As filed with the Securities and Exchange Commission on July 19, 2010
Securities Act File No. 33-20827
Investment Company Act File No. 811-5518
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER | ||
THE SECURITIES ACT OF 1933 | x | |
Pre-Effective Amendment No. | ¨ | |
Post-Effective Amendment No. 135 | x | |
and | ||
REGISTRATION STATEMENT | ||
UNDER | ||
THE INVESTMENT COMPANY ACT OF 1940 | x | |
Amendment No. 137 | x |
THE RBB FUND, INC.
(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center
103 Bellevue Parkway
Wilmington, DE 19809
(Address of Principal Executive Offices)
Registrants Telephone Number: (302) 791-1112
Copies to:
SALVATORE FAIA | MICHAEL P. MALLOY, ESQUIRE | |
BNY Mellon Investment Servicing (U.S.) Inc. | Drinker Biddle & Reath LLP | |
103 Bellevue Parkway | One Logan Square, Ste. 2000 | |
Wilmington, DE 19809 | Philadelphia, PA 19103-6996 | |
(Name and Address of Agent for Service) |
It is proposed that this filing will become effective (check appropriate box)
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immediately upon filing pursuant to paragraph (b) |
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on (date) pursuant to paragraph (b) |
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60 days after filing pursuant to paragraph (a)(1) |
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on (date) pursuant to paragraph (a)(1) |
x |
75 days after filing pursuant to paragraph (a)(2) |
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on (date) pursuant to paragraph (a)(2) of Rule 485 |
If appropriate, check the following box:
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This post-effective amendment designates a new effective date for a previously filed post-effective amendment. |
Title of Securities Being Registered Shares of Common Stock
Subject to Completion
Preliminary Prospectus
S1 Fund
of The RBB Fund, Inc.
Ticker Symbol: [ ]
I Shares
Prospectus
, 2010
Investment Adviser:
Simple Alternatives, LLC
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE SECURITIES DESCRIBED IN THIS PROSPECTUS HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE SEC, HOWEVER, HAS NOT JUDGED THESE SECURITIES FOR THEIR INVESTMENT MERIT AND HAS NOT DETERMINED THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIMINAL OFFENSE.
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S1 Fund |
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ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENTS AND RISKS |
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Shareholder Services Fees |
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FINANCIAL HIGHLIGHTS |
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FOR MORE INFORMATION |
Back Cover |
Investment Objective
The S1 Fund (the Fund) seeks to provide long-term capital appreciation with an emphasis on absolute (positive) returns and low correlation to traditional financial market indices such as the S&P 500 ® Index.
Expenses and Fees
As a shareholder, you pay certain fees and expenses. The table below describes the fees and expenses that you may pay if you buy and hold I Shares of the Fund.
I Shares | |||
Shareholder Fees (fees paid directly from your investment) |
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Maximum sales charge imposed on purchases |
None | ||
Maximum deferred sales charge |
None | ||
Maximum sales charge imposed on reinvested dividends |
None | ||
Redemption Fee |
None | ||
Exchange Fee |
None | ||
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) |
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Management fees |
[2.75 | ]% | |
Distribution (12b-1) fees |
None | ||
Other expenses 1 : |
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Dividend expense on short sales |
| % | |
Interest expense on borrowings |
| % | |
Other operating expenses |
| % | |
Total other expenses |
% | ||
Acquired Fund Operating Expenses |
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Total annual Fund operating expenses |
% | ||
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Based on estimated expenses for the current fiscal year |
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and Fund operating expenses remain the same. Although your actual costs and returns might be different, based on these assumptions your approximate costs of investing $10,000 in the Fund would be:
1 Year | 3 Years | |||||
I Shares |
$ | | $ | |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total annual Fund operating
Summary of Principal Investment Strategies
The Fund utilizes a multi-manager approach whereby the Funds assets are allocated to one or more sub-advisers (Sub-Advisers) in percentages determined at the discretion of the Funds investment adviser, Simple Alternatives, LLC (the Adviser). The Adviser also manages a portion of the Funds assets and monitors Sub-Adviser trading with the dual objectives of maximizing each Sub-Advisers investment flexibility and assuring that the Fund as a whole complies with investment restrictions. Otherwise, each Sub-Adviser acts independently from the others and utilizes its own distinct investment style in selecting securities. However, each Sub-Adviser must operate within the constraints of the Funds investment objective and strategies and the particular investment restrictions applicable to that Sub-Adviser.
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The strategies utilized by the Fund are hedge fund-type strategies and include absolute return strategies as well as strategies aimed at enhanced risk-adjusted returns. The strategies and investment techniques employed by the Sub-Advisers aim to produce absolute returns over a full market cycle while managing risk exposure. These strategies and techniques may attempt to exploit disparities or inefficiencies in particular markets or geographical regions; take advantage of security mispricings or anticipated price movements; and/or benefit from cyclical themes and relationships or special situations and events (such as spin-offs or reorganizations). Such strategies may have low correlation to traditional markets because they seek asymmetric investment opportunities that may present risks unrelated to traditional markets.
The Sub-Advisers may invest and trade in a wide range of instruments, markets and asset classes in U.S. and non-U.S., developed and emerging markets. Investments include equities and equity-related instruments, fixed-income and other debt-related instruments, currencies, financial futures, options and swaps, and private placements. Equities and equity-related instruments include common stocks, preferred stocks, convertible securities, depositary receipts, exchange traded funds (ETFs), Rule 144A securities, warrants, rights, and equity derivatives. Debt-related instruments include corporate bonds, defaulted debt securities, distressed debt securities, mezzanine investments, collateralized bond obligations, collateralized debt obligations, collateralized loan obligations, bank loans, asset-backed securities, mortgage-backed securities, unrated securities and securities of companies in bankruptcy. The Sub-Advisers may invest in equity and debt securities of companies of all sizes and without limit on the credit quality or maturity of debt securities. These securities can be rated investment grade, rated below investment grade, or high yield securities (also known as junk bonds), which are below Baa3 by Moodys, BBB- by S&P or BBB- by Fitch or unrated.
The Adviser has primary responsibility for allocating Fund assets in a manner that attempts to diversify the Funds portfolio across multiple strategies and investment styles that the Adviser believes are complementary and, when combined, will produce enhanced risk-adjusted returns. The Adviser reviews a range of qualitative and quantitative factors when determining the allocations and reallocations to Sub-Advisers, including, but not limited to, the Sub-Advisers style, historical performance and the characteristics of each Sub-Advisers allocated assets (including investment process and statistical analysis). The Adviser will allocate Fund assets among strategies of the Sub-Advisers that it believes offer the potential for attractive long-term investment returns individually and are expected to blend within the Funds portfolio so that it will have low correlation and low volatility relative to the broader stock and bond markets. The Adviser may direct a Sub-Adviser to reduce or limit its investment in certain assets or asset classes in order to achieve the desired composition of the Funds overall portfolio. The Adviser retains the discretion to invest the Funds assets in securities and other instruments directly and may do so in certain circumstances including pending allocation to a Sub-Adviser, to hedge against overall Fund exposure created by the Sub-Advisers, or to increase or reduce the Funds exposure to a particular issuer, sector, industry or general market risk, including interest rate risk.
Summary of Principal Risks
As with all mutual funds, a shareholder is subject to the risk that his or her investment could lose money. The principal risk factors affecting shareholders investments in the Fund are set forth below.
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Multi-Manager Dependence. The success of the Funds investment strategy depends both on the Advisers ability to select Sub-Advisers and to allocate assets to those Sub-Advisers and on each Sub-Advisers ability to execute the relevant strategy and select investments for the Fund. The Sub-Advisers investment styles may not always be complementary, which could affect the performance of the Fund. |
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Absolute Return Focus. The Funds returns may deviate from overall market returns to a greater degree than other funds that do not employ an absolute return focus. In addition, if the Fund or a Sub-Adviser takes a defensive posture by hedging its portfolio and stock prices subsequently advance, the Funds returns may be lower than expected and lower than if the Funds portfolio had not been hedged. |
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Mid-Cap Company Investments. Securities of companies with mid-cap capitalizations tend to be riskier than securities of companies with large-capitalizations. This is because mid cap companies typically have smaller product lines and less access to liquidity than large cap companies, and are therefore more sensitive to economic downturns. In addition, growth prospects of mid cap companies tend to be less certain than large cap companies, and the dividends paid by mid cap stocks are frequently negligible. Moreover, mid cap stocks have, on occasion, fluctuated in the opposite direction of large cap stocks or the general stock market. Consequently, securities of mid cap companies tend to be more volatile than those of large cap companies. |
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Small-Cap Company Investments. Securities of companies with small capitalizations tend to be riskier than securities of companies with mid-cap and large capitalizations. Smaller companies may have limited product lines, markets and financial resources. The prices of small capitalization stocks tend to be more volatile than those of other stocks. Small capitalization stocks are not priced as efficiently as stocks of larger companies. In addition, it may be harder to sell these stocks, especially during a down market or upon the occurrence of adverse company-specific events, which can reduce their selling prices. |
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Fixed-Income Securities. Fixed income securities in which the Fund may invest are subject to certain risks, including: interest rate risk, prepayment risk and credit/default risk. Interest rate risk involves the risk that prices of fixed income securities will rise and fall in response to interest rate changes. Prepayment risk involves the risk that in declining interest rate environments prepayments of principal could increase and require the Fund to reinvest proceeds of the prepayments at lower interest rates. Credit risk involves the risk that the credit rating of a security may be lowered. |
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High Yield Debt Obligations. The Fund may invest in high yield debt obligations, such as bonds and debentures, issued by corporations and other business organizations. An issuer of debt obligations may default on its obligation to pay interest and repay principal. Also, changes in the financial strength of an issuer or changes in the credit rating of a security may affect its value. Such high yield debt obligations are referred to as junk bonds and are not considered to be investment grade. |
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Foreign Investments. International investing is subject to special risks, including, but not limited to, currency exchange rate volatility, political, social or economic instability, and differences in taxation, auditing and other financial practices. |
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Emerging Markets. Investment in emerging market securities involves greater risk than that associated with investment in foreign securities of developed foreign countries. These risks include volatile currency exchange rates, periods of high inflation, increased risk of default, greater social, economic and political uncertainty and instability, less governmental supervision and regulation of securities markets, weaker auditing and financial reporting standards, lack of liquidity in the markets, and the significantly smaller market capitalizations of emerging market issuers. |
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Leverage. The Fund may make margin purchases of securities and, in connection with the purchases, borrow money from banks and other financial institutions for investment purposes. The Fund may also engage in selling securities short, which is a form of leverage. Although the use of leverage by the Fund may create an opportunity for increased return, it also results in additional risks and can magnify the effect of any losses. There is no assurance that the use of leverage as an investment strategy will be successful. |
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Derivatives. The Funds investments in derivative instruments such as options, forward currency exchange contracts, swaps and futures, which may be leveraged, may result in losses. Investments in derivative instruments may result in losses exceeding the amounts invested. |
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IPOs. IPO risk is the risk that the market value of initial public offering (IPO) shares will fluctuate considerably due to certain factors, such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited information about the issuer. The purchase of IPO shares may involve high transaction costs. IPO shares are subject to market risk and liquidity risk. When the Funds asset base is small, a significant portion of the Funds performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the Fund. As the Funds assets grow, the effect of the Funds investments in IPOs on the Funds performance probably will decline, which could reduce the Funds performance. Because of the price volatility of IPO shares, the Fund may choose to hold IPO shares for a very short period of time. This may increase the turnover of the Funds portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. |
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Convertible Securities. Securities that can be converted into common stock, such as certain securities and preferred stock, are subject to the usual risks associated with fixed income investments, such as interest rate risk and credit risk. In addition, because they react to changes in the value of the equity securities into which they will convert, convertible securities are also subject to the risks associated with equity securities. |
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Portfolio Turnover. If the Fund frequently trades its portfolio securities, the Fund will incur higher brokerage commissions and transaction costs, which could lower the Funds performance. In addition to lower performance, high portfolio turnover could result in taxable capital gains. |
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Exchange Traded Funds. Exchange traded funds (ETFs) are a type of investment company bought and sold on a securities exchange. An ETF represents a fixed portfolio of securities designed to track a particular market index. The risks of owning an ETF generally reflect the risks of owning the underlying securities that they are designed to track, although lack of liquidity in an ETF could result in its being more volatile. The Fund may incur brokerage fees in connection with its purchase of ETF shares. |
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Management of the Fund
Investment Advisers and Sub-Advisers
Simple Alternatives, LLC, 25 Burtis Avenue, Suite 200, New Canaan, Connecticut 06840, serves as investment adviser to the Fund. Argonaut
Management, L.P., Blue Lion Capital Management, LLC, Courage Capital Management, LLC, Cramer Rosenthal McGlynn, LLC, EverKey Global Partners, Limited, Lauren Templeton Capital Management, LLC, Moab Capital Partners, LLC, Sandler Capital Management,
Portfolio Managers
Title |
Portfolio Manager
of Fund since: |
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Simple Alternatives, LLC |
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James Dilworth |
Managing Member | Inception | ||
Bruce MacDonald |
Chief Investment Officer | Inception | ||
Argonaut Management, L.P. |
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David Gerstenhaber |
President | Inception | ||
Blue Lion Capital Management, LLC |
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Charles W. Griege, Jr. |
Managing Partner, Chief Investment Officer | Inception | ||
Courage Capital Management, LLC |
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Richard C. Patton |
Chief Investment Officer | Inception | ||
Cramer Rosenthal McGlynn |
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Jay B. Abramson |
President, Chief Investment Officer | Inception | ||
EverKey Global Partners, Limited |
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Jeffrey Everett |
Managing Member, President | Inception | ||
Lauren Templeton Capital Management, LLC |
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Lauren C. Templeton |
Founder, Managing Member, Chief Compliance Officer | Inception | ||
Scott Phillips |
Portfolio Manager, Head of Research | Inception | ||
Moab Capital Partners, LLC |
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Michael M. Rothenberg |
Portfolio Manager | Inception | ||
David A. Sackler |
Portfolio Manager | Inception | ||
Sandler Capital Management, LLC |
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Andrew Sandler |
Senior Managing Director | Inception | ||
Starwood Real Estate Securities, LLC |
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Matthew C. Gilman |
Chief Executive Officer, Portfolio Manager | Inception | ||
Trellus Management Co., LLC |
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Adam Usdan |
President, Portfolio Manager | Inception | ||
John Alderman |
Portfolio Manager | Inception |
Purchase and Sale of Fund Shares
Minimum Initial Investment: $1,000,000*
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I Shares of the Fund may be available through certain brokerage firms, financial institutions and other industry professionals (collectively, Service Organizations). Certain features of the I Shares, such as the initial investment minimum and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if I Shares are purchased directly from The RBB Fund, Inc. The Fund may accept initial investments of smaller amounts in its sole discretion. |
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You can only purchase and redeem Shares of the Fund on days the New York Stock Exchange is open and through the means described below.
Purchase and Redemption By Mail: | Purchase and Redemption By Wire: | |
S1 Fund |
PNC Bank, N.A. |
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c/o BNY Mellon Investment Servicing (US) Inc. |
Philadelphia, Pennsylvania 19103 |
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P.O. Box 9842 |
ABA# 0310-005-3 |
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Providence, RI 02940-8042 |
Account # |
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F/B/O S1 Fund |
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Ref. (Shareholder Name; Account Number) |
Redemption By Telephone:
Call the Transfer Agent at [ ]**
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A wire charge of $7.50 will apply |
Involuntary Redemption: The Fund reserves the right to redeem a shareholders account in the Fund at any time the value of the account falls below $5,000 as a result of a redemption or an exchange request.
Taxes
The Fund intends to make distributions that may be taxed as ordinary income or capital gains. The Fund contemplates declaring as dividends each year all or substantially all of its taxable income. More information about taxes can be found under the section entitled Shareholder Information or in the Funds Statement of Additional Information (SAI).
Potential Conflicts of Interest
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund may pay the intermediary for the sale of Fund shares and other related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
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ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENTS AND RISKS
This section provides some additional information about the Funds investments and certain portfolio management techniques that the Fund may use. More information about the Funds investments and portfolio management techniques, and related risks, is included in the SAI.
Additional Information About the Funds Principal Investments and Risks
Sub-Adviser Investment Strategies. The Sub-Advisers will use a combination of the following investment strategies:
Relative Value
This strategy is designed to take advantage of perceived discrepancies in the market prices of certain convertible bond, common stock, fixed income and derivative securities. Such discrepancies are often created by imbalances in supply and demand of different types of issues (for example, agency securities relative to U.S. Treasury securities).
Event Driven
This strategy is designed to invest in securities whose prices are or will be impacted by a corporate event. Such events include, but are not limited to corporate events, such as restructurings, spin-offs and significant litigation (e.g., tobacco litigation). Opportunities in this area are created by the reluctance of traditional investors to assume the risk associated with certain corporate events.
Long/Short Equity
This strategy employs long and short trading in common stock, and preferred stock of U.S. and foreign issuers. This strategy attempts to neutralize exposure to general market risk by primarily investing in stocks that are undervalued and short selling those stocks that are considered to be undervalued.
Market Neutral Equity
This strategy is designed to exploit equity market inefficiencies, which involves being simultaneously invested in long and short matched equity portfolios generally of the same size, usually in the same market. These strategies are typically constructed to attempt to be beta neutral and attempt to control the industry, sector, market capitalization and other potential market bias exposures.
Global Macro
This strategy seeks to generate income and/or capital appreciation through a portfolio of investments focused on macro-economic opportunities across numerous markets and instruments. These strategies may include positions in the cash, currency, futures and forward markets. Trading positions are generally held both long and/or short in both U.S. and non-U.S. markets. With a broader global scope, returns to the Global Macro strategy generally exhibit little to no correlation with the broader domestic equity and bond markets.
Convertible Arbitrage
This strategy seeks to take advantage of pricing inefficiencies of the embedded option in a convertible bond. The strategy typically involves the purchase of a convertible debt or preferred equity instrument (an instrument that is effectively a bond or has a fixed obligation of repayment with an embedded equity option, non-detachable warrants or an equity-linked or equity-indexed note) concurrent with the short sale of, or a short over-the-counter derivative position in, the common stock of the issuer of such debt instrument.
Credit Biased
These strategies invest primarily in the following sectors: secured leveraged loans, high yield bonds, distressed debt, structured credit, and global debt (typically less efficient areas of the global fixed income markets than traditional fixed income strategies). Generally these sectors may include wide credit rating ranges (including leveraged buyouts), may include distressed debt strategies and may include restricted securities and securities that may not be registered for which a market may not be readily available.
Mortgage Backed Securities
This strategy is designed to exploit perceived mispricings in mortgage back securities. Such mispricings can result from periods of market illiquidity and distress or from analytical anomalies. The strategy will invest in both conventional and complex mortgage backed securities.
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Opportunistic Equities
This strategy is designed to capitalize on underpriced equity securities or on positive market trends and may focus in certain securities markets, industries, company sizes, or geographical areas. Strategies are primarily managed for absolute return and Sub-Advisers assess risk and opportunity on an absolute, not an index-relative basis, by focusing on relatively few investments that the manager believes are undervalued and either offer a margin-of-safety, or offer high growth opportunities. Selective hedging through the use of short sales or options may be utilized to manage risk
Other Investment Strategies
The Fund also has the ability to employ strategies including, but not limited to, borrowing money from banks or other financial institutions to purchase securities and investing in warrants, options and futures, reverse repurchase agreements, initial public offerings, restricted securities, and other investment companies.
Derivative Contracts. The Fund may, but need not, use derivative contracts for any of the following purposes:
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To seek to hedge against the possible adverse impact of changes in stock market prices, currency exchange rates or interest rates in the market value of its securities or securities to be purchased; |
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As a substitute for buying or selling currencies or securities; or |
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To seek to enhance the Funds return in non-hedging situations. |
Examples of derivative contracts include: futures and options on securities, securities indices or currencies; options on these futures; forward foreign currency contracts; and interest rate or currency swaps. The Fund may use derivative contracts involving foreign currencies. A derivative contract will obligate or entitle the Fund to deliver or receive an asset or cash payment that is based on the change in value of one or more securities, currencies or indices. Even a small investment in derivative contracts can have a big impact on the Funds stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gains when stock prices, currency rates or interest rates are changing. The Fund may not fully benefit from or may lose money on derivatives if changes in their value do not correspond accurately to changes in the value of the Funds holdings. The other parties to certain derivative contracts present the same types of default risk as issuers of fixed income securities in that the counterparty may default on its payment obligations or become insolvent. Derivatives can also make the Fund less liquid and harder to value, especially in declining markets.
