The names "Nations Funds Trust" and "Trustees of Nations Funds Trust" refer respectively to the trust created and the Trustees, as Trustees but not individually or personally, acting from time to time under a Declaration of Trust which is hereby referred to and a copy of which is at the principal office of the Trust. The obligations of "Nations Funds Trust" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with a Fund's Investor B Shares of the Trust must look solely to the Trust property belonging to such Fund's Investor B Shares for the enforcement of any claims against the Trust.
Section 11. Records. The Trust will preserve copies of this Plan, and any Agreements and written reports related to this Plan presented to the Board of Trustees for a period of not less than six years.
Section 12. Miscellaneous. The captions in this Plan are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
EXHIBIT A
NATIONS FUNDS TRUST
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
Last Amended: December 9, 1999
NATIONS FUNDS TRUST
INVESTOR C DISTRIBUTION PLAN
This Distribution Plan (the "Plan") for the Investor C shares of the series of Nations Funds Trust (the "Trust") listed on the schedule attached hereto (the "Funds"), has been adopted by the Board of Trustees of the Trust in conformance with Rule 12b-1 under the Investment Company Act of 1940 (the "1940 Act").
Section 1. Payments for Distribution-Related Services. The Trust may compensate or reimburse its Distributor for any activities or expenses primarily intended to result in the sale of Investor C Shares of the Trust's Funds. Payments by the Trust under this Section of the Plan will be calculated daily and paid monthly at a rate or rates set from time to time by the Trust's Board of Trustees, provided that no rate set by the Board for any Fund may exceed, on an annual basis, 0.75% of the average daily net assets of a Fund's Investor C Shares.
Section 2. Expenses Covered by Plan. The fees payable under Section 1 shall be used primarily to compensate or reimburse the Distributor for distribution services provided by it, and related expenses incurred, including payments by the Distributor to compensate or reimburse banks, broker/dealers or other financial institutions that have entered into a Sales Support Agreement (defined below) with the Distributor ("Selling Agents"), for sales support services provided, and related expenses incurred, by such Selling Agents. Payments under Section 1 may be made with respect to: (i) preparation, printing and distribution of prospectuses, sales literature and advertising materials by the Distributor or, as applicable, Selling Agents, attributable to distribution or sales support activities, respectively; (ii) commissions, incentive compensation or other compensation to, and expenses of, account executives or other employees of the Distributor or Selling Agents, attributable to distribution or sales support activities, respectively; (iii) overhead and other office expenses of the Distributor or Selling Agents, attributable to distribution or sales support activities, respectively; (iv) opportunity costs relating to the foregoing (which may be calculated as a carrying charge on the Distributor's or Selling Agents' unreimbursed expenses incurred in connection with distribution or sales support activities, respectively); and (v) any other costs and expenses relating to distribution or sales support activities. The overhead and other office expenses referenced in this Section may include, without limitation: (i) the expenses of operating the Distributor's or Selling Agents' offices in connection with the sale of Fund shares, including lease costs, the salaries and employee benefit costs of administrative, operations and support personnel, utility costs, communication costs and the costs of stationery and supplies; (ii) the costs of client sales seminars and travel related to distribution and sales support activities; and (iii) other expenses relating to distribution and sales support activities.
Section 3. Distribution and Sales Support Agreements. Any officer of the Trust is authorized to execute and deliver, in the name and on behalf of the Trust, a written agreement with the Distributor in a form duly approved from time to time by the Trust's Board of Trustees. Such agreement shall authorize the Distributor to enter into written Sales Support Agreements, in substantially the form attached hereto as Exhibit B ("Sales Support Agreements"), with Selling Agents.
Section 4. Limitations on Payments. Payment made by a particular Fund under Section 1 must be for distribution or sales support services rendered for or on behalf of such Fund. However, joint distribution or sales support financing with respect to the Funds (which financing may also involve other investment portfolios or companies that are affiliated persons of such a person, or affiliated persons of the Distributor) shall be permitted in accordance with applicable regulations of the Securities and Exchange Commission as in effect from time to time.
To the extent any payments made by a Fund pursuant to a Shareholder Servicing Plan and Servicing Agreement are deemed to be payments for the financing of any activity primarily intended to result in the sale of shares within the context of Rule 12b-1 under the 1940 Act, such payments shall be deemed to have been approved pursuant to the Plan.