Short Sales. The Fund engages in short sales including those that are not against the box, which means that the Fund may make short sales where the Fund does not currently own or have the right to acquire, at no added cost, securities identical to those sold short in accordance with the provisions of the Investment Company Act of 1940, as amended (the 1940 Act). In a typical short sale, the Fund borrows from a broker a security in order to sell the security to a third party. The Fund is then obligated to return a security of the same issuer and quantity at some future date. The Fund realizes a loss to the extent the security increases in value or a profit to the extent the security declines in value (after taking into account any associated costs). Short sales against the box may protect the Fund against the risk of losses in the value of a portfolio security because any decline in value of the security should be wholly or partially offset by a corresponding gain in the short position. Any potential gains in the security, however, would be wholly or partially offset by a corresponding loss in the short position. Short sales that are not against the box involve a form of investment leverage, and the amount of the Funds loss on a short sale is potentially unlimited.
Equity and Equity-Related Securities. The Fund invests in all types of equity securities. Equity securities include exchange-traded and over-the-counter common and preferred stocks, warrants, rights, convertible securities, depositary receipts and shares, trust certificates, limited partnership interests, shares of other investment companies and real estate investment trusts (REITs), and equity participations. The number of issuers in the Funds portfolio will vary over time.
Fixed Income Investments. The Fund invests a portion of its assets in fixed income securities. Fixed income investments include bonds, notes (including structured notes), mortgage-backed securities, asset-backed securities, convertible securities, Eurodollar and Yankee dollar instruments, preferred stocks and money market instruments. Fixed income securities may be issued by corporate and governmental issuers and may have all types of interest rate payment and reset terms, including (without limitation) fixed rate, adjustable rate, zero coupon, contingent, deferred, payment-in-kind and auction rate features.
The credit quality of securities held in the Funds portfolio is determined at the time of investment. If a security is rated differently by multiple ratings organizations, the Fund treats the security as being rated in the higher rating category.
Mortgage-Backed Securities. Mortgage-backed securities may be issued by private companies or by agencies of the U.S. government. Mortgage-backed securities represent direct or indirect participation in, or are collateralized by and payable from, mortgage loans secured by real property.
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Certain debt instruments may only pay principal at maturity or may only represent the right to receive payments of principal or payments of interest on underlying pools of mortgage or government securities, but not both. The value of these types of instruments may change more drastically than debt securities that pay both principal and interest during periods of changing interest rates. Principal only mortgage-backed securities are particularly subject to prepayment risk. The Fund may obtain a below market yield or incur a loss on such instruments during periods of declining interest rates. Interest only instruments are particularly subject to extension risk, i.e. the risk that an issuer will exercise its right to pay later than expected. This may occur when there is a rise in interest rates. Mortgage derivatives and structured securities often employ features that have the effect of leverage. As a result, small changes in interest or prepayment rates may cause large and sudden price movements, especially compared to an investment in a security that is not leveraged. Mortgage derivatives can also become illiquid and hard to value in declining markets.
The Fund may also use mortgage dollar rolls to finance the purchase of additional investments. Dollar rolls expose the Fund to the risk that it will lose money if the additional investments do not produce enough income to cover the Funds dollar roll obligations. In addition, if the Advisers or Sub-Advisers prepayment assumptions are incorrect, the Fund may have performed better had the Fund not entered into the mortgage dollar roll.
Foreign Securities. The Fund may invest in securities of foreign issuers that are traded or denominated in U.S. dollars (including equity securities of foreign issuers trading in U.S. markets) through American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs) or International Depositary Receipts (IDRs). In addition, the Fund may invest in securities traded or denominated in foreign currencies and in multinational currencies such as the Euro. The Fund will value its securities and other assets in U.S. dollars. Investments in securities of foreign entities and securities denominated or traded in foreign currencies involve special risks. These include possible political and economic instability and the possible imposition of exchange controls or other restrictions on investments. Changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the Funds assets denominated or quoted in currencies other than the U.S. dollar. Emerging market investments offer the potential for significant gains but also involve greater risks than investing in more developed countries. Political or economic instability, lack of market liquidity and government actions such as currency controls or seizure of private business or property may be more likely in emerging markets.
Interest Rate Risk. During periods of rising interest rates, the market value of the Funds fixed-income securities will tend to be lower than prevailing market interest rates. In periods of falling interest rates, the market value of the Funds fixed-income securities generally will tend to be higher than prevailing market interest rates. Prices of longer-term fixed income securities are typically more sensitive to changes in interest rates than prices of shorter-term fixed-income securities.
Credit/Default Risk. The credit rating of an issuer or guarantor of a security in which the Fund invests may be lowered or an issuer or guarantor of a security or the counterparty to a derivatives contract or a repurchase agreement may default on its payment obligations.
Initial Public Offerings (IPOs) Risk. IPO risk is the risk that the market value of IPO shares will fluctuate considerably due to facts such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited information about the issuer. The purchase of IPO shares may involve high transaction costs. IPO shares are subject to market risk and liquidity risk. When the Funds asset base is small, a significant portion of the Funds performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the Fund. As the Funds assets grow, the effect of the Funds investments in IPOs on the Funds performance probably will decline, which could reduce the Funds performance. Because of the price volatility of IPO shares, the Fund may choose to hold IPO shares for a very short period of time, which may increase the turnover of the Funds portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. In addition, the Fund cannot guarantee continued access to IPOs.
Liquidity Risk. Liquidity risk exists when particular investments are difficult to purchase or sell. The Funds investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Liquid securities may also become illiquid because of market events or uncertainties. Illiquidity can be caused by a drop in overall market trading volume, an inability to find a ready buyer, or legal restrictions on the securities resale. Certain securities that were liquid when purchased may later become illiquid, particularly in times of overall economic distress.
Leveraging Risks. The use of leverage by the Adviser and Sub-Advisers may increase the volatility of the Fund. These leveraged instruments may result in losses to the Fund or may adversely affect the Funds net asset value or total return, because instruments that contain leverage are more sensitive to changes in interest rates. The Fund may also use borrowed funds to create leverage. Although the use of leverage by the Fund may create an opportunity for increased return, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on the securities and instruments purchased with leverage proceeds are greater than the cost of the leverage, the Funds return will be greater than if leverage had not been used. Conversely, if the income and gains from the securities and
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instruments purchased with such proceeds does not cover the cost of leverage, the Funds return will be less than if leverage had not been used. In the event of a sudden, precipitous drop in value of the Funds assets, the Fund may not be able to liquidate assets quickly enough to pay off its borrowing. Short sales of securities also involve the use of leverage. Using this investment technique may adversely affect the Funds net asset value or total return.
To limit leverage risk, the Fund will segregate assets determined by the Adviser to be liquid in accordance with procedures established by the Board of Directors, or, when permissible, enter into offsetting transactions, to cover its obligations resulting from its use of derivative instruments. Securities held in a segregated account cannot be sold while the futures contract, option or other derivative is outstanding, unless they are replaced with other suitable assets. As a result, it is possible that segregating a large percentage of the Funds assets could impede portfolio management or its ability to meet redemption requests or other current obligations.
Interest Rate Swaps, Total Return Swaps, Credit Default Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars.
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Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. |
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Total return swaps are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component. |
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Credit default swaps are contracts whereby one party makes periodic payments to a counterparty in exchange for the right to receive from the counterparty a payment equal to the par (or other agreed-upon) value of a referenced debt obligation in the event of a default by the issuer of the debt obligation. |
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Options on swaps (swaptions) are options to enter into a swap agreement. The Fund may also purchase and write (sell) swaptions. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. |
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Interest rate caps entitle the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. |
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Interest rate floors entitle the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. |
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Interest rate collars combine a cap and a floor that are designed to preserve a certain return within a predetermined range of interest rates. |
The Fund may enter into the transactions described above for hedging purposes or to seek to increase total return (which is considered a speculative activity). The use of swaps, swaptions, and interest rate caps, floors and collars is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Adviser or a Sub-Adviser is incorrect in its forecasts of market values and interest rates, the investment performance of the Fund would be less favorable than it would have been if these investment techniques were not used.
Convertible Securities Risk. Convertible securities have characteristics of both equity and fixed-income securities. The value of a convertible security tends to move with the market value of the underlying stock, but may also be affected by interest rates, credit quality of the issuer and any call provisions. In particular, when interest rates rise, fixed-income securities will decline in value. Convertible securities frequently have speculative characteristics and may be acquired without regard to minimum quality ratings. Lower quality convertible securities, also known as junk bonds, involve greater risk of default or price changes due to the issuers creditworthiness. The market prices of these securities may fluctuate more than those of higher quality securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates. Securities in the lowest quality category may present the risk of default, or may be in default.
Exchange-Traded Fund (ETFs ) . The Fund may invest up to 25% of its assets in ETFs. ETFs are registered investment companies whose shares are listed and traded on U.S. stock exchanges or otherwise traded in the over-the-counter market. In general, ETFs seek to track a specified securities index or a basket of securities that an index provider, such as Standard & Poors, selects as representative of a market, market segment or industry sector. An ETF portfolio generally holds the same stocks or bonds as the index it tracks or it may hold a representative sample of such securities. Thus, an ETF is designed so that its performance will correspond closely with that of the index it tracks. As a shareholder in an ETF, the Fund will bear its pro rata portion of an ETFs expenses, including advisory fees, in addition to its own expenses.
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Other Investment Companies. The Fund may invest up to 10% of its total assets in the securities of other investment companies but may not invest more than 5% of its total assets in the securities of any one investment company or acquire more than 3% of the voting securities of any other investment company. Among other things, the Fund may invest in money market mutual funds for cash management purposes by sweeping excess cash balances into such funds until the cash is invested or otherwise utilized. The Fund will indirectly bear its proportionate share of any management fees and other expenses paid by investment companies in which it invests in addition to the advisory and administration fees paid by the Fund.
Portfolio Turnover. The Fund may engage in active and frequent trading, resulting in high portfolio turnover. This may lead to the realization and distribution to shareholders of higher capital gains, increasing their tax liability. Frequent trading may also increase transaction costs, which could detract from the Funds performance.
Temporary Investments. The Fund may depart from its principal investment strategy in response to adverse market, economic, political or other conditions by taking temporary defensive positions (up to 100% of its assets) in all types of money market and short-term debt securities. If the Fund were to take a temporary defensive position, it may be unable for a time to achieve its investment objective.
Disclosure of Portfolio Holdings
A description of The RBB Fund, Inc.s (the Company) policies and procedures with respect to the disclosure of the Funds portfolio securities is available in the SAI. The SAI is incorporated herein.
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Simple Alternatives, LLC, a registered investment adviser located at 25 Burtis Avenue, Suite 200, New Canaan, Connecticut 06840, provides investment advisory services to the Fund subject to the general supervision of the Companys Board of Directors. The Adviser was founded in October 2009 by James Dilworth.
Pursuant to an investment advisory agreement with the Company, the Adviser is entitled to an advisory fee at the annual rate of 2.75% of the Funds average daily net assets, computed daily and payable monthly. A discussion regarding the basis for the Companys Board of Directors approval of the Funds investment advisory agreement with the Adviser will be available in the Funds first annual or semi-annual report to shareholders following its commencement of operations.
The Fund is managed by the Adviser and one or more Sub-Advisers unaffiliated with the Adviser. The Adviser also has the ultimate responsibility to oversee the Sub-Advisers, and to recommend their hiring, termination, and replacement, subject to approval by the Board of Directors. James Dilworth and Bruce MacDonald are the portfolio managers primarily responsible for the day-to-day management of the Fund. Prior to founding Simple Alternatives, LLC, Mr. Dilworth worked with Common Sense Investment Management, LLC. Common Sense Investment Management is an institutional hedge fund of funds. Mr. Dilworth founded Dilworth Securities, Inc. and Dilworth Capital Management, LLC in 2003. Prior to establishing Dilworth Capital, Mr. Dilworth served as the CEO and Managing Director of London-based Middlebury Capital Partners International, a holding company partially owned by and managing investments for the Charles R. Schwab family. In 1998, Mr. Dilworth joined Clark Winter in developing Winter Capital International, a fund of funds based in New York City, which was sold to Citigroup Private Bank in late 2000. Mr. Dilworth received his MBA from Northwestern Universitys Kellogg Graduate School of Business. Mr. MacDonald currently serves as Chief Investment Officer of the Adviser. From 2005 to 2009 he was Director of Asset Allocation and Risk Management for the University of Virginia Investment Management Company (UVIMCO). Before joining UVIMCO Mr. MacDonald was the Senior Investment Strategist for Putnam Investments Global Asset Allocation team. Mr. MacDonald holds an MBA from Columbia University and a BA in religion from Wesleyan University.
The Fund has received an exemptive order from the SEC that permits the Adviser to engage or terminate a Sub-Adviser, and to enter into and materially amend an existing sub-advisory agreement, upon the approval of the Board of Directors, without obtaining shareholder approval. The Sub-Advisers will provide investment advisory services to the portion of the Funds portfolio allocated to them by the Adviser. The Adviser will select Sub-Advisers based upon the Sub-Advisers skills in managing assets pursuant to particular investment styles and strategies. The Adviser will monitor existing Sub-Advisers based on their investment styles, strategies, and results in managing assets for specific asset classes. Each Sub-Adviser will have discretion to select portfolio securities for its portion of the Fund, but must select those securities according to the Funds investment objectives and restrictions. The Fund is not required to invest with any minimum number of Sub-Advisers, and does not have minimum or maximum limitations with respect to allocations of assets to any Sub-Adviser. The Adviser may change the allocation of the Funds assets among the available Sub-Advisers, and may add or remove Sub-Advisers, at any time.
Argonaut Management, L.P. (Argonaut Management) , a registered investment adviser located at 546 Fifth Avenue, 17 th Floor, New York, New York 10036, has served as a Sub-Adviser to the Fund since its inception. Argonaut Management was founded in 1993 and is comprised of two partners, David Gerstenhaber and Jarrett Posner. Mr. Gerstenhaber, President and founder of Argonaut Management, is the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Argonaut Management. Prior to forming Argonaut Management, Mr. Gerstenhaber was a Managing Director of Tiger Management Corporation from January 1991 to June 1993. Mr. Gerstenhaber received a simultaneous award of both B.A. and M.A. degrees with honors in economics from Yale in 1982, where he studied extensively with Nobel laureate economist James Tobin. Mr. Gerstenhaber was awarded a Fulbright Scholarship to Cambridge University where he earned a Master of Philosophy in Economics in 1983. Mr. Posner joined Argonaut Management in September 2003 as Chief Operating Officer. Prior to joining Argonaut Management, Mr. Posner worked at Triarc Companies, Inc, from May 1993 through July 2003, most recently as Senior Vice President of Corporate Finance. At Triarc, Mr. Posner worked directly for Nelson Pelz. Mr. Posner received a B.A in Economics from Brown University. Argonaut Management employs a global macro investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Blue Lion Capital Management, LLC (Blue Lion) , a registered investment adviser located at 5950 Berkshire Lane, Suite 510, Dallas, Texas 75225, has served as a Sub-Adviser to the Fund since its inception. Charles W. Griege, Jr. is the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Blue Lion. Mr. Griege has been Managing Partner and Chief Investment Officer of Blue Lion since 2005. Prior to starting Blue Lion Mr. Griege joined Atlas Capital Management, a long/short equity fund, as a partner in May 2001. Prior to Atlas,
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Mr. Griege spent six years in investment banking, most recently as a Managing Director at SoundView Technology Group. Prior to joining SoundView, Mr. Griege was a Vice President in the research sales division of Sanford Bernstein. Mr. Griege received an MBA with honors from Columbia Business School in 1990 and a BA degree from Vanderbilt University in 1985. Blue Lion employs a long/short equity strategy with a value-oriented bias in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Courage Capital Management, LLC (Courage Capital) , a registered investment adviser located at 4400 Harding Road Ste. 503, Nashville, Tennessee 37205, has served as a Sub-Adviser to the Fund since its inception. Courage Capital was founded in 1998 by Richard C. Patton, who is also the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Courage Capital. Mr. Patton is also Chief Investment Adviser of Courage Capital. Prior to founding Courage Capital, Mr. Patton co-founded and operated Woodmont Capital, LLC. Mr. Patton serves on the American Red Cross Board of Governors. Mr. Patton earned a B.S. in Economics from Vanderbilt University and an M.B.A. from Harvard Business School. Courage Capital employs an event driven investment strategy, including investments in special situations companies and distressed securities, in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Cramer Rosenthal McGlynn (CRM) , a registered investment adviser located at 520 Madison Avenue, 20 th Floor, New York, New York 10022, has served as a Sub-Adviser to the Fund since its inception. CRM was founded in 1973. Wilmington Trust Investments, Inc. has a controlling interest in CRM. Jay B. Abramson, the President and Chief Investment Officer of CRM, has responsibility for the day-to-day management of the portion of the Fund sub-advised by CRM. Mr. Abramson has been with CRM since 1985. As Chief Investment Officer, he maintains overall responsibility for the firms investment team. Prior to CRM, Mr. Abramson earned his CPA. He received a BSE from The Wharton School of the University of Pennsylvania and a JD from the University of Pennsylvania Law School. CRM employs a long/short equity investment strategy in managing its portion of the Fund.
EverKey Global Partners, Limited (EverKey) , a registered investment adviser located at 767 Fifth Avenue, 6th Floor, New York, New York 10153, has served as a Sub-Adviser to the Fund since its inception. EverKey was founded in 2008. Jeffery Everett is managing member of EverKey and has responsibility for the day-to-day management of the portion of the Fund sub-advised by EverKey. Mr. Everett has been with EverKey since it was founded in 2008. From 2000-2007, Mr. Everett served as a President and Chief Investment Officer of Templeton Global Advisors based in Nassau, Bahamas. In this capacity, Mr. Everett oversaw all portfolio management responsibilities for mutual fund portfolios and activities within the Templeton Global Equity Group, encompassing 35 portfolio managers and analysts. He was the lead manager for several funds and accounts, including the World Fund. Mr. Everett has 20 years of research experience. Mr. Everett received his BS from Pennsylvania State University and is a Chartered Financial Analyst. EverKey employs a global long/short equity investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Lauren Templeton Capital Management, LLC (LT) , a registered investment adviser located at 1208 Pointe Centre Drive, Suite 210, Chattanooga, Tennessee 37421, has served as a Sub-Adviser to the Fund since its inception. LT was founded in 2001 by Lauren C. Templeton. Ms. Templeton and Scott Phillips have responsibility for the day-to-day management of the portion of the Fund sub-advised by LT. Ms. Templeton is managing member and Chief Compliance Officer of LT. Ms. Templeton is also founder and director of the Southeastern Hedge Fund Association. In addition to these responsibilities Ms. Templeton also serves the following organizations; The Atlanta Hedge Fund Roundtable (President), the Board of Trustees at the Baylor School, the Pre-Business Advisory Council at the University of the South, Sewanee (Board Member), and the Finance Advisory Board of the University of Tennessee Chattanooga. Ms. Templeton is a published book author having written Investing the Templeton Way released by McGraw Hill in 2008. Investing the Templeton Way is a value investors guide to the successful methods employed by her mentor, Sir John Templeton. Ms. Templeton received a B.A. in Economics from the University of the South. Mr. Phillips joined LT in 2007 and serves as Portfolio Manager and Head of Research. Prior to joining LT, Mr. Phillips founded Cumberland Capital Corp, located in Chattanooga, Tennessee in 2004, where he provided equity research services to Green Cay Asset Management, a hedge fund management company located in Nassau, Bahamas. Mr. Phillips received his B.A. in English from the University of the South. Mr. Phillips co-authored Investing the Templeton Way. LT uses a global value investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Moab Capital Partners, LLC (Moab) , a registered investment adviser located at 15 East 62 nd , New York, New York 10065, has served as a Sub-Adviser to the Fund since its inception. Moab was founded in 2006. Michael Rothenberg and David Sackler each control 50% of Moab. Mr. Rothenberg and Mr. Sackler are the co-portfolio managers primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Moab. Mr. Rothenberg has 12 years of hedge fund investment experience. From 2003-2005, Mr. Rothenberg was the senior investment professional at Xerion Capital Partners, LLC where he was responsible for investing and trading a portfolio of distressed debt, bank debt and event driven equities. Mr. Rothenberg has a BS in Finance from the Wharton School of the University of Pennsylvania. Mr. Sackler has 11 years of hedge fund investment experience. From 1999-2005, Mr. Sackler worked at Perry Capital, LLC and OSS Capital Management, LLC. He has extensive experience investing in all sub-sectors
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of healthcare and is experienced in sizing and managing both long and short positions. Mr. Sackler has a BA in Economics from Princeton University. Moab employs an event driven investment strategy, including investments in special situations companies and distressed securities, in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Sandler Capital Management, LLC (Sandler Capital) , a registered investment adviser located at 711 Fifth Avenue, 15 th Floor, New York, New York 10022, has served as a Sub-Adviser to the Fund since its inception. Sandler Capital has been a registered investment adviser since 1988. Andrew Sandler is a majority owner of Sandler Capital and the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Sandler Capital. Mr. Sandler has served as a portfolio manager since 1997. Prior to joining Sandler, Mr. Sandler began his career as a research analyst with Perry Capital in 1989. Mr. Sandler has a B.S. in Finance from the School of Business of the University of Wisconsin at Madison. Sandler Capital employs a long/short equity strategy with a multi-sector focus in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Starwood Real Estate Securities, LLC (SRES) , a registered investment adviser located at 591 West Putnam Avenue, Greenwich, Connecticut 06830, has served as a Sub-Adviser to the Fund since its inception. SRES was launched in 2004. SRES is jointly owned by Barry Sternlicht, Chairman and Advisor, and Matthew C. Gilman, Chief Executive Officer and Portfolio Manager. Over the past 19 years, Mr. Sternlicht has structured more than 400 investment transactions with an asset value of more than $40 billion. From 1995 through 2005, Mr. Sternlicht was Chairman and CEO of Starwood Hotels & Resorts Worldwide, Inc., a company he founded in 1995. Mr. Gilman is the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by SRES. Mr. Gilman joined Starwood Real Estate Securities LLC at its founding in 2004. From 1999 to 2004, Mr. Gilman was Senior Portfolio Manager at ABP Investments US, Inc., the US subsidiary of the Dutch Civil Service Pension Fund, regarded as one of the largest in the world. Mr. Gilman covered real estate securities at JP Morgan Investment Management from 1995 to 1999 and for one year at Genesis Realty Advisors from 1994 to 1995. Mr. Gilman began his career at Wellsford Residential Properties in 1992, a multi-family real estate investment trust. Mr. Gilman is a graduate of Dartmouth College and is a member of the National Association of Real Estate Investment Trusts. SRES employs a long/short equity investment strategy, with a focus on public real estate securities, in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Trellus Management Co., LLC (Trellus) , a registered investment adviser located at 350 Madison Avenue, New York, New York 10017 has served as a Sub-Adviser to the Fund since its inception. Trellus was founded in 1994 by Adam Usdan, the sole owner of Trellus. Mr. Usdan and John Alderman are the portfolio managers primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Trellus. Mr. Usdan is the President, Chief Investment Officer and Portfolio Manager of Trellus. Mr. Usdan earned an MBA in Finance, Accounting & Marketing from the Kellogg Graduate School of Management, Northwestern University and a BA in English, from Wesleyan University. John Alderman, Portfolio Manager, has been with Trellus since 2001. Mr. Alderman earned an MBA in Finance from New York University and a BA in Economics from Connecticut College. Trellus employs a long/short equity investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
The SAI provides additional information about the portfolio managers compensation, other accounts managed by the portfolio managers and the portfolio managers ownership of securities in the Fund.
Marketing Arrangement
The Adviser or its affiliates may pay additional compensation, out of profits derived from the Advisers management fee and not as an additional charge to the Fund, to certain financial institutions (which may include banks, securities dealers and other industry professionals) for the sale and/or distribution of Fund shares or the retention and/or servicing of Fund investors and Fund shares (revenue sharing). These payments are in addition to any record keeping or sub-transfer agency fees payable by the Fund, or other fees described in the fee table or elsewhere in the Prospectus or SAI. Examples of revenue sharing payments include, but are not limited to, payment to financial institutions for shelf space or access to a third party platform or fund offering list or other marketing programs, including, but not limited to, inclusion of the Fund on preferred or recommended sales lists, mutual fund supermarket platforms and other formal sales programs; granting the Adviser access to the financial institutions sales force; granting the Adviser access to the financial institutions conferences and meetings; assistance in training and educating the financial institutions personnel; and obtaining other forms of marketing support. The level of revenue sharing payments made to financial institutions may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the Fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the Fund available to its customers and may allow the Fund greater access to the financial institutions customers.
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The following chart shows the Funds service providers and includes their addresses and principal activities.
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I Shares of the Fund (Shares) are priced at their net asset value (NAV). The NAV per share of the Fund is calculated as follows:
Value of Assets Attributable to I Shares |
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NAV = |
Value of Liabilities Attributable to I Shares |
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Number of Outstanding Shares of I Shares |
The Funds NAV is calculated once daily at the close of regular trading hours on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on each day the NYSE is open. The NYSE is generally open Monday through Friday, except national holidays. The Fund will effect purchases of Fund shares at the NAV next determined after receipt of your order or request in proper form. The Fund will effect redemptions of Fund shares at the NAV next calculated after receipt of your order in proper form.
The Funds equity securities listed on any national or foreign exchange market system will be valued at the last sale price, except for the National Association of Securities Dealers Automatic Quotation System (NASDAQ). Equity securities listed on NASDAQ will be valued at the official closing price. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. When prices are not available from such services or are deemed to be unreliable, securities may be valued by dealers who make markets in such securities. Foreign securities, currencies and other securities denominated in foreign currencies are translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar provided by a pricing service. All assets denominated in foreign currencies will be converted into U.S. dollars at the exchange rates in effect at the time of valuation. If the Fund holds foreign equity securities, the calculation of the Funds NAV will not occur at the same time as the determination of the value of the foreign equities securities in the Funds portfolio, since these securities are traded on foreign exchanges.
If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Companys Board of Directors. In addition, the prices of foreign securities may be affected by events that occur after the close of a foreign market but before the Fund prices its shares. In such instances, a foreign security may be fair valued in accordance with procedures adopted by the Companys Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation involves the risk that the values used by the Fund to price its investments may be higher or lower than the values used by other investment companies and investors to price the same investments.
Investments in other open-end investment companies are valued based on the NAV of those investment companies (which may use fair value pricing as discussed in their prospectuses).
In accordance with the policy adopted by the Companys Board of Directors, the Company discourages market timing and other excessive trading practices. Purchases should be made with a view to longer-term investment only. Excessive short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm Fund performance and result in dilution in the value of Fund shares held by long-term shareholders. The Company and the Adviser reserve the right to reject or restrict purchase requests from any investor. The Company and the Adviser will not be liable for any loss resulting from rejected purchase orders. To minimize harm to the Company and its shareholders (or the Adviser), the Company (or the Adviser) will exercise its right if, in the Companys (or the Advisers) judgment, an investor has a history of excessive trading or if an investors trading, in the judgment of the Company or the Adviser, has been or may be disruptive to the Fund. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Fund and its shareholders or would subordinate the interests of the Fund and its shareholders to those of the Adviser or any affiliated person or associated person of the Adviser.
Pursuant to the policy adopted by the Board of Directors, the Adviser has developed criteria that it uses to identify trading activity that may be excessive. The Adviser reviews on a regular, periodic basis available information related to the trading activity in the Fund in order to assess the likelihood that the Fund may be the target of excessive trading. As part of its excessive trading surveillance process, the Adviser, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. If, in its judgment, the Adviser detects excessive, short-term trading, it may reject or restrict a purchase request and may further seek to close an investors account with the Fund. The Adviser may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. The Adviser will apply the criteria in a manner that, in its judgment, will be uniform.
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If necessary, the Company may prohibit additional purchases of Fund shares by a financial intermediary or by certain customers of the financial intermediary. Financial intermediaries may also monitor their customers trading activities in the Fund. The criteria used by intermediaries to monitor for excessive trading may differ from the criteria used by the Company. If a financial intermediary fails to enforce the Companys excessive trading policies, the Company may take certain actions, including terminating the relationship.
There is no assurance that the Fund will be able to identify market timers, particularly if they are investing through intermediaries.
Shares representing interests in the Fund are offered continuously for sale by BNY Mellon Distributors Inc. (the Distributor).
General. You may purchase Shares of the Fund at the NAV per Share next calculated after your order is received by the Transfer Agent in proper form as described below. After an initial purchase is made, the Transfer Agent will set up an account for you on the Company records. The minimum initial investment in the Fund is $1,000,000. There is no minimum for subsequent investments. The Fund may accept initial investments of smaller amounts in its sole discretion. You can only purchase Shares of the Fund on days the NYSE is open and through the means described below.
Purchases Through Intermediaries. Shares of the Fund may also be available through certain brokerage firms, financial institutions and other industry professionals (collectively, Service Organizations). Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if Shares are purchased directly from the Company. Therefore, you should contact the Service Organization acting on your behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing your accounts with the Service Organization. Service Organizations will be responsible for promptly transmitting client or customer purchase and redemption orders to the Company in accordance with their agreements with the Company or its agent and with clients or customers. Service Organizations or, if applicable, their designees that have entered into agreements with the Company or its agent may enter confirmed purchase orders on behalf of clients and customers, with payment to follow no later than the Companys pricing on the following Business Day. If payment is not received by such time, the Service Organization could be held liable for resulting fees or losses. The Company will be deemed to have received a purchase or redemption order when a Service Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order if the order is actually received by the Company in good order not later than the next business morning. If a purchase order is not received by the Fund in good order, BNY Mellon Investment Servicing (US) Inc. (the Transfer Agent) will contact the financial intermediary to determine the status of the purchase order. Orders received by the Company in good order will be priced at the Funds NAV next computed after they are deemed to have been received by the Service Organization or its authorized designee.
The Company relies upon the integrity of Service Organizations to ensure that orders are timely and properly submitted. The Fund cannot assure you that a Service Organization properly submitted to it all purchase and redemption orders received from the Service Organizations customers before the time for determination of the Funds NAV in order to obtain that days price.
For administration, subaccounting, transfer agency and/or other services, the Adviser may pay Service Organizations and certain recordkeeping organizations a fee (the Service Fee) of the average annual net asset value of accounts with the Company maintained by such Service Organization or recordkeepers. The Service Fee payable to any one Service Organization is determined based upon a number of factors, including the nature and quality of services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper.
Initial Investment By Mail. An account may be opened by completing and signing the application included with this Prospectus and mailing it to the Transfer Agent at the address noted below, together with a check ($1,000,000 minimum) payable to the Fund. Third party checks will not be accepted.
Regular Mail: |
Overnight Mail: | |
S1 Fund |
S1 Fund | |
c/o BNY Mellon Investment Servicing (US) Inc. |
c/o BNY Mellon Investment Servicing (US) Inc. |
|
P.O. Box 9816 |
101 Sabin Street |
|
Providence, RI 02940 |
Pawtucket, RI 02860-1427 |
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The name of the Fund should be designated on the application and should appear on the check. Payment for the purchase of Shares received by mail will be credited to a shareholders account at the NAV per share of the Fund next determined after receipt of payment in good order.
Initial Investment By Wire. Shares of the Fund may be purchased by wiring federal funds to PNC Bank, N.A. (see instructions below). A completed application must be forwarded to the Transfer Agent at the address noted above under Initial Investment by Mail in advance of the wire. For the Fund, notification must be given to the Transfer Agent at [ ] prior to 4:00 p.m., Eastern time, on the wire date. (Prior notification must also be received from investors with existing accounts.) Request account information and routing instructions by calling the Transfer Agent at [ ]. Funds should be wired to:
PNC Bank, N.A.
Philadelphia, Pennsylvania 19103
ABA# 0310-0005-3
Account #
F/B/O S1 Fund
Ref. (Account Number)
Shareholder or Account Name
Federal funds wire purchases will be accepted only on days when the NYSE and PNC Bank, N.A. are open for business.
Additional Investments. Additional investments may be made at any time by purchasing Shares of the Fund at the NAV per Share of the Fund by mailing a check to the Transfer Agent at the address noted under Initial Investment by Mail (payable to S1 Fund) or by wiring monies to PNC Bank, N.A. as outlined under Initial Investment by Wire. Notification must be given to the Transfer Agent at [ ] prior to 4:00 p.m., Eastern time, on the wire date. Initial and additional purchases made by check cannot be redeemed until payment of the purchase has been collected. This may take up to 15 calendar days from the date of purchase.
Automatic Investment Plan. Additional investments in Shares of the Fund may be made automatically by authorizing the Transfer Agent to withdraw funds from your bank account through an Automatic Investment Plan ($ minimum). Investors desiring to participate in an Automatic Investment Plan should call the Transfer Agent at [ ].
Retirement Plans/IRA Accounts. Shares may be purchased in conjunction with individual retirement accounts (IRAs) and rollover IRAs where PFPC Trust Company acts as custodian. A $15.00 custodial maintenance fee is charged per IRA account per year. For further information as to applications and annual fees, contact the Transfer Agent at [ ]. To determine whether the benefits of an IRA are available and/or appropriate, you should consult with a tax advisor.
Other Purchase Information. The Company reserves the right, in its sole discretion, to suspend the offering of shares or to reject purchase orders when, in the judgment of management, such suspension or rejection is in the best interest of the Fund. The Adviser will monitor the Funds total assets and may, subject to Board approval, decide to close the Fund at any time to new investments or to new accounts due to concerns that a significant increase in the size of the Fund may adversely affect the implementation of the Funds strategy. The Adviser, subject to Board approval, may also choose to reopen the Fund to new investments at any time, and may subsequently close the Fund again should concerns regarding the Funds size recur. If the Fund closes to new investments, the Fund may be offered only to certain existing shareholders of the Fund and certain other persons who may be subject to cumulative, maximum purchase amounts, as follows:
a. |
Persons who already hold Shares of the closed Fund directly or through accounts maintained by brokers by arrangement with the Company, |
b. |
Existing and future clients of financial advisers and planners whose clients already hold Shares of the closed Fund, |
c. |
Employees of the Adviser and their spouses, parents and children, and |
d. |
Directors of the Company. |
Distributions to all shareholders of the closed Fund will continue to be reinvested unless a shareholder elects otherwise. The Adviser, subject to the Board of Directors discretion, reserves the right to implement other purchase limitations at the time of closing, including limitations on current shareholders.
Purchases of the Funds Shares will be made in full and fractional shares of the Fund calculated to three decimal places.
The Companys officers are authorized to waive the minimum initial and subsequent investment requirements.
17
Good Order. You must include complete and accurate required information on your purchase request. Please see Purchase of Fund Shares for instructions. Purchase requests not in good order may be rejected.
Customer Identification Program. Federal law requires the Company to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), social security or taxpayer identification number or other identifying information for each investor who opens or reopens an account with the Company. Applications without the required information, or without any indication that a social security or taxpayer identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by applicable law or its customer identification program, the Company reserves the right (a) to place limits on transactions in any account until the identity of the investor is verified; or (b) to refuse an investment in a Company portfolio or to involuntarily redeem an investors Shares and close an account in the event that an investors identity is not verified. The Company and its agents will not be responsible for any loss in an investors account resulting from the investors delay in providing all required identifying information or from closing an account and redeeming an investors Shares when an investors identity cannot be verified.
You may redeem Fund Shares at the next NAV calculated after a redemption request is received by the Transfer Agent in proper form. You can only redeem Shares of the Fund on days the NYSE is open and through the means described below. You may redeem Fund Shares by mail, or, if you are authorized, by telephone. The value of Shares redeemed may be more or less than the purchase price, depending on the market value of the investment securities held by the Fund.
Redemption By Mail. Your redemption requests should be addressed to S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., P.O. Box 9816, Providence, RI 02940; for overnight delivery, requests should be addressed to S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., 101 Sabin Street, Pawtucket, RI 02860-1427 and must include:
a. |
Name of the Fund; |
b. |
Account number; |
c. |
Your Share certificates, if any, properly endorsed or with proper powers of attorney; |
d. |
A letter of instruction specifying the number of Shares or dollar amount to be redeemed, signed by all registered owners of the Shares in the exact names in which they are registered; |
e. |
Medallion signature guarantees are required when (i) the redemption proceeds are to be sent to someone other than the registered shareholder(s) or (ii) the redemption request is for $50,000 or more. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a Medallion Program recognized by the Securities Transfer Association. The three recognized Medallion Programs are Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Program (MSP). Signature guarantees which are not a part of these programs will not be accepted. Please note that a notary public stamp or seal is not acceptable; and |
f. |
Other supporting legal documents, if required, in the case of estates, trusts, guardianships, custodianships, corporations, pension and profit sharing plans and other organizations. |
Redemption By Telephone. In order to utilize the telephone redemption option, you must indicate that option on your Account Application. Please note that the telephone redemption option is not available for retirement accounts. You may then initiate a redemption of Shares by calling the Transfer Agent at [ ] and requesting that the redemption proceeds be mailed to the primary registration address or wired per the authorized instructions. A wire charge of $7.50 is assessed and charged to the shareholder. If the telephone redemption option is authorized, the Transfer Agent may act on telephone instructions from any person representing himself or herself to be a shareholder and believed by the Transfer Agent to be genuine. The Transfer Agents records of such instructions are binding and shareholders, not the Fund or its Transfer Agent, bear the risk of loss in the event of unauthorized instructions reasonably believed by the Fund or its Transfer Agent to be genuine. The Fund and the Transfer Agent will employ reasonable procedures to confirm that instructions communicated are genuine and, if it does not, it may be liable for any losses due to unauthorized or fraudulent instructions. The procedures employed by the Fund and the Transfer Agent in connection with transactions initiated by telephone include tape recording of telephone instructions and requiring some form of personal identification prior to acting upon instructions received by telephone.
Involuntary Redemption. The Fund reserves the right to redeem a shareholders account in the Fund at any time the value of the account in the Fund falls below $5,000 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account in the Fund is less than $5,000 and will be allowed 30 days to make additional investments before the redemption is processed. The transaction fee applicable to the Fund will not be charged when Shares are involuntarily redeemed.
18
The Fund may assert the right to redeem your shares at current NAV at any time and without prior notice if, and to the extent that, such redemption is necessary to reimburse the Fund for any loss sustained by reason of your failure to make full payment for shares of the Fund you previously purchased or subscribed for.
Other Redemption Information. Redemption proceeds for Shares of the Fund recently purchased by check may not be distributed until payment for the purchase has been collected, which may take up to fifteen days from the purchase date. Shareholders can avoid this delay by utilizing the wire purchase option.
Other than as described above, payment of the redemption proceeds will be made within seven days after receipt of an order for a redemption. The Company may suspend the right of redemption or postpone the date at times when the NYSE is closed or under any emergency circumstances as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the best interests of the remaining shareholders of the Fund to make payment wholly or partly in cash, redemption proceeds may be paid in whole or in part by an in-kind distribution of readily marketable securities held by the Fund instead of cash in conformity with applicable rules of the SEC. Investors generally will incur brokerage charges on the sale of portfolio securities so received in payment of redemptions. The Company has elected, however, to be governed by Rule 18f-1 under the 1940 Act, so that the Fund is obligated to redeem its Shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Fund.
Proper Form. You must include complete and accurate required information on your redemption request. Please see Redemption of Fund Shares for instructions. Redemption requests not in proper form may be delayed.
The Fund will distribute substantially all of its net investment income and net realized capital gains, if any, to its shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Fund unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually. Net realized capital gains (including net short-term capital gains), if any, will be distributed by the Fund at least annually. The estimated amount of any annual distribution will be posted to the Advisers website at [website] or a free copy may be obtained by calling [Phone Number].
The Fund may pay additional distributions and dividends at other times if necessary for the Fund to avoid U.S. federal tax. The Funds distributions and dividends, whether received in cash or reinvested in additional Fund Shares, are subject to U.S. federal income tax.
The following is a summary of certain United States tax considerations relevant under current law, which may be subject to change in the future. Except where otherwise indicated, the discussion relates to investors who are individual United States citizens or residents. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
Federal Taxes. The Fund contemplates distributing as dividends each year all or substantially all of its taxable income, including its net capital gain (the excess of net long-term capital gain over net short-term capital loss). Except as otherwise discussed below, you will be subject to federal income tax on Fund distributions regardless of whether they are paid in cash or reinvested in additional shares. Fund distributions attributable to short-term capital gains and net investment income will generally be taxable to you as ordinary income, except as discussed below.
Distributions attributable to the net capital gain of the Fund will be taxable to you as long-term capital gain, no matter how long you have owned your Fund shares. The maximum long-term capital gain rate applicable to individuals, estates, and trusts is currently 15%. You will be notified annually of the tax status of distributions to you.