With respect to Investor C Shares, actual distribution expenses incurred by the Distributor (or sales support expenses incurred by Selling Agents) in a given year may exceed the sum of the fees received by the Distributor pursuant to this Plan and payments received by the Distributor pursuant to contingent deferred sales charges. Any such excess may be recovered by the Distributor, and retained by it or paid over to Selling Agents, as applicable, in future years as long as this Plan is in effect. If this Plan is terminated or not continued, the Trust shall not be obligated to pay the Distributor (or Selling Agents) for any expenses not previously reimbursed by the Trust or recovered through contingent deferred sales charges.
Notwithstanding anything herein to the contrary, no Fund or class of shares shall make any payments under the Plan that exceed the maximum amounts payable under applicable Conduct Rules of the National Association of Securities Dealers, Inc.
Section 5. Reports of Distributor. So long as this Plan is in effect, the Distributor shall provide to the Trust's Officers and Board of Trustees, and the Trustees shall review at least quarterly, a written report of the amounts expended by it pursuant to the Distribution Agreement, or by Selling Agents pursuant to Sales Support Agreements, and the purposes for which such expenditures were made.
Section 6. Approval of Plan. This Plan will become effective immediately, as to any Fund's Investor C Shares, upon its approval by (a) a majority of the outstanding Investor C Shares of such Fund, and (b) a majority of the Board of Trustees, including a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of this Plan or in any agreements entered into in connection with this Plan, pursuant to a vote cast in person at a meeting called for the purpose of voting on the approval of the Plan.
Section 7. Continuance of Plan. The Plan shall continue in effect for so long as its continuance is specifically approved at least annually by the Trust's Board of Trustees in the manner described in Section 6.
Section 8. Amendments. This Plan may be amended at any time by the
Board of Trustees provided that (a) any amendment to increase materially the
costs which a Fund's Investor C Shares may bear for distribution pursuant to
this Plan shall be effective only upon approval by a vote of a majority of the
outstanding Investor C Shares of such Fund, and (b) any material amendments of
the terms of this Plan shall become effective only upon approval as provided in
Section 6 hereof.
Section 9. Termination. This Plan is terminable, as to a Fund's
Investor C Shares, without penalty at any time by (a) a vote of a majority of
the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of this Plan or in any agreements entered into in connection with this Plan, or
(b) a vote of a majority of the outstanding Investor C Shares of such Fund.
Section 10. Limitation of Liability. The names "Nations Funds Trust" and "Trustees of Nations Funds Trust" refer respectively to the trust created and the Trustees, as Trustees but not individually or personally, acting from time to time under a Declaration of Trust which is hereby referred to and a copy of which is at the principal office of the Trust. The obligations of "Nations Funds Trust" entered into in the name or on behalf thereof by any of the Trustees, officers, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the Trustees, Shareholders, officers, representatives or agents of the Trust personally, but bind only the Trust Property (as defined in the Declaration of Trust), and all persons dealing with a Fund's Investor C Shares of the Trust must look solely to the Trust property belonging to such Fund's Investor C Shares for the enforcement of any claims against the Trust.
Section 11. Records. The Trust will preserve copies of this Plan, and any Agreements and written reports related to this Plan presented to the Board of Trustees for a period of not less than six years.
Section 12. Miscellaneous. The captions in this Plan are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
EXHIBIT A
NATIONS FUNDS TRUST
1. Nations High Yield Bond Fund
2. Nations Kansas Municipal Income Fund
Last Amended: December 9, 1999
NATIONS FUNDS TRUST
RULE 18F-3 MULTI-CLASS PLAN
I. INTRODUCTION.
Pursuant to Rule 18f-3 under the Investment Company Act of 1940, as amended (the "1940 Act"), the following sets forth the method for allocating fees and expenses among each class of shares in the investment portfolios of Nations Funds Trust (the "Trust"). In addition, this Rule 18f-3 Multi-Class Plan (the "Plan") sets forth the maximum initial sales loads, contingent deferred sales charges, Rule 12b-1 distribution fees, shareholder servicing fees, conversion features, exchange privileges and other shareholder services, if any, applicable to a particular class of shares of the portfolios. The Plan also identifies expenses that may be allocated to a particular class of shares to the extent that they are actually incurred in a different amount by the class or relate to a different kind or degree of services provided to the class.
The Trust is an open-end series investment company registered under the 1940 Act, the shares of which are registered on Form N-1A under the Securities Act of 1933 (Registration Nos. 333-89661 and 811-09645). The Trust elects to offer multiple classes of shares in its investment portfolios pursuant to the provisions of Rule 18f-3 and this Plan.
The Trust currently consists of the following three separate investment portfolios: Nations MidCap Index Fund, Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund.
The above-listed investment portfolios of the Trust (the "Funds") are authorized to issue the following classes of shares representing interests in the Funds:
(i) Nations MidCap Index Fund-- Primary A Shares and Investor A Shares;
(ii) Nations High Yield Bond Fund-- Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares;
(iii) Nations Kansas Municipal Income Fund -- Primary A Shares, Investor A Shares, Investor B Shares and Investor C Shares.
II. ALLOCATION OF EXPENSES.
A. Pursuant to Rule 18f-3 under the 1940 Act, the Trust shall allocate
to each class of shares in a Fund (i) any fees and expenses incurred by the
Trust in connection with the distribution of such class of shares under a
distribution plan adopted for such class of shares pursuant to Rule 12b-1, and
(ii) any fees and expenses incurred by the Trust under a shareholder servicing
plan in connection with the provision of shareholder services to the holders of
such class of shares.
B. In addition, pursuant to Rule 18f-3, the Trust may allocate the following fees and expenses, if any, to a particular class of shares in a single Fund:
(i) transfer agent fees identified by the transfer agent as being attributable to such class of shares;
(ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses, reports, and proxies to current shareholders of such class of shares or to regulatory agencies with respect to such class of shares;
(iii) blue sky registration or qualification fees incurred by such class of shares;
(iv) Securities and Exchange Commission registration fees incurred by such class of shares;
(v) the expense of administrative personnel and services (including, but not limited to, those of a portfolio accountant, custodian or dividend paying agent charged with calculating net asset values or determining or paying dividends) as required to support the shareholders of such class of shares;
(vi) litigation or other legal expenses relating solely to such class of shares;
(vii) fees of the Trustees of the Trust incurred as a result of issues relating to such class of shares;
(viii) independent accountants' fees relating solely to such class of shares; and
(ix) any other fees and expenses, not including advisory or custodial fees or other expenses related to the management of the Fund's assets, relating to (as defined below) such class of shares.
C. For all purposes under this Plan, fees and expenses "relating to" a
class of shares are those fees and expenses that are actually incurred in a
different amount by the class or that relate to a different kind or degree of
services provided to the class. The proper officers of the Trust shall have the
authority to determine whether any or all of the fees and expenses described in
Section B of this Part II should be allocated to a particular class of shares.
The Board of Trustees will monitor any such allocations to ensure that they
comply with the requirements of the Plan.
D. Income and any expenses of Nations MidCap Index Fund, Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund not allocated to a particular class of any such Fund pursuant to this Plan shall be allocated to each class of the Fund on the basis of the relative net assets (settled shares), as defined in Rule 18f-3, of that class in relation to the net assets of the Fund.
Realized and unrealized capital gains and losses of Nations MidCap Index Fund, Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund shall be allocated to each class of the Fund on the basis of the relative net assets (settled shares), as defined in Rule 18f-3, of that class in relation to the net assets of the Fund.
E. In certain cases, Banc of America Advisors, Inc., Banc of America Capital Management, Inc., MacKay-Shields LLC, Bank of America, N.A., Stephens Inc., PFPC Inc., or another service provider for a Fund may waive or reimburse all or a portion of the expenses of a specific class of shares of the Fund. The Board of Trustees will monitor any such waivers or reimbursements to ensure that they do not provide a means for cross-subsidization between classes.
III. CLASS ARRANGEMENTS.
The following summarizes the maximum front-end sales charges, contingent deferred sales charges, Rule 12b-1 distribution fees, shareholder servicing fees, conversion features, exchange privileges and other shareholder services, if any, applicable to each class of shares of the Trust. Additional details regarding such fees and services are set forth in the relevant Fund's (or Funds') current Prospectus(es) and Statement of Additional Information.