Distributions of qualifying dividends will also generally be taxable to you at long-term capital gain rates, as long as certain requirements are met. In general, if 95% or more of the gross income of the Fund (other than net capital gain) consists of dividends received from domestic corporations or qualified foreign corporations (qualifying dividends), then all distributions paid by the Fund to individual shareholders will be taxed at long-term capital gains rates. But if less than 95% of the gross income of the Fund (other than net capital gain) consists of qualifying dividends, then distributions paid by the Fund to individual shareholders will be qualifying dividends only to the extent they are derived from qualifying dividends earned by the Fund. For the lower rates to apply, you must have owned your Fund shares for at least 61 days during the 121-day period beginning on the date that is 60 days before the Funds ex-dividend date (and the Fund will need to have met a similar holding period requirement with respect to the shares of the corporation paying the qualifying dividend). The amount of the Funds distributions that qualify for this favorable treatment may be reduced as a result of the Funds securities lending activities (if any), a high portfolio turnover rate or investments in debt securities or non-qualified foreign corporations.
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Distributions from the Fund will generally be taxable to you in the taxable year in which they are paid, with one exception. Distributions declared by the Fund in October, November or December and paid in January of the following year are taxed as though they were paid on December 31.
A portion of distributions paid by the Fund to shareholders that are corporations may also qualify for the dividends-received deduction for corporations, subject to certain holding period requirements and debt financing limitations.
If you purchase shares just before a distribution, the purchase price will reflect the amount of the upcoming distribution, but you will be taxed on the entire amount of the distribution received, even though, as an economic matter, the distribution simply constitutes a return of capital. This is known as buying into a dividend.
Sales and Exchanges. You will generally recognize taxable gain or loss for federal income tax purposes on a sale, exchange or redemption of your shares, including an exchange for shares of another Simple Alternatives Fund, based on the difference between your tax basis in the shares and the amount you receive for them. Generally, you will recognize long-term capital gain or loss if you have held your Fund shares for over twelve months at the time you dispose of them. (To aid in computing your tax basis, you should retain your account statements for the periods during which you held shares.)
Any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a disposition of shares of the Fund may be disallowed under wash sale rules to the extent the shares disposed of are replaced with other shares of the Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of the Fund. If disallowed, the loss will be reflected in an upward adjustment to the basis of the shares acquired.
IRAs and Other Tax-Qualified Plans. The one major exception to the preceding tax principles is that distributions on, and sales, exchanges and redemptions of, shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Backup Withholding. The Fund may be required in certain cases to withhold and remit to the Internal Revenue Service a percentage of taxable dividends or gross proceeds realized upon sale payable to shareholders who have failed to provide a correct tax identification number in the manner required, or who are subject to withholding by the Internal Revenue Service for failure to properly include on their return payments of taxable interest or dividends, or who have failed to certify to the Fund that they are not subject to backup withholding when required to do so or that they are exempt recipients. The current withholding rate is 28%.
U.S. Tax Treatment of Foreign Shareholders. For nonresident aliens, foreign corporations and other foreign investors, Fund distributions attributable to net long-term capital gains of the Fund will generally be exempt from U.S. tax, but all other Fund distributions will generally be subject to a 30% withholding tax. The withholding tax may, however, be reduced (and, in some cases, eliminated) under an applicable tax treaty between the United States and a shareholders country of residence or incorporation, provided that the shareholder furnishes the Fund with a properly completed Form W-8BEN to establish entitlement for these treaty benefits.
Foreign shareholders will generally not be subject to U.S. tax on gains realized on sale, exchange or redemption of shares in the Fund.
Different U.S. tax rules may apply to a foreign shareholder, however, if the investment in the Fund is connected to a trade or business of the shareholder in the United States or the investor is present in the United States for 183 days or more in a year.
All foreign investors should consult their own tax advisors regarding the tax consequences in their country of residence of an investment in the Fund.
State and Local Taxes. You may also be subject to state and local taxes on income and gain from Fund shares. State income taxes may not apply, however, to the portions of the Funds distributions, if any, that are attributable to interest on U.S. government securities. You should consult your tax adviser regarding the tax status of distributions in your state and locality.
Future Tax Treatment. Some of the tax provisions described above are subject to sunset provisions. Specifically, a sunset provision provides that in 2011 the 15% maximum long-term capital gain rate will increase to 20%, that the taxation of qualifying dividends at the long-term capital gain rate will cease, and that the highest ordinary income tax bracket will increase from 35% to 39.6%. In addition, beginning 2013, individual taxpayers with income of $200,000 or more or joint filers with income of $250,000 or more will be subject to an additional tax of 3.8% on unearned income, including capital gains and dividends.
More information about taxes is contained in the SAI.
20
The Fund also offers R Shares, which are offered directly to individual investors in a separate prospectus. Shares of each class of the Fund represent equal pro rata interests in the Fund and accrue dividends and calculate NAV and performance quotations in the same manner. The performance of each class is quoted separately due to different actual expenses. The total return on I Shares of the Fund can be expected to differ from the total return on R Shares of the Fund. Information concerning other classes of the Fund can be requested by calling the Fund at .
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUNDS SAI INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
21
S1 Fund
of
The RBB Fund, Inc.
([Phone Number])
[Website]
For More Information:
This Prospectus contains important information you should know before you invest. Read it carefully and keep it for future reference. More information about the S1 Fund is available free of charge, upon request, including:
Annual/SemiAnnual Reports
These reports contain additional information about the Funds investments, describe the Funds performance, list portfolio holdings, and discuss recent market conditions and economic trends. The annual report includes fund strategies that significantly affected the Funds performance during their last fiscal year.
When available, the annual and semi-annual reports to shareholders may be obtained by visiting [website].
Statement of Additional Information
An SAI, dated , 2010 has been filed with the SEC. The SAI, which includes additional information about the Fund, may be obtained free of charge, along with the annual and semiannual reports, by calling [Phone number]. The SAI, as supplemented from time to time, is incorporated by reference into this prospectus (and is legally part of the prospectus). The SAI is available on the Advisers website at [Website].
Shareholder Inquiries
Representatives are available to discuss account balance information, mutual fund prospectuses, literature, programs and services available. Hours: 8 a.m. to 6 p.m. (Eastern time) MondayFriday. Call: [Phone Number] or visit the website of the Adviser at [website].
Purchases and Redemptions
Call [phone number].
Written Correspondence
Street Address:
S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., 101 Sabin Street, Pawtucket, RI 02860-1427]
P.O. Box Address:
S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., P.O. Box 9816, Providence, RI 02940
Securities and Exchange Commission
You may also view and copy information about the Company and the Funds, including the SAI, by visiting the SECs Public Reference Room in Washington, DC or the EDGAR Database on the SECs Internet site at www.sec.gov. You may also obtain copies of Fund documents by paying a duplicating fee and sending an electronic request to the following e-mail address: publicinfo@sec.gov, or by sending your written request and a duplicating fee to the SECs Public Reference Section, Washington, DC 20549-1520. You may obtain information on the operation of the public reference room by calling the SEC at (202) 551-8090.
INVESTMENT COMPANY ACT FILE NO.81105518
Subject to Completion
Preliminary Prospectus
S1 Fund
of The RBB Fund, Inc.
Ticker Symbol: [ ]
R Shares
Prospectus
, 2010
Investment Adviser:
Simple Alternatives, LLC
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE SECURITIES DESCRIBED IN THIS PROSPECTUS HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE SEC). THE SEC, HOWEVER, HAS NOT JUDGED THESE SECURITIES FOR THEIR INVESTMENT MERIT AND HAS NOT DETERMINED THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIMINAL OFFENSE.
TABLE OF CONTENTS
SUMMARY SECTION
Investment Objective
The S1 Fund (the Fund) seeks to provide long-term capital appreciation with an emphasis on absolute (positive) returns and low correlation to traditional financial market indices such as the S&P 500 ®
Expenses and Fees
As a shareholder, you pay certain fees and expenses. The table below describes the fees and expenses that you may pay if you buy and hold R Shares of the Fund.
R Shares | |||
Shareholder Fees (fees paid directly from your investment) |
|||
Maximum sales charge imposed on purchases |
None | ||
Maximum deferred sales charge |
None | ||
Maximum sales charge imposed on reinvested dividends |
None | ||
Redemption Fee |
None | ||
Exchange Fee |
None | ||
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) |
|||
Management fees |
[2.75 | ]% | |
Distribution (12b-1) fees |
0.25 | % | |
Other expenses 1 : |
|||
Dividend expense on short sales |
| % | |
Interest expense on borrowings |
| % | |
Other operating expenses |
| % | |
Total other expenses |
% | ||
Acquired Fund Operating Expenses |
|||
Total annual Fund operating expenses |
% | ||
1 |
Based on estimated expenses for the current fiscal year |
Example
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and that you sell your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and Fund operating expenses remain the same. Although your actual costs and returns might be different, based on these assumptions your approximate costs of investing $10,000 in the Fund would be:
1 Year | 3 Years | |||||
R Shares |
$ | | $ | |
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total annual Fund operating
Summary of Principal Investment Strategies
The Fund utilizes a multi-manager approach whereby the Funds assets are allocated to one or more sub-advisers (Sub-Advisers) in percentages determined at the discretion of the Funds investment adviser, Simple Alternatives, LLC (the Adviser). The Adviser also manages a portion of the Funds assets and monitors Sub-Adviser trading with the dual objectives of maximizing each Sub-Advisers investment flexibility and assuring that the Fund as a whole complies with investment restrictions. Otherwise, each Sub-Adviser acts independently from the others and utilizes its own distinct investment style in selecting securities. However, each Sub-Adviser must operate within the constraints of the Funds investment objective and strategies and the particular investment restrictions applicable to that Sub-Adviser.
The strategies utilized by the Fund are hedge fund-type strategies and include absolute return strategies as well as
1
strategies aimed at enhanced risk-adjusted returns. The strategies and investment techniques employed by the Sub-Advisers aim to produce absolute returns over a full market cycle while managing risk exposure. These strategies and techniques may attempt to exploit disparities or inefficiencies in particular markets or geographical regions; take advantage of security mispricings or anticipated price movements; and/or benefit from cyclical themes and relationships or special situations and events (such as spin-offs or reorganizations). Such strategies may have low correlation to traditional markets because they seek asymmetric investment opportunities that may present risks unrelated to traditional markets.
The Sub-Advisers may invest and trade in a wide range of instruments, markets and asset classes in U.S. and non-U.S., developed and emerging markets. Investments include equities and equity-related instruments, fixed-income and other debt-related instruments, currencies, financial futures, options and swaps, and private placements. Equities and equity-related instruments include common stocks, preferred stocks, convertible securities, depositary receipts, exchange traded funds (ETFs), Rule 144A securities, warrants, rights, and equity derivatives. Debt-related instruments include corporate bonds, defaulted debt securities, distressed debt securities, mezzanine investments, collateralized bond obligations, collateralized debt obligations, collateralized loan obligations, bank loans, asset-backed securities, mortgage-backed securities, unrated securities and securities of companies in bankruptcy. The Sub-Advisers may invest in equity and debt securities of companies of all sizes and without limit on the credit quality or maturity of debt securities. These securities can be rated investment grade, rated below investment grade, or high yield securities (also known as junk bonds), which are below Baa3 by Moodys, BBB- by S&P or BBB- by Fitch or unrated.
The Adviser has primary responsibility for allocating Fund assets in a manner that attempts to diversify the Funds portfolio across multiple strategies and investment styles that the Adviser believes are complementary and, when combined, will produce enhanced risk-adjusted returns. The Adviser reviews a range of qualitative and quantitative factors when determining the allocations and reallocations to Sub-Advisers, including, but not limited to, the Sub-Advisers style, historical performance and the characteristics of each Sub-Advisers allocated assets (including investment process and statistical analysis). The Adviser will allocate Fund assets among strategies of the Sub-Advisers that it believes offer the potential for attractive long-term investment returns individually and are expected to blend within the Funds portfolio so that it will have low correlation and low volatility relative to the broader stock and bond markets. The Adviser may direct a Sub-Adviser to reduce or limit its investment in certain assets or asset classes in order to achieve the desired composition of the Funds overall portfolio. The Adviser retains the discretion to invest the Funds assets in securities and other instruments directly and may do so in certain circumstances including pending allocation to a Sub-Adviser, to hedge against overall Fund exposure created by the Sub-Advisers, or to increase or reduce the Funds exposure to a particular issuer, sector, industry or general market risk, including interest rate risk.
Summary of Principal Risks
As with all mutual funds, a shareholder is subject to the risk that his or her investment could lose money. The principal risk factors affecting shareholders investments in the Fund are set forth below.
|
Multi-Manager Dependence. The success of the Funds investment strategy depends both on the Advisers ability to select Sub-Advisers and to allocate assets to those Sub-Advisers and on each Sub-Advisers ability to execute the relevant strategy and select investments for the Fund. The Sub-Advisers investment styles may not always be complementary, which could affect the performance of the Fund. |
|
Absolute Return Focus. The Funds returns may deviate from overall market returns to a greater degree than other funds that do not employ an absolute return focus. In addition, if the Fund or a Sub-Adviser takes a defensive posture by hedging its portfolio and stock prices subsequently advance, the Funds returns may be lower than expected and lower than if the Funds portfolio had not been hedged. |
|
Mid-Cap Company Investments. Securities of companies with mid-cap capitalizations tend to be riskier than securities of companies with large-capitalizations. This is because mid cap companies typically have smaller product lines and less access to liquidity than large cap companies, and are therefore more sensitive to economic downturns. In addition, growth prospects of mid cap companies tend to be less certain than large cap companies, and the dividends paid by mid cap stocks are frequently negligible. Moreover, mid cap stocks have, on occasion, fluctuated in the opposite direction of large cap stocks or the general stock market. Consequently, securities of mid cap companies tend to be more volatile than those of large cap companies. |
|
Small-Cap Company Investments. Securities of companies with small capitalizations tend to be riskier than securities of companies with mid-cap and large capitalizations. Smaller companies may have limited product lines, markets and financial resources. The prices of small capitalization stocks tend to be more volatile than those of other stocks. Small capitalization stocks are not priced as efficiently as stocks of larger companies. In addition, it may be harder to sell these stocks, especially during a down market or upon the occurrence of adverse company-specific events, which can reduce their selling prices. |
2
|
Fixed-Income Securities. Fixed income securities in which the Fund may invest are subject to certain risks, including: interest rate risk, prepayment risk and credit/default risk. Interest rate risk involves the risk that prices of fixed income securities will rise and fall in response to interest rate changes. Prepayment risk involves the risk that in declining interest rate environments prepayments of principal could increase and require the Fund to reinvest proceeds of the prepayments at lower interest rates. Credit risk involves the risk that the credit rating of a security may be lowered. |
|
High Yield Debt Obligations. The Fund may invest in high yield debt obligations, such as bonds and debentures, issued by corporations and other business organizations. An issuer of debt obligations may default on its obligation to pay interest and repay principal. Also, changes in the financial strength of an issuer or changes in the credit rating of a security may affect its value. Such high yield debt obligations are referred to as junk bonds and are not considered to be investment grade. |
|
Foreign Investments. International investing is subject to special risks, including, but not limited to, currency exchange rate volatility, political, social or economic instability, and differences in taxation, auditing and other financial practices. |
|
Emerging Markets. Investment in emerging market securities involves greater risk than that associated with investment in foreign securities of developed foreign countries. These risks include volatile currency exchange rates, periods of high inflation, increased risk of default, greater social, economic and political uncertainty and instability, less governmental supervision and regulation of securities markets, weaker auditing and financial reporting standards, lack of liquidity in the markets, and the significantly smaller market capitalizations of emerging market issuers. |
|
Leverage. The Fund may make margin purchases of securities and, in connection with the purchases, borrow money from banks and other financial institutions for investment purposes. The Fund may also engage in selling securities short, which is a form of leverage. Although the use of leverage by the Fund may create an opportunity for increased return, it also results in additional risks and can magnify the effect of any losses. There is no assurance that the use of leverage as an investment strategy will be successful. |
|
Derivatives. The Funds investments in derivative instruments such as options, forward currency exchange contracts, swaps and futures, which may be leveraged, may result in losses. Investments in derivative instruments may result in losses exceeding the amounts invested. |
|
IPOs. IPO risk is the risk that the market value of initial public offering (IPO) shares will fluctuate considerably due to certain factors, such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited information about the issuer. The purchase of IPO shares may involve high transaction costs. IPO shares are subject to market risk and liquidity risk. When the Funds asset base is small, a significant portion of the Funds performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the Fund. As the Funds assets grow, the effect of the Funds investments in IPOs on the Funds performance probably will decline, which could reduce the Funds performance. Because of the price volatility of IPO shares, the Fund may choose to hold IPO shares for a very short period of time. This may increase the turnover of the Funds portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. |
|
Convertible Securities. Securities that can be converted into common stock, such as certain securities and preferred stock, are subject to the usual risks associated with fixed income investments, such as interest rate risk and credit risk. In addition, because they react to changes in the value of the equity securities into which they will convert, convertible securities are also subject to the risks associated with equity securities. |
|
Portfolio Turnover. If the Fund frequently trades its portfolio securities, the Fund will incur higher brokerage commissions and transaction costs, which could lower the Funds performance. In addition to lower performance, high portfolio turnover could result in taxable capital gains. |
|
Exchange Traded Funds. Exchange traded funds (ETFs) are a type of investment company bought and sold on a securities exchange. An ETF represents a fixed portfolio of securities designed to track a particular market index. The risks of owning an ETF generally reflect the risks of owning the underlying securities that they are designed to track, although lack of liquidity in an ETF could result in its being more volatile. The Fund may incur brokerage fees in connection with its purchase of ETF shares. |
Management of the Fund
Investment Advisers and Sub-Advisers
Simple Alternatives, LLC, 25 Burtis Avenue, Suite 200, New Canaan, Connecticut 06840, serves as investment adviser to the Fund. Argonaut Management, L.P., Blue Lion Capital Management, LLC, Courage Capital Management, LLC,
3
Cramer Rosenthal McGlynn, LLC, EverKey Global Partners, Limited, Lauren Templeton Capital Management, LLC, Moab Capital Partners, LLC, Sandler Capital Management, LLC, Starwood Real Estate
Portfolio Managers
Title |
Portfolio Manager
of Fund since: |
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Simple Alternatives, LLC |
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James Dilworth |
Managing Member | Inception | ||
Bruce MacDonald |
Chief Investment Officer | Inception | ||
Argonaut Management, L.P. |
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David Gerstenhaber |
President | Inception | ||
Blue Lion Capital Management, LLC |
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Charles W. Griege, Jr. |
Managing Partner, Chief Investment Officer | Inception | ||
Courage Capital Management, LLC |
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Richard C. Patton |
Chief Investment Officer | Inception | ||
Cramer Rosenthal McGlynn |
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Jay B. Abramson |
President, Chief Investment Officer | Inception | ||
EverKey Global Partners, Limited |
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Jeffrey Everett |
Managing Member, President | Inception | ||
Lauren Templeton Capital Management, LLC |
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Lauren C. Templeton |
Founder, Managing Member, Chief Compliance Officer | Inception | ||
Scott Phillips |
Portfolio Manager, Head of Research | Inception | ||
Moab Capital Partners, LLC |
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Michael M. Rothenberg |
Portfolio Manager | Inception | ||
David A. Sackler |
Portfolio Manager | Inception | ||
Sandler Capital Management, LLC |
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Andrew Sandler |
Senior Managing Director | Inception | ||
Starwood Real Estate Securities, LLC |
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Matthew C. Gilman |
Chief Executive Officer, Portfolio Manager | Inception | ||
Trellus Management Co., LLC |
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Adam Usdan |
President, Portfolio Manager | Inception | ||
John Alderman |
Portfolio Manager | Inception |
Purchase and Sale of Fund Shares
Minimum Initial Investment: $250,000*
* |
R Shares of the Fund may be available through certain brokerage firms, financial institutions and other industry professionals (collectively, Service Organizations). Certain features of the R Shares, such as the initial investment minimum and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if R Shares are purchased directly from The RBB Fund, Inc. The Fund may accept initial investments of smaller amounts in its sole discretion. |
You can only purchase and redeem Shares of the Fund on days the New York Stock Exchange is open and through the means described below.
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Purchase and Redemption By Mail: |
Purchase and Redemption By Wire: |
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S1 Fund |
PNC Bank, N.A. |
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c/o BNY Mellon Investment Servicing (US) Inc. |
Philadelphia, Pennsylvania 19103 |
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P.O. Box 9842 |
ABA# 0310-005-3 |
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Providence, RI 02940-8042 |
Account # |
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F/B/O S1 Fund |
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Ref. (Shareholder Name; Account Number) |
Redemption By Telephone:
Call the Transfer Agent at [ ]**
** A wire charge of $7.50 will apply
Involuntary Redemption: The Fund reserves the right to redeem a shareholders account in the Fund at any time the value of the account falls below $5,000 as a result of a redemption or an exchange request.