A. PRIMARY A SHARES -- ALL FUNDS.
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge: None
3. Maximum Rule 12b-1 Distribution Fees: None
4. Maximum Shareholder Servicing Fees: None
5. Conversion Features: None
6. Exchange Privileges:
(a) Primary A Shares of a Fund may be exchanged for Primary A Shares of any other Nations Fund. In some cases, the only Money Market Fund option is Trust Class Shares of Nations Reserves Money Market Funds.
(b) From time to time, the Board of Trustees of the Trust may modify, or ratify modifications to, the exchange privileges of Primary A Shares of a Fund without amending this Plan, provided that such exchange privileges, as modified, are described in the then-current prospectus for such shares of such Fund.
7. Other Shareholder Services: None
B. INVESTOR A SHARES -- NATIONS MIDCAP INDEX FUND ONLY.
1. Maximum Initial Sales Load: None.
2. Contingent Deferred Sales Charge (as a percentage of the lower of the original purchase price or redemption proceeds): None.
3. Maximum Rule 12b-1 Distribution/Shareholder Servicing Fees:
None.
4. Conversion Features: None.
5. Exchange Privileges:
(a) Investor A Shares of Nations MidCap Index Fund may be exchanged for Investor A Shares of any other Nations Index Fund.
(b) From time to time, the Board of Trustees of the Trust may modify, or ratify modifications to, the exchange privileges of Investor A Shares of a Fund without amending this Plan, provided that such exchange privileges, as modified, are described in the then-current prospectus for such shares of such Fund.
6. Other Shareholder Services. The Trust offers a Systematic Investment Plan, an Automatic Withdrawal Plan and an Automatic Exchange Feature to holders of Investor A Shares of the Nations MidCap Index Fund.
C. INVESTOR A SHARES-- NATIONS HIGH YIELD BOND FUND AND NATIONS KANSAS
MUNICIPAL INCOME FUND ONLY.
1. Maximum Initial Sales Load:
(a) Nations High Yield Bond Fund: maximum of 3.25%.
(b) Nations Kansas Municipal Income Fund: maximum of 3.25%.
2. Contingent Deferred Sales Charge (as a percentage of the lower of the original purchase price or redemption proceeds):
(a) 1.00% of purchases made before August 1, 1999 in amounts over $1 million if redeemed within one year of purchase, declining to 0.50% in the second year after purchase and eliminated thereafter.
(b) 1.00% of purchases made on or after August 1, 1999 in amounts over $1 million if redeemed within 18 months of purchase and eliminated thereafter.
3. Redemption Fee:
(a) 1.00% of the current net asset value of shares purchased in amounts of $1 million or more between July 31, 1997 and November 15, 1998, and redeemed within 18 months of purchase.
(b) 1.00% of the current net asset value of shares purchased by an employee benefit plan that initially invested in Investor A Shares between July 31, 1997 and November 15, 1998, and redeemed within 18 months of purchase in connection with redemption of all Nations Funds holdings of the employee benefit plan.
4. Maximum Rule 12b-1 Distribution/Shareholder Servicing Fees:
(a) Pursuant to a Shareholder Servicing and Distribution Plan adopted under Rule 12b-1, Investor A Shares of the Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may pay a combined distribution and shareholder servicing fee of up to 0.25% of the average daily net assets of such shares.
5. Conversion Features: Investor A Shares of a Fund shall have such conversion features, if any, as are determined by or ratified by the Board of Trustees of the Trust and described in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Investor A Shares of the Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may be exchanged for Investor A Shares of any other Nations Fund, except Index Funds.
(b) From time to time, the Board of Trustees of the Trust may modify, or ratify modifications to, the exchange privileges of Investor A Shares of a Fund without amending this Plan, provided that such exchange privileges, as modified, are described in the then-current prospectus for such shares of such Fund.
7. Other Shareholder Services. The Trust offers a Systematic Investment Plan, an Automatic Withdrawal Plan and an Automatic Exchange Feature to holders of Investor A Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund.
D. INVESTOR B SHARES-- NATIONS HIGH YIELD BOND FUND AND NATIONS KANSAS
MUNICIPAL INCOME FUND ONLY.
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge (as a percentage of the lower of the original purchase price or redemption proceeds):
(a) Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund: 3.00% if redeemed within one year of purchase, declining to 1.00% in the sixth year after purchase and eliminated thereafter.