Taxes
The Fund intends to make distributions that may be taxed as ordinary income or capital gains. The Fund contemplates declaring as dividends each year all or substantially all of its taxable income. More information about taxes can be found under the section entitled Shareholder Information or in the Funds Statement of Additional Information (SAI).
Potential Conflicts of Interest
If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund may pay the intermediary for the sale of Fund shares and other related services. These payments may create a conflict of interest by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson or visit your financial intermediarys website for more information.
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ADDITIONAL INFORMATION ABOUT THE FUNDS INVESTMENTS AND RISKS
This section provides some additional information about the Funds investments and certain portfolio management techniques that the Fund may use. More information about the Funds investments and portfolio management techniques, and related risks, is
Additional Information About the Funds Principal Investments and Risks
Sub-Adviser Investment Strategies. The Sub-Advisers will use a combination of the following investment strategies:
Relative Value
This strategy is designed to take advantage of perceived discrepancies in the market prices of certain convertible bond, common stock, fixed income and derivative securities. Such discrepancies are often created by imbalances in supply and demand of different types of issues (for example, agency securities relative to U.S. Treasury securities).
Event Driven
This strategy is designed to invest in securities whose prices are or will be impacted by a corporate event. Such events include, but are not limited to corporate events, such as restructurings, spin-offs and significant litigation (e.g., tobacco litigation). Opportunities in this area are created by the reluctance of traditional investors to assume the risk associated with certain corporate events.
Long/Short Equity
This strategy employs long and short trading in common stock, and preferred stock of U.S. and foreign issuers. This strategy attempts to neutralize exposure to general market risk by primarily investing in stocks that are undervalued and short selling those stocks that are considered to be undervalued.
Market Neutral Equity
This strategy is designed to exploit equity market inefficiencies, which involves being simultaneously invested in long and short matched equity portfolios generally of the same size, usually in the same market. These strategies are typically constructed to attempt to be beta neutral and attempt to control the industry, sector, market capitalization and other potential market bias exposures.
Global Macro
This strategy seeks to generate income and/or capital appreciation through a portfolio of investments focused on macro-economic opportunities across numerous markets and instruments. These strategies may include positions in the cash, currency, futures and forward markets. Trading positions are generally held both long and/or short in both U.S. and non-U.S. markets. With a broader global scope, returns to the Global Macro strategy generally exhibit little to no correlation with the broader domestic equity and bond markets.
Convertible Arbitrage
This strategy seeks to take advantage of pricing inefficiencies of the embedded option in a convertible bond. The strategy typically involves the purchase of a convertible debt or preferred equity instrument (an instrument that is effectively a bond or has a fixed obligation of repayment with an embedded equity option, non-detachable warrants or an equity-linked or equity-indexed note) concurrent with the short sale of, or a short over-the-counter derivative position in, the common stock of the issuer of such debt instrument.
Credit Biased
These strategies invest primarily in the following sectors: secured leveraged loans, high yield bonds, distressed debt, structured credit, and global debt (typically less efficient areas of the global fixed income markets than traditional fixed income strategies). Generally these sectors may include wide credit rating ranges (including leveraged buyouts), may include distressed debt strategies and may include restricted securities and securities that may not be registered for which a market may not be readily available.
Mortgage Backed Securities
This strategy is designed to exploit perceived mispricings in mortgage back securities. Such mispricings can result from periods of market illiquidity and distress or from analytical anomalies. The strategy will invest in both conventional and complex mortgage backed securities.
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Opportunistic Equities
This strategy is designed to capitalize on underpriced equity securities or on positive market trends and may focus in certain securities markets, industries, company sizes, or geographical areas. Strategies are primarily managed for absolute return and Sub-Advisers assess risk and opportunity on an absolute, not an index-relative basis, by focusing on relatively few investments that the manager believes are undervalued and either offer a margin-of-safety, or offer high growth opportunities. Selective hedging through the use of short sales or options may be utilized to manage risk exposure. Strategies may also focus on special situations or events, including distressed equities.
Other Investment Strategies
The Fund also has the ability to employ strategies including, but not limited to, borrowing money from banks or other financial institutions to purchase securities and investing in warrants, options and futures, reverse repurchase agreements, initial public offerings, restricted securities, and other investment companies.
Derivative Contracts. The Fund may, but need not, use derivative contracts for any of the following purposes:
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To seek to hedge against the possible adverse impact of changes in stock market prices, currency exchange rates or interest rates in the market value of its securities or securities to be purchased; |
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As a substitute for buying or selling currencies or securities; or |
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To seek to enhance the Funds return in non-hedging situations. |
Examples of derivative contracts include: futures and options on securities, securities indices or currencies; options on these futures; forward foreign currency contracts; and interest rate or currency swaps. The Fund may use derivative contracts involving foreign currencies. A derivative contract will obligate or entitle the Fund to deliver or receive an asset or cash payment that is based on the change in value of one or more securities, currencies or indices. Even a small investment in derivative contracts can have a big impact on the Funds stock market, currency and interest rate exposure. Therefore, using derivatives can disproportionately increase losses and reduce opportunities for gains when stock prices, currency rates or interest rates are changing. The Fund may not fully benefit from or may lose money on derivatives if changes in their value do not correspond accurately to changes in the value of the Funds holdings. The other parties to certain derivative contracts present the same types of default risk as issuers of fixed income securities in that the counterparty may default on its payment obligations or become insolvent. Derivatives can also make the Fund less liquid and harder to value, especially in declining markets.
Short Sales. The Fund engages in short sales including those that are not against the box, which means that the Fund may make short sales where the Fund does not currently own or have the right to acquire, at no added cost, securities identical to those sold short in accordance with the provisions of the Investment Company Act of 1940, as amended (the 1940 Act). In a typical short sale, the Fund borrows from a broker a security in order to sell the security to a third party. The Fund is then obligated to return a security of the same issuer and quantity at some future date. The Fund realizes a loss to the extent the security increases in value or a profit to the extent the security declines in value (after taking into account any associated costs). Short sales against the box may protect the Fund against the risk of losses in the value of a portfolio security because any decline in value of the security should be wholly or partially offset by a corresponding gain in the short position. Any potential gains in the security, however, would be wholly or partially offset by a corresponding loss in the short position. Short sales that are not against the box involve a form of investment leverage, and the amount of the Funds loss on a short sale is potentially unlimited.
Equity and Equity-Related Securities. The Fund invests in all types of equity securities. Equity securities include exchange-traded and over-the-counter common and preferred stocks, warrants, rights, convertible securities, depositary receipts and shares, trust certificates, limited partnership interests, shares of other investment companies and real estate investment trusts (REITs), and equity participations. The number of issuers in the Funds portfolio will vary over time.
Fixed Income Investments. The Fund invests a portion of its assets in fixed income securities. Fixed income investments include bonds, notes (including structured notes), mortgage-backed securities, asset-backed securities, convertible securities, Eurodollar and Yankee dollar instruments, preferred stocks and money market instruments. Fixed income securities may be issued by corporate and governmental issuers and may have all types of interest rate payment and reset terms, including (without limitation) fixed rate, adjustable rate, zero coupon, contingent, deferred, payment-in-kind and auction rate features.
The credit quality of securities held in the Funds portfolio is determined at the time of investment. If a security is rated differently by multiple ratings organizations, the Fund treats the security as being rated in the higher rating category.
Mortgage-Backed Securities. Mortgage-backed securities may be issued by private companies or by agencies of the U.S. government. Mortgage-backed securities represent direct or indirect participation in, or are collateralized by and payable from, mortgage loans secured by real property.
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Certain debt instruments may only pay principal at maturity or may only represent the right to receive payments of principal or payments of interest on underlying pools of mortgage or government securities, but not both. The value of these types of instruments may change more drastically than debt securities that pay both principal and interest during periods of changing interest rates. Principal only mortgage-backed securities are particularly subject to prepayment risk. The Fund may obtain a below market yield or incur a loss on such instruments during periods of declining interest rates. Interest only instruments are particularly subject to extension risk, i.e. the risk that an issuer will exercise its right to pay later than expected. This may occur when there is a rise in interest rates. Mortgage derivatives and structured securities often employ features that have the effect of leverage. As a result, small changes in interest or prepayment rates may cause large and sudden price movements, especially compared to an investment in a security that is not leveraged. Mortgage derivatives can also become illiquid and hard to value in declining markets.
The Fund may also use mortgage dollar rolls to finance the purchase of additional investments. Dollar rolls expose the Fund to the risk that it will lose money if the additional investments do not produce enough income to cover the Funds dollar roll obligations. In addition, if the Advisers or Sub-Advisers prepayment assumptions are incorrect, the Fund may have performed better had the Fund not entered into the mortgage dollar roll.
Foreign Securities. The Fund may invest in securities of foreign issuers that are traded or denominated in U.S. dollars (including equity securities of foreign issuers trading in U.S. markets) through American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs) or International Depositary Receipts (IDRs). In addition, the Fund may invest in securities traded or denominated in foreign currencies and in multinational currencies such as the Euro. The Fund will value its securities and other assets in U.S. dollars. Investments in securities of foreign entities and securities denominated or traded in foreign currencies involve special risks. These include possible political and economic instability and the possible imposition of exchange controls or other restrictions on investments. Changes in foreign currency rates relative to the U.S. dollar will affect the U.S. dollar value of the Funds assets denominated or quoted in currencies other than the U.S. dollar. Emerging market investments offer the potential for significant gains but also involve greater risks than investing in more developed countries. Political or economic instability, lack of market liquidity and government actions such as currency controls or seizure of private business or property may be more likely in emerging markets.
Interest Rate Risk. During periods of rising interest rates, the market value of the Funds fixed-income securities will tend to be lower than prevailing market interest rates. In periods of falling interest rates, the market value of the Funds fixed-income securities generally will tend to be higher than prevailing market interest rates. Prices of longer-term fixed income securities are typically more sensitive to changes in interest rates than prices of shorter-term fixed-income securities.
Credit/Default Risk. The credit rating of an issuer or guarantor of a security in which the Fund invests may be lowered or an issuer or guarantor of a security or the counterparty to a derivatives contract or a repurchase agreement may default on its payment obligations.
Initial Public Offerings (IPOs) Risk. IPO risk is the risk that the market value of IPO shares will fluctuate considerably due to facts such as the absence of a prior public market, unseasoned trading, the small number of shares available for trading and limited information about the issuer. The purchase of IPO shares may involve high transaction costs. IPO shares are subject to market risk and liquidity risk. When the Funds asset base is small, a significant portion of the Funds performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the Fund. As the Funds assets grow, the effect of the Funds investments in IPOs on the Funds performance probably will decline, which could reduce the Funds performance. Because of the price volatility of IPO shares, the Fund may choose to hold IPO shares for a very short period of time, which may increase the turnover of the Funds portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. In addition, the Fund cannot guarantee continued access to IPOs.
Liquidity Risk. Liquidity risk exists when particular investments are difficult to purchase or sell. The Funds investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Liquid securities may also become illiquid because of market events or uncertainties. Illiquidity can be caused by a drop in overall market trading volume, an inability to find a ready buyer, or legal restrictions on the securities resale. Certain securities that were liquid when purchased may later become illiquid, particularly in times of overall economic distress.
Leveraging Risks. The use of leverage by the Adviser and Sub-Advisers may increase the volatility of the Fund. These leveraged instruments may result in losses to the Fund or may adversely affect the Funds net asset value or total return, because instruments that contain leverage are more sensitive to changes in interest rates. The Fund may also use borrowed funds to create leverage. Although the use of leverage by the Fund may create an opportunity for increased return, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on the securities and instruments purchased with leverage proceeds are greater than the cost of the leverage, the Funds return will be greater than if leverage had not been used. Conversely, if the income and gains from the securities and
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instruments purchased with such proceeds does not cover the cost of leverage, the Funds return will be less than if leverage had not been used. In the event of a sudden, precipitous drop in value of the Funds assets, the Fund may not be able to liquidate assets quickly enough to pay off its borrowing. Short sales of securities also involve the use of leverage. Using this investment technique may adversely affect the Funds net asset value or total return.
To limit leverage risk, the Fund will segregate assets determined by the Adviser to be liquid in accordance with procedures established by the Board of Directors, or, when permissible, enter into offsetting transactions, to cover its obligations resulting from its use of derivative instruments. Securities held in a segregated account cannot be sold while the futures contract, option or other derivative is outstanding, unless they are replaced with other suitable assets. As a result, it is possible that segregating a large percentage of the Funds assets could impede portfolio management or its ability to meet redemption requests or other current obligations.
Interest Rate Swaps, Total Return Swaps, Credit Default Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars.
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Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. |
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Total return swaps are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component. |
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Credit default swaps are contracts whereby one party makes periodic payments to a counterparty in exchange for the right to receive from the counterparty a payment equal to the par (or other agreed-upon) value of a referenced debt obligation in the event of a default by the issuer of the debt obligation. |
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Options on swaps (swaptions) are options to enter into a swap agreement. The Fund may also purchase and write (sell) swaptions. Like other types of options, the buyer of a swaption pays a non-refundable premium for the option and obtains the right, but not the obligation, to enter into an underlying swap on agreed-upon terms. The seller of a swaption, in exchange for the premium, becomes obligated (if the option is exercised) to enter into an underlying swap on agreed-upon terms. |
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Interest rate caps entitle the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. |
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Interest rate floors entitle the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. |
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Interest rate collars combine a cap and a floor that are designed to preserve a certain return within a predetermined range of interest rates. |
The Fund may enter into the transactions described above for hedging purposes or to seek to increase total return (which is considered a speculative activity). The use of swaps, swaptions, and interest rate caps, floors and collars is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. If the Adviser or a Sub-Adviser is incorrect in its forecasts of market values and interest rates, the investment performance of the Fund would be less favorable than it would have been if these investment techniques were not used.
Convertible Securities Risk. Convertible securities have characteristics of both equity and fixed-income securities. The value of a convertible security tends to move with the market value of the underlying stock, but may also be affected by interest rates, credit quality of the issuer and any call provisions. In particular, when interest rates rise, fixed-income securities will decline in value. Convertible securities frequently have speculative characteristics and may be acquired without regard to minimum quality ratings. Lower quality convertible securities, also known as junk bonds, involve greater risk of default or price changes due to the issuers creditworthiness. The market prices of these securities may fluctuate more than those of higher quality securities and may decline significantly in periods of general economic difficulty, which may follow periods of rising interest rates. Securities in the lowest quality category may present the risk of default, or may be in default.
Exchange-Traded Fund (ETFs). The Fund may invest up to 25% of its assets in ETFs. ETFs are registered investment companies whose shares are listed and traded on U.S. stock exchanges or otherwise traded in the over-the-counter market. In general, ETFs seek to track a specified securities index or a basket of securities that an index provider, such as Standard & Poors, selects as representative of a market, market segment or industry sector. An ETF portfolio generally holds the same stocks or bonds as the index it tracks or it may hold a representative sample of such securities. Thus, an ETF is designed so that its performance will correspond closely with that of the index it tracks. As a shareholder in an ETF, the Fund will bear its pro rata portion of an ETFs expenses, including advisory fees, in addition to its own expenses.
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Other Investment Companies. The Fund may invest up to 10% of its total assets in the securities of other investment companies, but may not invest more than 5% of its total assets in the securities of any one investment company or acquire more than 3% of the voting securities of any other investment company. Among other things, the Fund may invest in money market mutual funds for cash management purposes by sweeping excess cash balances into such funds until the cash is invested or otherwise utilized. The Fund will indirectly bear its proportionate share of any management fees and other expenses paid by investment companies in which it invests in addition to the advisory and administration fees paid by the Fund.
Portfolio Turnover. The Fund may engage in active and frequent trading, resulting in high portfolio turnover. This may lead to the realization and distribution to shareholders of higher capital gains, increasing their tax liability. Frequent trading may also increase transaction costs, which could detract from the Funds performance.
Temporary Investments. The Fund may depart from its principal investment strategy in response to adverse market, economic, political or other conditions by taking temporary defensive positions (up to 100% of its assets) in all types of money market and short-term debt securities. If the Fund were to take a temporary defensive position, it may be unable for a time to achieve its investment objective.
Disclosure of Portfolio Holdings
A description of The RBB Fund, Inc.s (the Company) policies and procedures with respect to the disclosure of the Funds portfolio securities is available in the SAI. The SAI is incorporated herein.
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MANAGEMENT OF THE FUNDS
Investment Adviser
Simple Alternatives, LLC, a registered investment adviser located at 25 Burtis Avenue, Suite 200, New Canaan, Connecticut 06840, provides investment advisory services to the Fund subject to the general supervision of the Companys Board of Directors. The Adviser was founded in October 2009 by James Dilworth.
Pursuant to an investment advisory agreement with the Company, the Adviser is entitled to an advisory fee at the annual rate of 2.75% of the Funds average daily net assets, computed daily and payable monthly. A discussion regarding the basis for the Companys Board of Directors approval of the Funds investment advisory agreement with the Adviser will be available in the Funds first annual or semi-annual report to shareholders following its commencement of operations.
The Fund is managed by the Adviser and one or more Sub-Advisers unaffiliated with the Adviser. The Adviser also has the ultimate responsibility to oversee the Sub-Advisers, and to recommend their hiring, termination, and replacement, subject to approval by the Board of Directors. James Dilworth and Bruce MacDonald are the portfolio managers primarily responsible for the day-to-day management of the Fund. Prior to founding Simple Alternatives, LLC, Mr. Dilworth worked with Common Sense Investment Management, LLC. Common Sense Investment Management is an institutional hedge fund of funds. Mr. Dilworth founded Dilworth Securities, Inc. and Dilworth Capital Management, LLC in 2003. Prior to establishing Dilworth Capital, Mr. Dilworth served as the CEO and Managing Director of London-based Middlebury Capital Partners International, a holding company partially owned by and managing investments for the Charles R. Schwab family. In 1998, Mr. Dilworth joined Clark Winter in developing Winter Capital International, a fund of funds based in New York City, which was sold to Citigroup Private Bank in late 2000. Mr. Dilworth received his MBA from Northwestern Universitys Kellogg Graduate School of Business. Mr. MacDonald currently serves as Chief Investment Officer of the Adviser. From 2005 to 2009 he was Director of Asset Allocation and Risk Management for the University of Virginia Investment Management Company (UVIMCO). Before joining UVIMCO Mr. MacDonald was the Senior Investment Strategist for Putnam Investments Global Asset Allocation team. Mr. MacDonald holds an MBA from Columbia University and a BA in religion from Wesleyan University.
Sub-Advisers
The Fund has received an exemptive order from the SEC that permits the Adviser to engage or terminate a Sub-Adviser, and to enter into and materially amend an existing sub-advisory agreement, upon the approval of the Board of Directors, without obtaining shareholder approval. The Sub-Advisers will provide investment advisory services to the portion of the Funds portfolio allocated to them by the Adviser. The Adviser will select Sub-Advisers based upon the Sub-Advisers skills in managing assets pursuant to particular investment styles and strategies. The Adviser will monitor existing Sub-Advisers based on their investment styles, strategies, and results in managing assets for specific asset classes. Each Sub-Adviser will have discretion to select portfolio securities for its portion of the Fund, but must select those securities according to the Funds investment objectives and restrictions. The Fund is not required to invest with any minimum number of Sub-Advisers, and does not have minimum or maximum limitations with respect to allocations of assets to any Sub-Adviser. The Adviser may change the allocation of the Funds assets among the available Sub-Advisers, and may add or remove Sub-Advisers, at any time.
Argonaut Management, L.P. (Argonaut Management) , a registered investment adviser located at 546 Fifth Avenue, 17 th Floor, New York, New York 10036, has served as a Sub-Adviser to the Fund since its inception. Argonaut Management was founded in 1993 and is comprised of two partners, David Gerstenhaber and Jarrett Posner. Mr. Gerstenhaber, President and founder of Argonaut Management, is the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Argonaut Management. Prior to forming Argonaut Management, Mr. Gerstenhaber was a Managing Director of Tiger Management Corporation from January 1991 to June 1993. Mr. Gerstenhaber received a simultaneous award of both B.A. and M.A. degrees with honors in economics from Yale in 1982, where he studied extensively with Nobel laureate economist James Tobin. Mr. Gerstenhaber was awarded a Fulbright Scholarship to Cambridge University where he earned a Master of Philosophy in Economics in 1983. Mr. Posner joined Argonaut Management in September 2003 as Chief Operating Officer. Prior to joining Argonaut Management, Mr. Posner worked at Triarc Companies, Inc, from May 1993 through July 2003, most recently as Senior Vice President of Corporate Finance. At Triarc, Mr. Posner worked directly for Nelson Pelz. Mr. Posner received a B.A in Economics from Brown University. Argonaut Management employs a global macro investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Blue Lion Capital Management, LLC (Blue Lion) , a registered investment adviser located at 5950 Berkshire Lane, Suite 510, Dallas, Texas 75225, has served as a Sub-Adviser to the Fund since its inception. Charles W. Griege, Jr. is the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Blue Lion. Mr. Griege has been Managing Partner and Chief Investment Officer of Blue Lion since 2005. Prior to starting Blue Lion Mr. Griege joined Atlas Capital Management, a long/short equity fund, as a partner in May 2001. Prior to Atlas,
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Mr. Griege spent six years in investment banking, most recently as a Managing Director at SoundView Technology Group. Prior to joining SoundView, Mr. Griege was a Vice President in the research sales division of Sanford Bernstein. Mr. Griege received an MBA with honors from Columbia Business School in 1990 and a BA degree from Vanderbilt University in 1985. Blue Lion employs a long/short equity strategy with a value-oriented bias in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Courage Capital Management, LLC (Courage Capital) , a registered investment adviser located at 4400 Harding Road Ste. 503, Nashville, Tennessee 37205, has served as a Sub-Adviser to the Fund since its inception. Courage Capital was founded in 1998 by Richard C. Patton, who is also the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Courage Capital. Mr. Patton is also Chief Investment Adviser of Courage Capital. Prior to founding Courage Capital, Mr. Patton co-founded and operated Woodmont Capital, LLC. Mr. Patton serves on the American Red Cross Board of Governors. Mr. Patton earned a B.S. in Economics from Vanderbilt University and an M.B.A. from Harvard Business School. Courage Capital employs an event driven investment strategy, including investments in special situations companies and distressed securities, in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Cramer Rosenthal McGlynn (CRM) , a registered investment adviser located at 520 Madison Avenue, 20 th Floor, New York, New York 10022, has served as a Sub-Adviser to the Fund since its inception. CRM was founded in 1973. Wilmington Trust Investments, Inc. has a controlling interest in CRM. Jay B. Abramson, the President and Chief Investment Officer of CRM, has responsibility for the day-to-day management of the portion of the Fund sub-advised by CRM. Mr. Abramson has been with CRM since 1985. As Chief Investment Officer, he maintains overall responsibility for the firms investment team. Prior to CRM, Mr. Abramson earned his CPA. He received a BSE from The Wharton School of the University of Pennsylvania and a JD from the University of Pennsylvania Law School. CRM employs a long/short equity investment strategy in managing its portion of the Fund.
EverKey Global Partners, Limited (EverKey) , a registered investment adviser located at 767 Fifth Avenue, 6th Floor, New York, New York 10153, has served as a Sub-Adviser to the Fund since its inception. EverKey was founded in 2008. Jeffery Everett is managing member of EverKey and has responsibility for the day-to-day management of the portion of the Fund sub-advised by EverKey. Mr. Everett has been with EverKey since it was founded in 2008. From 2000-2007, Mr. Everett served as a President and Chief Investment Officer of Templeton Global Advisors based in Nassau, Bahamas. In this capacity, Mr. Everett oversaw all portfolio management responsibilities for mutual fund portfolios and activities within the Templeton Global Equity Group, encompassing 35 portfolio managers and analysts. He was the lead manager for several funds and accounts, including the World Fund. Mr. Everett has 20 years of research experience. Mr. Everett received his BS from Pennsylvania State University and is a Chartered Financial Analyst. EverKey employs a global long/short equity investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Lauren Templeton Capital Management, LLC (LT) , a registered investment adviser located at 1208 Pointe Centre Drive, Suite 210, Chattanooga, Tennessee 37421, has served as a Sub-Adviser to the Fund since its inception. LT was founded in 2001 by Lauren C. Templeton. Ms. Templeton and Scott Phillips have responsibility for the day-to-day management of the portion of the Fund sub-advised by LT. Ms. Templeton is managing member and Chief Compliance Officer of LT. Ms. Templeton is also founder and director of the Southeastern Hedge Fund Association. In addition to these responsibilities Ms. Templeton also serves the following organizations; The Atlanta Hedge Fund Roundtable (President), the Board of Trustees at the Baylor School, the Pre-Business Advisory Council at the University of the South, Sewanee (Board Member), and the Finance Advisory Board of the University of Tennessee Chattanooga. Ms. Templeton is a published book author having written Investing the Templeton Way released by McGraw Hill in 2008. Investing the Templeton Way is a value investors guide to the successful methods employed by her mentor, Sir John Templeton. Ms. Templeton received a B.A. in Economics from the University of the South. Mr. Phillips joined LT in 2007 and serves as Portfolio Manager and Head of Research. Prior to joining LT, Mr. Phillips founded Cumberland Capital Corp, located in Chattanooga, Tennessee in 2004, where he provided equity research services to Green Cay Asset Management, a hedge fund management company located in Nassau, Bahamas. Mr. Phillips received his B.A. in English from the University of the South. Mr. Phillips co-authored Investing the Templeton Way. LT uses a global value investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Moab Capital Partners, LLC (Moab) , a registered investment adviser located at 15 East 62 nd , New York, New York 10065, has served as a Sub-Adviser to the Fund since its inception. Moab was founded in 2006. Michael Rothenberg and David Sackler each control 50% of Moab. Mr. Rothenberg and Mr. Sackler are the co-portfolio managers primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Moab. Mr. Rothenberg has 12 years of hedge fund investment experience. From 2003-2005, Mr. Rothenberg was the senior investment professional at Xerion Capital Partners, LLC where he was responsible for investing and trading a portfolio of distressed debt, bank debt and event driven equities. Mr. Rothenberg has a BS in Finance from the Wharton School of the University of Pennsylvania. Mr. Sackler has 11 years of hedge fund investment experience. From 1999-2005, Mr. Sackler worked at Perry Capital, LLC and OSS Capital Management, LLC. He has extensive experience investing in all sub-sectors
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of healthcare and is experienced in sizing and managing both long and short positions. Mr. Sackler has a BA in Economics from Princeton University. Moab employs an event driven investment strategy, including investments in special situations companies and distressed securities, in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Sandler Capital Management, LLC (Sandler Capital) , a registered investment adviser located at 711 Fifth Avenue, 15 th Floor, New York, New York 10022, has served as a Sub-Adviser to the Fund since its inception. Sandler Capital has been a registered investment adviser since 1988. Andrew Sandler is a majority owner of Sandler Capital and the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Sandler Capital. Mr. Sandler has served as a portfolio manager since 1997. Prior to joining Sandler, Mr. Sandler began his career as a research analyst with Perry Capital in 1989. Mr. Sandler has a B.S. in Finance from the School of Business of the University of Wisconsin at Madison. Sandler Capital employs a long/short equity strategy with a multi-sector focus in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Starwood Real Estate Securities, LLC (SRES) , a registered investment adviser located at 591 West Putnam Avenue, Greenwich, Connecticut 06830, has served as a Sub-Adviser to the Fund since its inception. SRES was launched in 2004. SRES is jointly owned by Barry Sternlicht, Chairman and Advisor, and Matthew C. Gilman, Chief Executive Officer and Portfolio Manager. Over the past 19 years, Mr. Sternlicht has structured more than 400 investment transactions with an asset value of more than $40 billion. From 1995 through 2005, Mr. Sternlicht was Chairman and CEO of Starwood Hotels & Resorts Worldwide, Inc., a company he founded in 1995. Mr. Gilman is the portfolio manager primarily responsible for the day-to-day management of the portion of the Fund sub-advised by SRES. Mr. Gilman joined Starwood Real Estate Securities LLC at its founding in 2004. From 1999 to 2004, Mr. Gilman was Senior Portfolio Manager at ABP Investments US, Inc., the US subsidiary of the Dutch Civil Service Pension Fund, regarded as one of the largest in the world. Mr. Gilman covered real estate securities at JP Morgan Investment Management from 1995 to 1999 and for one year at Genesis Realty Advisors from 1994 to 1995. Mr. Gilman began his career at Wellsford Residential Properties in 1992, a multi-family real estate investment trust. Mr. Gilman is a graduate of Dartmouth College and is a member of the National Association of Real Estate Investment Trusts. SRES employs a long/short equity investment strategy, with a focus on public real estate securities, in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
Trellus Management Co., LLC (Trellus) , a registered investment adviser located at 350 Madison Avenue, New York, New York 10017 has served as a Sub-Adviser to the Fund since its inception. Trellus was founded in 1994 by Adam Usdan, the sole owner of Trellus. Mr. Usdan and John Alderman are the portfolio managers primarily responsible for the day-to-day management of the portion of the Fund sub-advised by Trellus. Mr. Usdan is the President, Chief Investment Officer and Portfolio Manager of Trellus. Mr. Usdan earned an MBA in Finance, Accounting & Marketing from the Kellogg Graduate School of Management, Northwestern University and a BA in English, from Wesleyan University. John Alderman, Portfolio Manager, has been with Trellus since 2001. Mr. Alderman earned an MBA in Finance from New York University and a BA in Economics from Connecticut College. Trellus employs a long/short equity investment strategy in managing its portion of the Fund. The Fund is the only mutual fund for which the Sub-Adviser provides advisory services.
The SAI provides additional information about the portfolio managers compensation, other accounts managed by the portfolio managers and the portfolio managers ownership of securities in the Fund.
Marketing Arrangement
The Adviser or its affiliates may pay additional compensation, out of profits derived from the Advisers management fee and not as an additional charge to the Fund, to certain financial institutions (which may include banks, securities dealers and other industry professionals) for the sale and/or distribution of Fund shares or the retention and/or servicing of Fund investors and Fund shares (revenue sharing). These payments are in addition to any distribution or servicing fees payable under a 12b-l distribution and/or service plan of the Fund, any record keeping or sub-transfer agency fees payable by the Fund, or other fees described in the fee table or elsewhere in the Prospectus or SAI. Examples of revenue sharing payments include, but are not limited to, payment to financial institutions for shelf space or access to a third party platform or fund offering list or other marketing programs, including, but not limited to, inclusion of the Fund on preferred or recommended sales lists, mutual fund supermarket platforms and other formal sales programs; granting the Adviser access to the financial institutions sales force; granting the Adviser access to the financial institutions conferences and meetings; assistance in training and educating the financial institutions personnel; and obtaining other forms of marketing support. The level of revenue sharing payments made to financial institutions may be a fixed fee or based upon one or more of the following factors: gross sales, current assets and/or number of accounts of the Fund attributable to the financial institution, or other factors as agreed to by the Adviser and the financial institution or any combination thereof. The amount of these revenue sharing payments is determined at the discretion of the Adviser from time to time, may be substantial, and may be different for different financial institutions depending upon the services provided by the financial institution. Such payments may provide an incentive for the financial institution to make shares of the Fund available to its customers and may allow the Fund greater access to the financial institutions customers.
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Other Service Providers
The following chart shows the Funds service providers and includes their addresses and principal activities.
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SHAREHOLDER INFORMATION
Pricing of Fund Shares
R Shares of the Fund (Shares) are priced at their net asset value (NAV). The NAV per share of the Fund is calculated as follows:
Value of Assets Attributable to R Shares |
||||
NAV = |
Value of Liabilities Attributable to R Shares |
|||
Number of Outstanding Shares of R Shares |
The Funds NAV is calculated once daily at the close of regular trading hours on the New York Stock Exchange (NYSE) (generally 4:00 p.m. Eastern time) on each day the NYSE is open. The NYSE is generally open Monday through Friday, except national holidays. The Fund will effect purchases of Fund shares at the NAV next determined after receipt of your order or request in proper form. The Fund will effect redemptions of Fund shares at the NAV next calculated after receipt of your order in proper form.
The Funds equity securities listed on any national or foreign exchange market system will be valued at the last sale price, except for the National Association of Securities Dealers Automatic Quotation System (NASDAQ). Equity securities listed on NASDAQ will be valued at the official closing price. Equity securities traded in the over-the-counter market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities having a remaining maturity of 60 days or less are valued at amortized cost, which approximates market value. Fixed income securities having a remaining maturity of greater than 60 days are valued using an independent pricing service. When prices are not available from such services or are deemed to be unreliable, securities may be valued by dealers who make markets in such securities. Foreign securities, currencies and other securities denominated in foreign currencies are translated into U.S. dollars at the exchange rate of such currencies against the U.S. dollar provided by a pricing service. All assets denominated in foreign currencies will be converted into U.S. dollars at the exchange rates in effect at the time of valuation. If the Fund holds foreign equity securities, the calculation of the Funds NAV will not occur at the same time as the determination of the value of the foreign equities securities in the Funds portfolio, since these securities are traded on foreign exchanges.
If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Companys Board of Directors. In addition, the prices of foreign securities may be affected by events that occur after the close of a foreign market but before the Fund prices its shares. In such instances, a foreign security may be fair valued in accordance with procedures adopted by the Companys Board of Directors. Relying on prices supplied by pricing services or dealers or using fair valuation involves the risk that the values used by the Fund to price its investments may be higher or lower than the values used by other investment companies and investors to price the same investments.
Investments in other open-end investment companies are valued based on the NAV of those investment companies (which may use fair value pricing as discussed in their prospectuses).
Market Timing
In accordance with the policy adopted by the Companys Board of Directors, the Company discourages market timing and other excessive trading practices. Purchases should be made with a view to longer-term investment only. Excessive short-term (market timing) trading practices may disrupt portfolio management strategies, increase brokerage and administrative costs, harm Fund performance and result in dilution in the value of Fund shares held by long-term shareholders. The Company and the Adviser reserve the right to reject or restrict purchase requests from any investor. The Company and the Adviser will not be liable for any loss resulting from rejected purchase orders. To minimize harm to the Company and its shareholders (or the Adviser), the Company (or the Adviser) will exercise its right if, in the Companys (or the Advisers) judgment, an investor has a history of excessive trading or if an investors trading, in the judgment of the Company or the Adviser, has been or may be disruptive to the Fund. No waivers of the provisions of the policy established to detect and deter market timing and other excessive trading activity are permitted that would harm the Fund and its shareholders or would subordinate the interests of the Fund and its shareholders to those of the Adviser or any affiliated person or associated person of the Adviser.
Pursuant to the policy adopted by the Board of Directors, the Adviser has developed criteria that it uses to identify trading activity that may be excessive. The Adviser reviews on a regular, periodic basis available information related to the trading activity in the Fund in order to assess the likelihood that the Fund may be the target of excessive trading. As part of its excessive trading surveillance process, the Adviser, on a periodic basis, examines transactions that exceed certain monetary thresholds or numerical limits within a period of time. If, in its judgment, the Adviser detects excessive, short-term trading, it may reject or restrict a purchase request and may further seek to close an investors account with the Fund. The Adviser may modify its surveillance procedures and criteria from time to time without prior notice regarding the detection of excessive trading or to address specific circumstances. The Adviser will apply the criteria in a manner that, in its judgment, will be uniform.
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If necessary, the Company may prohibit additional purchases of Fund shares by a financial intermediary or by certain customers of the financial intermediary. Financial intermediaries may also monitor their customers trading activities in the Fund. The criteria used by intermediaries to monitor for excessive trading may differ from the criteria used by the Company. If a financial intermediary fails to enforce the Companys excessive trading policies, the Company may take certain actions, including terminating the relationship.
There is no assurance that the Fund will be able to identify market timers, particularly if they are investing through intermediaries.
Purchase of Fund Shares
Shares representing interests in the Fund are offered continuously for sale by BNY Mellon Distributors Inc. (the Distributor).
General. You may purchase Shares of the Fund at the NAV per Share next calculated after your order is received by the Transfer Agent in proper form as described below. After an initial purchase is made, the Transfer Agent will set up an account for you on the Company records. The minimum initial investment in the Fund is $250,000. There is no minimum for subsequent investments. The Fund may accept initial investments of smaller amounts in its sole discretion. You can only purchase Shares of the Fund on days the NYSE is open and through the means described below.
Purchases Through Intermediaries. Shares of the Fund may also be available through certain brokerage firms, financial institutions and other industry professionals (collectively, Service Organizations). Certain features of the Shares, such as the initial and subsequent investment minimums and certain trading restrictions, may be modified or waived by Service Organizations. Service Organizations may impose transaction or administrative charges or other direct fees, which charges and fees would not be imposed if Shares are purchased directly from the Company. Therefore, you should contact the Service Organization acting on your behalf concerning the fees (if any) charged in connection with a purchase or redemption of Shares and should read this Prospectus in light of the terms governing your accounts with the Service Organization. Service Organizations will be responsible for promptly transmitting client or customer purchase and redemption orders to the Company in accordance with their agreements with the Company or its agent and with clients or customers. Service Organizations or, if applicable, their designees that have entered into agreements with the Company or its agent may enter confirmed purchase orders on behalf of clients and customers, with payment to follow no later than the Companys pricing on the following Business Day. If payment is not received by such time, the Service Organization could be held liable for resulting fees or losses. The Company will be deemed to have received a purchase or redemption order when a Service Organization, or, if applicable, its authorized designee, accepts a purchase or redemption order in good order if the order is actually received by the Company in good order not later than the next business morning. If a purchase order is not received by the Fund in good order, BNY Mellon Investment Servicing (US) Inc. (the Transfer Agent) will contact the financial intermediary to determine the status of the purchase order. Orders received by the Company in good order will be priced at the Funds NAV next computed after they are deemed to have been received by the Service Organization or its authorized designee.
The Company relies upon the integrity of Service Organizations to ensure that orders are timely and properly submitted. The Fund cannot assure you that a Service Organization properly submitted to it all purchase and redemption orders received from the Service Organizations customers before the time for determination of the Funds NAV in order to obtain that days price.
For administration, subaccounting, transfer agency and/or other services, the Adviser may pay Service Organizations and certain recordkeeping organizations a fee (the Service Fee) of the average annual net asset value of accounts with the Company maintained by such Service Organization or recordkeepers. The Service Fee payable to any one Service Organization is determined based upon a number of factors, including the nature and quality of services provided, the operations processing requirements of the relationship and the standardized fee schedule of the Service Organization or recordkeeper.
Initial Investment By Mail. An account may be opened by completing and signing the application included with this Prospectus and mailing it to the Transfer Agent at the address noted below, together with a check ($250,000 minimum) payable to the Fund. Third party checks will not be accepted.
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Regular Mail: |
Overnight Mail: |
|
S1 Fund |
S1 Fund |
|
c/o BNY Mellon Investment Servicing (US) Inc. |
c/o BNY Mellon Investment Servicing (US) Inc. |
|
P.O. Box 9816 |
101 Sabin Street |
|
Providence, RI 02940 |
Pawtucket, RI 02860-1427 |
The name of the Fund should be designated on the application and should appear on the check. Payment for the purchase of Shares received by mail will be credited to a shareholders account at the NAV per share of the Fund next determined after receipt of payment in good order.
Initial Investment By Wire. Shares of the Fund may be purchased by wiring federal funds to PNC Bank, N.A. (see instructions below). A completed application must be forwarded to the Transfer Agent at the address noted above under Initial Investment by Mail in advance of the wire. For the Fund, notification must be given to the Transfer Agent at [ ] prior to 4:00 p.m., Eastern time, on the wire date. (Prior notification must also be received from investors with existing accounts.) Request account information and routing instructions by calling the Transfer Agent at [ ]. Funds should be wired to:
PNC Bank, N.A.
Philadelphia, Pennsylvania 19103
ABA# 0310-0005-3
Account #
F/B/O S1 Fund
Ref. (Account Number)
Shareholder or Account Name
Federal funds wire purchases will be accepted only on days when the NYSE and PNC Bank, N.A. are open for business.
Additional Investments. Additional investments may be made at any time by purchasing Shares of the Fund at the NAV per Share of the Fund by mailing a check to the Transfer Agent at the address noted under Initial Investment by Mail (payable to S1 Fund) or by wiring monies to PNC Bank, N.A. as outlined under Initial Investment by Wire. Notification must be given to the Transfer Agent at [ ] prior to 4:00 p.m., Eastern time, on the wire date. Initial and additional purchases made by check cannot be redeemed until payment of the purchase has been collected. This may take up to 15 calendar days from the date of purchase.
Automatic Investment Plan. Additional investments in Shares of the Fund may be made automatically by authorizing the Transfer Agent to withdraw funds from your bank account through an Automatic Investment Plan ($ minimum). Investors desiring to participate in an Automatic Investment Plan should call the Transfer Agent at [ ].
Retirement Plans/IRA Accounts. Shares may be purchased in conjunction with individual retirement accounts (IRAs) and rollover IRAs where PFPC Trust Company acts as custodian. A $15.00 custodial maintenance fee is charged per IRA account per year. For further information as to applications and annual fees, contact the Transfer Agent at [ ]. To determine whether the benefits of an IRA are available and/or appropriate, you should consult with a tax advisor.