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a Distribution Plan adopted under Rule 12b-1, Investor B Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may pay distribution fees of up to 0.75% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder Servicing Plan, Investor B Shares Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may pay shareholder servicing fees of up to 0.25% of the average daily net assets of such shares.
5. Conversion Features: Investor B Shares bought after November 15, 1998 convert automatically to Investor A Shares after a shareholder has owned them for eight years. Investor B Shares bought between August 1, 1997 and November 15, 1998 for $0-$499,999 will convert to Investor A Shares after a shareholder has owned them for six years. Investor B Shares bought between August 1, 1997 and November 15, 1998 for $500,000-$999,999 will convert to Investor A Shares after a shareholder has owned them for five years. Investor B Shares bought before August 1, 1997 will convert to investor A Shares after a shareholder has owned them for six years.
6. Exchange Privileges:
(a) Investor B Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may be exchanged for Investor B Shares of any other Nations Fund, except Money Market Funds.
(b) Investor B Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may be exchanged for Investor B Shares of any Nations Reserves Money Market Fund.
(c) From time to time, the Board of Trustees of the Trust may modify, or ratify modifications to, the exchange privileges of Investor B Shares of a Fund without amending this Plan, provided that such exchange privileges, as modified, are described in the then-current prospectus for such shares of such Fund.
7. Other Shareholder Services: The Trust offers a Systematic Investment Plan, an Automatic Withdrawal Plan and an Automatic Exchange Feature to holders of Investor B Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund.
E. INVESTOR C SHARES-- NATIONS HIGH YIELD BOND FUND AND NATIONS KANSAS
MUNICIPAL INCOME FUND ONLY.
1. Maximum Initial Sales Load: None
2. Contingent Deferred Sales Charge (as a percentage of the lower of the original purchase price or redemption proceeds): 1.00% if redeemed within one year of purchase and eliminated thereafter.
3. Maximum Rule 12b-1 Distribution Fees: Pursuant to a Distribution Plan adopted under Rule 12b-1, Investor C Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may pay distribution fees of up to 0.75% of the average daily net assets of such shares.
4. Maximum Shareholder Servicing Fees: Pursuant to a Shareholder Servicing Plan, Investor C Shares of each Non-Money Market Fund may pay shareholder servicing fees of up to 0.25% of the average daily net assets of such shares.
5. Conversion Features: Investor C Shares of a Fund shall have such conversion features, if any, as are determined by or ratified by the Board of Trustees of the Trust and described in the then-current prospectus for such shares of such Fund.
6. Exchange Privileges:
(a) Investor C Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may be exchanged for Investor C Shares of any other Nations Fund, except Money Market Funds.
(b) Investor C Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund may be exchanged for Investor C Shares of any Nations Reserves Money Market Fund.
(c) Investor C Shares of a Non-Money Market Fund that were originally obtained in an exchange of Investor A Shares of a Managed Index Fund for Investor C Shares of a Non-Money Market Fund may be exchanged for Investor A Shares of any Managed Index Fund.
(d) From time to time, the Board of Trustees of the Trust may modify, or ratify modifications to, the exchange privileges of Investor C Shares of a Fund without amending this Plan, provided that such exchange privileges, as modified, are described in the then-current prospectus for such shares of such Fund.
7. Other Shareholder Services. The Trust offers a Systematic Investment Plan, an Automatic Withdrawal Plan and an Automatic Exchange Feature to holders of Investor C Shares of Nations High Yield Bond Fund and Nations Kansas Municipal Income Fund.
IV. BOARD REVIEW.
The Board of Trustees of the Trust shall review this Plan as frequently as it deems necessary. Prior to any material amendment(s) to this Plan, the Board of Trustees of the Trust, including a majority of the Trustees who are not interested persons of the Trust, shall find that the Plan, as proposed to be amended (including any proposed amendments to the method of allocating class and/or fund expenses), is in the best interests of each class of shares of the Fund individually and the Fund as a whole. In considering whether to approve any proposed amendment(s) to the Plan, the Trustees of the Trust shall request and evaluate such information as they consider reasonably necessary to evaluate the proposed amendment(s) to the Plan.
Adopted: December 9, 1999
Last Amended December 9, 1999