Other Purchase Information. The Company reserves the right, in its sole discretion, to suspend the offering of shares or to reject purchase orders when, in the judgment of management, such suspension or rejection is in the best interest of the Fund. The Adviser will monitor the Funds total assets and may, subject to Board approval, decide to close the Fund at any time to new investments or to new accounts due to concerns that a significant increase in the size of the Fund may adversely affect the implementation of the Funds strategy. The Adviser, subject to Board approval, may also choose to reopen the Fund to new investments at any time, and may subsequently close the Fund again should concerns regarding the Funds size recur. If the Fund closes to new investments, the Fund may be offered only to certain existing shareholders of the Fund and certain other persons who may be subject to cumulative, maximum purchase amounts, as follows:
a. |
Persons who already hold Shares of the closed Fund directly or through accounts maintained by brokers by arrangement with the Company, |
b. |
Existing and future clients of financial advisers and planners whose clients already hold Shares of the closed Fund, |
c. |
Employees of the Adviser and their spouses, parents and children, and |
d. |
Directors of the Company. |
Distributions to all shareholders of the closed Fund will continue to be reinvested unless a shareholder elects otherwise. The Adviser, subject to the Board of Directors discretion, reserves the right to implement other purchase limitations at the time of closing, including limitations on current shareholders.
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Purchases of the Funds Shares will be made in full and fractional shares of the Fund calculated to three decimal places.
The Companys officers are authorized to waive the minimum initial and subsequent investment requirements.
Good Order. You must include complete and accurate required information on your purchase request. Please see Purchase of Fund Shares for instructions. Purchase requests not in good order may be rejected.
Customer Identification Program. Federal law requires the Company to obtain, verify and record identifying information, which may include the name, residential or business street address, date of birth (for an individual), social security or taxpayer identification number or other identifying information for each investor who opens or reopens an account with the Company. Applications without the required information, or without any indication that a social security or taxpayer identification number has been applied for, may not be accepted. After acceptance, to the extent permitted by applicable law or its customer identification program, the Company reserves the right (a) to place limits on transactions in any account until the identity of the investor is verified; or (b) to refuse an investment in a Company portfolio or to involuntarily redeem an investors Shares and close an account in the event that an investors identity is not verified. The Company and its agents will not be responsible for any loss in an investors account resulting from the investors delay in providing all required identifying information or from closing an account and redeeming an investors Shares when an investors identity cannot be verified.
Redemption of Fund Shares
You may redeem Fund Shares at the next NAV calculated after a redemption request is received by the Transfer Agent in proper form. You can only redeem Shares of the Fund on days the NYSE is open and through the means described below. You may redeem Fund Shares by mail, or, if you are authorized, by telephone. The value of Shares redeemed may be more or less than the purchase price, depending on the market value of the investment securities held by the Fund.
Redemption By Mail. Your redemption requests should be addressed to S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., P.O. Box 9816, Providence, RI 02940; for overnight delivery, requests should be addressed to S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., 101 Sabin Street, Pawtucket, RI 02860-1427 and must include:
a. |
Name of the Fund; |
b. |
Account number; |
c. |
Your Share certificates, if any, properly endorsed or with proper powers of attorney; |
d. |
A letter of instruction specifying the number of Shares or dollar amount to be redeemed, signed by all registered owners of the Shares in the exact names in which they are registered; |
e. |
Medallion signature guarantees are required when (i) the redemption proceeds are to be sent to someone other than the registered shareholder(s) or (ii) the redemption request is for $50,000 or more. A signature guarantee may be obtained from a domestic bank or trust company, broker, dealer, clearing agency or savings association who are participants in a Medallion Program recognized by the Securities Transfer Association. The three recognized Medallion Programs are Securities Transfer Agent Medallion Program (STAMP), Stock Exchanges Medallion Program (SEMP) and New York Stock Exchange, Inc. Medallion Program (MSP). Signature guarantees which are not a part of these programs will not be accepted. Please note that a notary public stamp or seal is not acceptable; and |
f. |
Other supporting legal documents, if required, in the case of estates, trusts, guardianships, custodianships, corporations, pension and profit sharing plans and other organizations. |
Redemption By Telephone. In order to utilize the telephone redemption option, you must indicate that option on your Account Application. Please note that the telephone redemption option is not available for retirement accounts. You may then initiate a redemption of Shares by calling the Transfer Agent at [ ] and requesting that the redemption proceeds be mailed to the primary registration address or wired per the authorized instructions. A wire charge of $7.50 is assessed and charged to the shareholder. If the telephone redemption option is authorized, the Transfer Agent may act on telephone instructions from any person representing himself or herself to be a shareholder and believed by the Transfer Agent to be genuine. The Transfer Agents records of such instructions are binding and shareholders, not the Fund or its Transfer Agent, bear the risk of loss in the event of unauthorized instructions reasonably believed by the Fund or its Transfer Agent to be genuine. The Fund and the Transfer Agent will employ reasonable procedures to confirm that instructions communicated are genuine and, if it does not, it may be liable for any losses due to unauthorized or fraudulent instructions. The procedures employed by the Fund and the Transfer Agent in connection with transactions initiated by telephone include tape recording of telephone instructions and requiring some form of personal identification prior to acting upon instructions received by telephone.
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Involuntary Redemption. The Fund reserves the right to redeem a shareholders account in the Fund at any time the value of the account in the Fund falls below $5,000 as the result of a redemption or an exchange request. Shareholders will be notified in writing that the value of their account in the Fund is less than $5,000 and will be allowed 30 days to make additional investments before the redemption is processed. The transaction fee applicable to the Fund will not be charged when Shares are involuntarily redeemed.
The Fund may assert the right to redeem your shares at current NAV at any time and without prior notice if, and to the extent that, such redemption is necessary to reimburse the Fund for any loss sustained by reason of your failure to make full payment for shares of the Fund you previously purchased or subscribed for.
Other Redemption Information. Redemption proceeds for Shares of the Fund recently purchased by check may not be distributed until payment for the purchase has been collected, which may take up to fifteen days from the purchase date. Shareholders can avoid this delay by utilizing the wire purchase option.
Other than as described above, payment of the redemption proceeds will be made within seven days after receipt of an order for a redemption. The Company may suspend the right of redemption or postpone the date at times when the NYSE is closed or under any emergency circumstances as determined by the SEC.
If the Board of Directors determines that it would be detrimental to the best interests of the remaining shareholders of the Fund to make payment wholly or partly in cash, redemption proceeds may be paid in whole or in part by an in-kind distribution of readily marketable securities held by the Fund instead of cash in conformity with applicable rules of the SEC. Investors generally will incur brokerage charges on the sale of portfolio securities so received in payment of redemptions. The Company has elected, however, to be governed by Rule 18f-1 under the 1940 Act, so that the Fund is obligated to redeem its Shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Fund.
Proper Form. You must include complete and accurate required information on your redemption request. Please see Redemption of Fund Shares for instructions. Redemption requests not in proper form may be delayed.
Distribution Fees
The Board of Directors of the Company has adopted a plan pursuant to Rule 12b-1 under the 1940 Act (the Plan) that allows the Fund to pay fees from its R Shares assets for selling and distributing R Shares. Pursuant to the Plan, R Shares of the Fund can pay distribution fees at an annual rate of up to 0.25% of the Funds R Shares assets. Because distribution fees are paid on an ongoing basis, over time they increase the cost of your investment and may cost more than paying other sales charges.
Dividends and Distributions
The Fund will distribute substantially all of its net investment income and net realized capital gains, if any, to its shareholders. All distributions are reinvested in the form of additional full and fractional Shares of the Fund unless a shareholder elects otherwise.
The Fund will declare and pay dividends from net investment income annually. Net realized capital gains (including net short-term capital gains), if any, will be distributed by the Fund at least annually. The estimated amount of any annual distribution will be posted to the Advisers website at [website] or a free copy may be obtained by calling [Phone Number].
The Fund may pay additional distributions and dividends at other times if necessary for the Fund to avoid U.S. federal tax. The Funds distributions and dividends, whether received in cash or reinvested in additional Fund Shares, are subject to U.S. federal income tax.
More Information About Taxes
The following is a summary of certain United States tax considerations relevant under current law, which may be subject to change in the future. Except where otherwise indicated, the discussion relates to investors who are individual United States citizens or residents. You should consult your tax adviser for further information regarding federal, state, local and/or foreign tax consequences relevant to your specific situation.
Federal Taxes. The Fund contemplates distributing as dividends each year all or substantially all of its taxable income, including its net capital gain (the excess of net long-term capital gain over net short-term capital loss). Except as otherwise discussed below, you will be subject to federal income tax on Fund distributions regardless of whether they are paid in cash or reinvested in additional shares. Fund distributions attributable to short-term capital gains and net investment income will generally be taxable to you as ordinary income, except as discussed below.
Distributions attributable to the net capital gain of the Fund will be taxable to you as long-term capital gain, no matter how long you have owned your Fund shares. The maximum long-term capital gain rate applicable to individuals, estates, and trusts is currently 15%. You will be notified annually of the tax status of distributions to you.
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Distributions of qualifying dividends will also generally be taxable to you at long-term capital gain rates, as long as certain requirements are met. In general, if 95% or more of the gross income of the Fund (other than net capital gain) consists of dividends received from domestic corporations or qualified foreign corporations (qualifying dividends), then all distributions paid by the Fund to individual shareholders will be taxed at long-term capital gains rates. But if less than 95% of the gross income of the Fund (other than net capital gain) consists of qualifying dividends, then distributions paid by the Fund to individual shareholders will be qualifying dividends only to the extent they are derived from qualifying dividends earned by the Fund. For the lower rates to apply, you must have owned your Fund shares for at least 61 days during the 121-day period beginning on the date that is 60 days before the Funds ex-dividend date (and the Fund will need to have met a similar holding period requirement with respect to the shares of the corporation paying the qualifying dividend). The amount of the Funds distributions that qualify for this favorable treatment may be reduced as a result of the Funds securities lending activities (if any), a high portfolio turnover rate or investments in debt securities or non-qualified foreign corporations.
Distributions from the Fund will generally be taxable to you in the taxable year in which they are paid, with one exception. Distributions declared by the Fund in October, November or December and paid in January of the following year are taxed as though they were paid on December 31.
A portion of distributions paid by the Fund to shareholders that are corporations may also qualify for the dividends-received deduction for corporations, subject to certain holding period requirements and debt financing limitations.
If you purchase shares just before a distribution, the purchase price will reflect the amount of the upcoming distribution, but you will be taxed on the entire amount of the distribution received, even though, as an economic matter, the distribution simply constitutes a return of capital. This is known as buying into a dividend.
Sales and Exchanges. You will generally recognize taxable gain or loss for federal income tax purposes on a sale, exchange or redemption of your shares, including an exchange for shares of another Simple Alternatives Fund, based on the difference between your tax basis in the shares and the amount you receive for them. Generally, you will recognize long-term capital gain or loss if you have held your Fund shares for over twelve months at the time you dispose of them. (To aid in computing your tax basis, you should retain your account statements for the periods during which you held shares.)
Any loss realized on shares held for six months or less will be treated as a long-term capital loss to the extent of any capital gain dividends that were received on the shares. Additionally, any loss realized on a disposition of shares of the Fund may be disallowed under wash sale rules to the extent the shares disposed of are replaced with other shares of the Fund within a period of 61 days beginning 30 days before and ending 30 days after the shares are disposed of, such as pursuant to a dividend reinvestment in shares of the Fund. If disallowed, the loss will be reflected in an upward adjustment to the basis of the shares acquired.
IRAs and Other Tax-Qualified Plans. The one major exception to the preceding tax principles is that distributions on, and sales, exchanges and redemptions of, shares held in an IRA (or other tax-qualified plan) will not be currently taxable.
Backup Withholding. The Fund may be required in certain cases to withhold and remit to the Internal Revenue Service a percentage of taxable dividends or gross proceeds realized upon sale payable to shareholders who have failed to provide a correct tax identification number in the manner required, or who are subject to withholding by the Internal Revenue Service for failure to properly include on their return payments of taxable interest or dividends, or who have failed to certify to the Fund that they are not subject to backup withholding when required to do so or that they are exempt recipients. The current withholding rate is 28%.
U.S. Tax Treatment of Foreign Shareholders. For nonresident aliens, foreign corporations and other foreign investors, Fund distributions attributable to net long-term capital gains of the Fund will generally be exempt from U.S. tax, but all other Fund distributions will generally be subject to a 30% withholding tax. The withholding tax may, however, be reduced (and, in some cases, eliminated) under an applicable tax treaty between the United States and a shareholders country of residence or incorporation, provided that the shareholder furnishes the Fund with a properly completed Form W-8BEN to establish entitlement for these treaty benefits.
Foreign shareholders will generally not be subject to U.S. tax on gains realized on sale, exchange or redemption of shares in the Fund.
Different U.S. tax rules may apply to a foreign shareholder, however, if the investment in the Fund is connected to a trade or business of the shareholder in the United States or the investor is present in the United States for 183 days or more in a year.
All foreign investors should consult their own tax advisors regarding the tax consequences in their country of residence of an investment in the Fund.
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State and Local Taxes. You may also be subject to state and local taxes on income and gain from Fund shares. State income taxes may not apply, however, to the portions of the Funds distributions, if any, that are attributable to interest on U.S. government securities. You should consult your tax adviser regarding the tax status of distributions in your state and locality.
Future Tax Treatment. Some of the tax provisions described above are subject to sunset provisions. Specifically, a sunset provision provides that in 2011 the 15% maximum long-term capital gain rate will increase to 20%, that the taxation of qualifying dividends at the long-term capital gain rate will cease, and that the highest ordinary income tax bracket will increase from 35% to 39.6%. In addition, beginning 2013, individual taxpayers with income of $200,000 or more or joint filers with income of $250,000 or more will be subject to an additional tax of 3.8% on unearned income, including capital gains and dividends.
More information about taxes is contained in the SAI.
Multi-Class Structure
The Fund also offers I Shares, which are offered directly to institutional investors without distribution fees in a separate prospectus. Shares of each class of the Fund represent equal pro rata interests in the Fund and accrue dividends and calculate NAV and performance quotations in the same manner. The performance of each class is quoted separately due to different actual expenses. The total return on R Shares of the Fund can be expected to differ from the total return on I Shares of the Fund. Information concerning other classes of the Fund can be requested by calling the Fund at .
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUNDS SAI INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
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S1 Fund
of
The RBB Fund, Inc.
([Phone Number])
[Website]
For More Information:
This Prospectus contains important information you should know before you invest. Read it carefully and keep it for future reference. More information about the S1 Fund is available free of charge, upon request, including:
Annual/SemiAnnual Reports
These reports contain additional information about the Funds investments, describe the Funds performance, list portfolio holdings, and discuss recent market conditions and economic trends. The annual report includes fund strategies that significantly affected the Funds performance during their last fiscal year.
When available, the annual and semi-annual reports to shareholders may be obtained by visiting [website].
Statement of Additional Information
An SAI, dated , 2010 has been filed with the SEC. The SAI, which includes additional information about the Fund, may be obtained free of charge, along with the annual and semiannual reports, by calling [Phone number]. The SAI, as supplemented from time to time, is incorporated by reference into this prospectus (and is legally part of the prospectus). The SAI is available on the Advisers website at [Website].
Shareholder Inquiries
Representatives are available to discuss account balance information, mutual fund prospectuses, literature, programs and services available. Hours: 8 a.m. to 6 p.m. (Eastern time) MondayFriday. Call: [Phone Number] or visit the website of the Adviser at [website].
Purchases and Redemptions
Call [phone number].
Written Correspondence
Street Address:
S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., 101 Sabin Street, Pawtucket, RI 02860-1427]
P.O. Box Address:
S1 Fund, c/o BNY Mellon Investment Servicing (US) Inc., P.O. Box 9816, Providence, RI 02940
Securities and Exchange Commission
You may also view and copy information about the Company and the Funds, including the SAI, by visiting the SECs Public Reference Room in Washington, DC or the EDGAR Database on the SECs Internet site at www.sec.gov. You may also obtain copies of Fund documents by paying a duplicating fee and sending an electronic request to the following e-mail address: publicinfo@sec.gov, or by sending your written request and a duplicating fee to the SECs Public Reference Section, Washington, DC 20549-1520. You may obtain information on the operation of the public reference room by calling the SEC at (202) 551-8090.
INVESTMENT COMPANY ACT FILE NO.81105518
Subject to Completion
Preliminary Statement of Additional Information Dated July 19, 2010
STATEMENT OF ADDITIONAL INFORMATION
S1 FUND
a series of THE RBB FUND, INC.
I Shares Ticker Symbol: [ ]
R Shares Ticker Symbol: [ ]
[ ], 2010
Investment Adviser:
SIMPLE ALTERNATIVES, LLC
This Statement of Additional Information (SAI) provides supplementary information pertaining to shares of two classes, I Shares and R Shares (collectively, the Shares), representing interests in the S1 Fund (the Fund) of The RBB Fund, Inc. (the Company). This SAI is not a prospectus and should be read only in conjunction with the Funds I Shares and R Shares Prospectuses dated [ ], 2010 (the Prospectuses). Copies of the Prospectuses may be obtained free of charge by calling toll-free (877) 264-5346.
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The Company is an open-end management investment company currently operating 18 separate portfolios. The Company is registered under the
Investment Company Act of 1940, as amended, (the 1940 Act) and was organized as a Maryland corporation on February 29, 1988. This SAI pertains to the I Shares and R Shares of the S1 Fund. Simple Alternatives, LLC (SA or
INVESTMENT OBJECTIVE AND POLICIES
The following supplements the information contained in the Prospectuses concerning the investment objective and policies of the Fund.
The Fund seeks to provide long-term capital appreciation with an emphasis on absolute (positive) returns and low correlation to traditional financial market indices such as the S&P 500 ® Index. The Fund may not necessarily invest in all of the instruments or use all of the investment techniques permitted by the Funds Prospectuses and this SAI, or invest in such instruments or engage in such techniques to the full extent permitted by the Funds investment policies and limitations.
Multi-Manager Structure. The Fund is managed by the Adviser and one or more asset managers who are unaffiliated with the Adviser (each a Sub-Adviser and together, the Sub-Advisers). Subject to review by the Funds Board of Directors, the Adviser is responsible for selecting the Funds investment strategies and for allocating and reallocating assets among the Sub-Advisers consistent with the Funds investment objective and strategies. The Adviser is also responsible for recommending to the Board whether an agreement with a Sub-Adviser should be approved, renewed, modified or terminated and for monitoring and evaluating the Sub-Advisers. The Adviser is also responsible for implementing procedures to ensure that each Sub-Adviser complies with the Funds investment objective, strategies and restrictions.
Portfolio Turnover Rate. Portfolio turnover rate is defined under U.S. Securities and Exchange Commission (the SEC) rules as the greater of the value of the securities purchased or securities sold, excluding all securities whose maturities at the time of acquisition were one-year or less, divided by the average monthly value of such securities owned during the year. Based on this definition, instruments with remaining maturities of less than one-year are excluded from the calculation of the portfolio turnover rate. Instruments excluded from the calculation of portfolio turnover generally would include the futures contracts in which the Fund may invest since such contracts generally have remaining maturities of less than one-year. The Fund may at times hold investments in other short-term instruments, such as repurchase agreements, which are excluded for purposes of computing portfolio turnover.
Asset-Backed Securities. The Fund may invest in asset-backed securities, which represent participations in, or are secured by and payable from, pools of assets such as motor vehicle installment sale contracts, installment loan contracts, leases of various types of real and personal property, receivables from revolving credit (credit card) agreements and other categories of receivables. Asset-backed securities may also be collateralized by a portfolio of U.S. government securities but are not direct obligations of the U.S. government, its agencies or instrumentalities. Such asset pools are securitized through the use of privately-formed trusts or special purpose corporations. Payments or distributions of principal and interest on asset-backed securities may be guaranteed up to certain amounts and for a certain time period by a letter of credit or a pool insurance policy issued by a financial institution unaffiliated with the trust or corporation, or other credit enhancements may be present, although privately issued obligations collateralized by a portfolio of privately issued asset-backed securities do not involve any government-related guarantee or insurance. In addition to the risks that are presented by mortgage-backed securities, asset-backed securities generally do not have the benefit of a security interest in collateral that is comparable to mortgage assets. See Mortgage-Backed Securities below for additional information.
Asset-backed securities acquired by the Fund may also include collateralized debt obligations (CDOs). CDOs include collateralized bond obligations (CBOs) and collateralized loan obligations (CLOs) and other similarly structured securities.
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A CBO is a trust or other special purpose entity (SPE) that is typically backed by a diversified pool of fixed-income securities (which may include high risk, below investment grade securities). A CLO is a trust or other SPE that is typically collateralized by a pool of loans, which may include, among others, domestic and non-U.S. senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. Although certain CDOs may receive credit enhancement in the form of a senior-subordinate structure, over-collateralization or bond insurance, such enhancement may not always be present and may fail to protect a Fund against the risk of loss on default of the collateral. Certain CDOs may use derivatives contracts to create synthetic exposure to assets rather than holding such assets directly, which entails the risks of derivative instruments described elsewhere in this SAI. CDOs may charge management fees and administrative expenses, which are in addition to those of the Fund.
For both CBOs and CLOs, the cashflows from the SPE are split into two or more portions, called tranches, varying in risk and yield. The riskiest portion is the equity tranche, which bears the first loss from defaults from the bonds or loans in the SPE and serves to protect the other, more senior tranches from default (though such protection is not complete). Since it is partially protected from defaults, a senior tranche from a CBO or CLO typically has higher ratings and lower yields than its underlying securities, and may be rated investment grade. Despite the protection from the equity tranche, CBO or CLO tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults, as well as investor aversion to CBO or CLO securities as a class. Interest on certain tranches of a CDO may be paid in kind (paid in the form of obligations of the same type rather than cash), which involves continued exposure to default risk with respect to such payments.
The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which the Fund invests. Normally, CBOs, CLOs and other CDOs are privately offered and sold, and thus are not registered under the securities laws. As a result, investments in CDOs may be characterized by the Fund as illiquid securities. However, an active dealer market may exist for CDOs, allowing a CDO to qualify for Rule 144A transactions. In addition to the normal risks associated with fixed-income securities and asset-backed securities generally discussed elsewhere in this SAI, CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) a Fund may invest in tranches of CDOs that are subordinate to other tranches; (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results; and (v) the CDOs manager may perform poorly or default.
Commercial Paper. Commercial paper is the term used to designate unsecured short-term promissory notes issued by corporations and other entities. Maturities on these issues vary from a few to 270 days.
Corporate Obligations. The Fund may invest in debt obligations, such as bonds and debentures, issued by corporations and other business organizations without limit on credit quality or maturity of debt securities. See Appendix A to this SAI for a description of corporate debt ratings. An issuer of debt obligations may default on its obligation to pay interest and repay principal. Also, changes in the financial strength of an issuer or changes in the credit rating of a security may affect its value.
Dollar Rolls. The Fund may enter into dollar rolls in which the Fund sells fixed income securities for delivery in the current month and simultaneously contracts to repurchase substantially similar (same type, coupon and maturity) securities on a specified future date. During the roll period, the Fund would forgo principal and interest paid on such securities. However, the Fund would be compensated by the difference between the current sales price and the forward price for the future purchase, as well as by the interest earned on the cash proceeds of the initial sale. The return on dollar rolls may be negatively impacted by fluctuations in interest rates. The Fund does not presently intend to engage in dollar roll transactions involving more than 5% of its net assets. For additional information on dollar roll transactions, see the section entitled Mortgage Dollar Roll Transactions in this SAI.
Equity Securities. Equity securities represent ownership interests in a company and consist of common stocks, preferred stocks, warrants to acquire common stock, and securities convertible into common stock. Investments in equity securities in general are subject to market risks that may cause their prices to fluctuate over time. Fluctuations in the value of equity securities in which the Fund invests will cause the net asset value of the Fund to fluctuate. The Fund purchases equity securities traded in the U.S. on registered exchanges or the over-the-counter market. Equity securities are described in more detail below:
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Common Stock. Common stock represents an equity or ownership interest in an issuer. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds and preferred stock take precedence over the claims of those who own common stock. |
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Preferred Stock. Preferred stock represents an equity or ownership interest in an issuer that pays dividends at a specified rate and that has precedence over common stock in the payment of dividends. In the event an issuer is liquidated or declares bankruptcy, the claims of owners of bonds take precedence over the claims of those who own preferred and common stock. |
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Warrants. Warrants are instruments that entitle the holder to buy an equity security at a specific price for a specific period of time. Changes in the value of a warrant do not necessarily correspond to changes in the value of its underlying security. The price of a warrant may be more volatile than the price of its underlying security, and a warrant may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying security and do not represent any rights in the assets of the issuing company. A warrant ceases to have value if it is not exercised prior to its expiration date. These factors can make warrants more speculative than other types of investments. |
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Convertible Securities. Convertible securities are bonds, debentures, notes, preferred stocks or other securities that may be converted or exchanged (by the holder or by the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio. A convertible security may also be called for redemption or conversion by the issuer after a particular date and under certain circumstances (including a specified price) established upon issue. If a convertible security held by the Fund is called for redemption or conversion, the Fund could be required to tender it for redemption, convert it into the underlying common stock, or sell it to a third party. |
Convertible securities generally have less potential for gain or loss than common stocks. Convertible securities generally provide yields higher than the underlying common stocks, but generally lower than comparable non-convertible securities. Because of this higher yield, convertible securities generally sell at a price above their conversion value, which is the current market value of the stock to be received upon conversion. The difference between this conversion value and the price of convertible securities will vary over time depending on changes in the value of the underlying common stocks and interest rates. When the underlying common stocks decline in value, convertible securities will tend not to decline to the same extent because of the interest or dividend payments and the repayment of principal at maturity for certain types of convertible securities. However, securities that are convertible other than at the option of the holder generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder. When the underlying common stocks rise in value, the value of convertible securities may also be expected to increase. At the same time, however, the difference between the market value of convertible securities and their conversion value will narrow, which means that the value of convertible securities will generally not increase to the same extent as the value of the underlying common stocks. Because convertible securities may also be interest-rate sensitive, their value may increase as interest rates fall and decrease as interest rates rise. Convertible securities are also subject to credit risk, and are often lower-quality securities.
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Small and Medium Capitalization Issuers. Investing in equity securities of small and medium capitalization companies often involves greater risk than is customarily associated with investments in larger capitalization companies. This increased risk may be due to the greater business risks of smaller size, limited markets and financial resources, narrow product lines and frequent lack of depth of management. The securities of smaller companies are often traded in the over-the-counter market and even if listed on a national securities exchange may not be traded in volumes typical for that exchange. Consequently, the securities of smaller companies are less likely to be liquid, may have limited market stability, and may be subject to more abrupt or erratic market movements than securities of larger, more established growth companies or the market averages in general. |
Foreign Securities. The Fund may invest in securities of foreign issuers that are denominated or traded in foreign currencies. The Fund may also invest in securities of foreign issuers that are traded or denominated in U.S. dollars (including equity
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securities of foreign issuers trading in U.S. markets) through American Depositary Receipts (ADRs), Global Depositary Receipts (GDRs), European Depositary Receipts (EDRs) or International Depositary Receipts (IDRs). ADRs are securities, typically issued by a U.S. financial institution (a depository), that evidence ownership interests in a security or pool of securities issued by a foreign issuer and deposited with the depository. ADRs may be listed on a national securities exchange or may trade in the over-the-counter market. ADR prices are denominated in U.S. dollars; the underlying security may be denominated in a foreign currency. GDRs, EDRs and IDRs are securities that represent ownership interests in a security or pool of securities issued by a non-U.S. or U.S. corporation. Depositary receipts may be available through sponsored or unsponsored facilities. A sponsored facility is established jointly by the issuer of the security underlying the receipt and the depository, whereas an unsponsored facility is established by the depository without participation by the issuer of the underlying security. Holders of unsponsored depositary receipts generally bear all of the costs of the unsponsored facility. The depository of an unsponsored facility is frequently under no obligation to distribute shareholder communications received from the issuer of the deposited security or to pass through, to the holders of the receipts, voting rights with respect to the deposited securities. The depository of unsponsored depositary receipts may provide less information to receipt holders. Investments in depositary receipts do not eliminate the risks in investing in foreign issuers. The underlying security may be subject to foreign government taxes, which would reduce the yield on such securities.
Investments in foreign securities involve higher costs than investments in U.S. securities, including higher transaction costs as well as the imposition of additional taxes by foreign governments. In addition, foreign investments may include additional risks associated with currency exchange rates, less complete financial information about the issuers, less market liquidity and political stability. Volume and liquidity in most foreign bond markets are less than in the United States and, at times, volatility or price can be greater than in the United States. Future political and economic information, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign holdings, the possible establishment of exchange controls, or the adoption of other governmental restrictions, might adversely affect the payment of principal and interest on foreign obligations. Inability to dispose of Fund securities due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the securities, or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser. Individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth or gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
Fixed commissions on foreign securities exchanges are generally higher than negotiated commissions on U.S. exchanges, although the Fund endeavors to achieve the most favorable net results on their portfolio transactions. There is generally less government supervision and regulation of securities exchanges, brokers, dealers and listed companies than in the United States. Settlement mechanics ( e.g. , mail service between the United States and foreign countries) may be slower or less reliable than within the United States, thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Fund is uninvested and no return is earned thereon. The inability of the Fund to make intended security purchases due to settlement problems could cause the Fund to miss attractive investment opportunities.
Although the Fund may invest in securities denominated in foreign currencies, the Fund values its securities and other assets in U.S. dollars. As a result, the NAV of the Funds shares may fluctuate with U.S. dollar exchange rates as well as the price changes of the Funds securities in the various local markets and currencies. Thus, an increase in the value of the U.S. dollar compared to the currencies in which the Fund makes its investments could reduce the effect of increases and magnify the effect of decreases in the price of the Funds securities in their local markets. Conversely, a decrease in the value of the U.S. dollar may have the opposite effect of magnifying the effect of increases and reducing the effect of decreases in the prices of the Funds securities in its foreign markets. In addition to favorable and unfavorable currency exchange rate developments, the Fund is subject to the possible imposition of exchange control regulations or freezes on convertibility of currency. The Fund may invest in obligations of foreign branches of U.S. banks (Eurodollars) and U.S. branches of foreign banks (Yankee dollars) as well as foreign branches of foreign banks. These investments involve risks that are different from investments in securities of U.S. banks, including potential unfavorable political and economic developments, different tax provisions, seizure of foreign deposits, currency controls, interest limitations or other governmental restrictions which might affect payment of principal or interest. The Fund may also invest in Yankee bonds, which are issued by foreign governments and their agencies and foreign corporations but pay interest in U.S. dollars and are typically issued in the United States.
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Forward Commitment and When-Issued Transactions. The Fund may purchase or sell securities on a when-issued or forward commitment basis (subject to its investment policies and restrictions). These transactions involve a commitment by a fund to purchase or sell securities at a future date (ordinarily one or two months later). The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are fixed at the time the transaction is negotiated. When-issued purchases and forward commitments are negotiated directly with the other party, and such commitments are not traded on exchanges. The Fund will not enter into such transactions for the purpose of leverage.
When-issued purchases and forward commitments enable the Fund to lock in what is believed by the Adviser or Sub-Adviser, as applicable, to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. For instance, in periods of rising interest rates and falling prices, the Fund might sell securities it owns on a forward commitment basis to limit its exposure to falling prices. In periods of falling interest rates and rising prices, the Fund might sell securities it owns and purchase the same or a similar security on a when-issued or forward commitment basis, thereby obtaining the benefit of currently higher yields. When-issued securities or forward commitments involve a risk of loss if the value of the security to be purchased declines prior to the settlement date.
The value of securities purchased on a when-issued or forward commitment basis and any subsequent fluctuations in their value are reflected in the computation of the Funds NAV starting on the date of the agreement to purchase the securities, and the Fund is subject to the rights and risks of ownership of the securities on that date. The Fund does not earn interest 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 Funds assets. Fluctuations in the market value of the underlying securities are not reflected in the Funds NAV as long as the commitment to sell remains in effect. Settlement of when-issued purchases and forward commitment transactions generally takes place within two months after the date of the transaction, but the Fund may agree to a longer settlement period.
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. The Fund also may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. The Fund may realize a capital gain or loss in connection with these transactions, and its distributions from any net realized capital gains will be taxable to shareholders. When the Fund purchases securities on a when-issued or forward commitment basis, the Fund or the Custodian will maintain in a segregated account cash or liquid securities having a value (determined daily) at least equal to the amount of the Funds purchase commitments. These procedures are designed to ensure that the Fund will maintain sufficient assets at all times to cover its obligations under when-issued purchases and forward commitments.
Forward Foreign Currency Transactions. The Fund may, to the extent that it invests in foreign securities, enter into forward foreign currency exchange contracts in order to protect against uncertainty in the level of future foreign currency exchange rates. The Fund will conduct its foreign currency exchange transactions either on a spot ( i.e. , cash) basis at the spot rate prevailing in the foreign currency exchange market, or through entering into forward contracts to purchase or sell foreign currencies. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific currency at a future date, which may be any fixed number of days (usually less than one year) from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are traded in the interbank market conducted directly between traders (usually large commercial banks) and their customers. A forward contract generally has no deposit requirement, and no commissions are charged at any stage for trades. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the spread) between the price at which they are buying and selling various currencies.
The Fund is permitted to enter into forward contracts under two circumstances. First, when the Fund enters into a contract for the purchase or sale of a security quoted or denominated in a foreign currency, it may desire to lock in the U.S. dollar price of the security. By entering into a forward contract for the purchase or sale, for a fixed number of U.S. dollars, of the amount of foreign currency involved in the underlying security transactions, the Fund will be able to insulate itself from a possible loss resulting from a change in the relationship between the U.S. dollar and the subject foreign currency during the period between the date on which the security is purchased or sold and the date on which payment is made or received.
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Second, when the Adviser or Sub-Adviser, as applicable, believes that the currency of a particular foreign country may suffer a substantial decline against the U.S. dollar, it may cause the Fund to enter a forward contract to sell, for a fixed U.S. dollar amount, the amount of foreign currency approximating the value of some or all of the Funds portfolio securities quoted or denominated in such foreign currency. The precise matching of the forward contract amounts and the value of the securities involved will not generally be possible since the future value of such 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 the date it matures.
Although the Fund has no current intention to do so, it may engage in cross-hedging by using forward contracts in one currency to hedge against fluctuations in the value in securities denominated or quoted in a different currency if the Adviser or Sub-Adviser, as applicable, determines that there is a pattern of correlation between the two currencies. Cross-hedging may also include entering into a forward transaction involving two foreign currencies, using one foreign currency as a proxy for the U.S. dollar to hedge against variations in the other U.S. foreign currency, if the Adviser or Sub-Adviser, as applicable, determines that there is a pattern of correlation between the proxy currency and the U.S. dollar.
The Fund will not enter into forward contracts to sell currency or maintain a net exposure to such contracts if the consummation of such contracts would obligate the Fund to deliver an amount of foreign currency in excess of the value of the Funds respective portfolio securities or other assets quoted or denominated in that currency. At the consummation of the forward contract, the Fund may either make delivery of the foreign currency or terminate its contractual obligation by purchasing an offsetting contract obligating it to purchase at the same maturity date, the same amount of such foreign currency. If the Fund chooses to make delivery of foreign currency, it may be required to obtain such delivery through the sale of portfolio securities quoted or denominated in such currency or through conversion of other assets of the Fund into such currency. If the Fund engages in an offsetting transaction, the Fund will realize a gain or a loss to the extent that there has been a change in forward contract prices. Closing purchase transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract.
The Funds transactions in forward contracts will be limited to those described above. Of course, the Fund is not required to enter into such transactions with regard to its foreign currency quoted or denominated securities, and the Fund will not do so unless deemed appropriate by the Adviser or Sub-Adviser, as applicable.
When entering into a forward contract, the Fund will segregate either cash or liquid securities quoted or denominated in any currency in an amount equal to the value of the Funds total assets committed to the consummation of forward currency exchange contracts which require the Fund to purchase a foreign currency. If the value of the segregated securities declines, additional cash or securities will be segregated by the Fund on a daily basis so that the value of the segregated securities will equal the amount of the Funds commitments with respect to such contracts.
This method of protecting the value of the Funds portfolio securities against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange which can be achieved at some future point in time. The precise projection of short-term currency market movements is not possible, and short-term hedging provides a means of fixing the U.S. dollar value of only a portion of the Funds foreign assets. It also reduces any potential gain which may have otherwise occurred had the currency value increased above the settlement price of the contract.
While the Fund may enter into forward contracts to seek to reduce currency exchange rate risks, transactions in such contracts involve certain other risks. Thus, while the Fund may benefit from such transactions, unanticipated changes in currency prices may result in a poorer overall performance for the Fund than if it had not engaged in any such transactions. Moreover, there may be imperfect correlation between the Funds portfolio holdings or securities quoted or denominated in a particular currency and forward contracts entered into by the Fund. Such imperfect correlation may cause the Fund to sustain losses, which will prevent the Fund from achieving a complete hedge, or expose the Fund to the risk of foreign exchange loss.
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Forward contracts are subject to the risks that the counterparty to such contract will default on its obligations. Since a forward
foreign currency exchange contract is not guaranteed by an exchange or clearing house, a default on the contract would deprive the Fund of unrealized profits, transaction costs or the benefits of a currency hedge or force the Fund to cover its purchase or sale commitments, if any, at the current market price.
The Funds foreign currency transactions (including related options, futures and forward contracts) may be limited by the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the Code), for qualification as a regulated investment company.
Futures And Options On Futures. Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a specific security at a specified future time and at a specified price. An option on a futures contract gives the purchaser the right, in exchange for a premium, to assume a position in a futures contract at a specified exercise price during the term of the option. The Fund will reduce the risk that it will be unable to close out a futures contract by only entering into futures contracts that are traded on a national futures exchange regulated by the Commodities Futures Trading Commission (CFTC). The Fund may use futures contracts and related options for: bona fide hedging; attempting to offset changes in the value of securities held or expected to be acquired or be disposed of; attempting to minimize fluctuations in foreign currencies; attempting to gain exposure to a particular market, index or instrument; or other risk management purposes. To the extent futures and/or options on futures are employed by the Fund, such use will be in accordance with Rule 4.5 of the Commodity Exchange Act (CEA). The Company, on behalf of the Fund, has filed a notice of eligibility for exclusion from the definition of the term commodity pool operator in accordance with Rule 4.5 and therefore, the Fund is not subject to registration or regulation as a commodity pool operator under the CEA.
An index futures contract is a bilateral agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to a specified dollar amount times the difference between the index value at the close of trading of the contract and the price at which the futures contract is originally struck. No physical delivery of the securities comprising the index is made; generally contracts are closed out prior to the expiration date of the contract.
When the Fund purchases or sells a futures contract, or sells an option thereon, the Fund is required to cover its position in order to limit leveraging and related risks. To cover its position, the Fund may segregate (and mark-to-market on a daily basis) cash or liquid securities that, when added to any amounts deposited with a futures commission merchant as margin, are equal to the market value of the futures contract or otherwise cover its position in a manner consistent with the 1940 Act or the rules and SEC interpretations thereunder. The segregated account functions as a practical limit on the amount of leverage which the Fund may undertake and on the potential increase in the speculative character of the Funds outstanding portfolio securities. Additionally, such segregated accounts will generally assure the availability of adequate funds to meet the obligations of the Fund arising from such investment activities.
The Fund may also cover its long position in a futures contract by purchasing a put option on the same futures contract with a strike price (i.e., an exercise price) as high or higher than the price of the futures contract. In the alternative, if the strike price of the put is less than the price of the futures contract, the Fund will segregate cash or liquid securities equal in value to the difference between the strike price of the put and the price of the futures contract. The Fund may also cover its long position in a futures contract by taking a short position in the instruments underlying the futures contract, or by taking positions in instruments with prices which are expected to move relatively consistently with the futures contract. The Fund may cover its short position in a futures contract by taking a long position in the instruments underlying the futures contracts, or by taking positions in instruments with prices which are expected to move relatively consistently with the futures contract.
The Fund may cover its sale of a call option on a futures contract by taking a long position in the underlying futures contract at a price less than or equal to the strike price of the call option. In the alternative, if the long position in the underlying futures contract is established at a price greater than the strike price of the written (sold) call, the Fund will maintain in a segregated account cash or liquid securities equal in value to the difference between the strike price of the call and the price of the futures contract. The Fund may also cover its sale of a call option by taking positions in instruments with prices which are expected to move relatively consistently with the call option. The Fund may cover its sale of a put option on a futures contract by taking a short position in the underlying futures contract at a price greater than or equal to the strike price of the put option, or, if the short position in the underlying futures contract is established at a price less than the strike price of the written put, the Fund will maintain in a segregated account cash or liquid securities equal in value to the difference between the strike price of the put and the price of the futures contract. The Fund may also cover its sale of a put option by taking positions in instruments with prices which are expected to move relatively consistently with the put option.
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There are significant risks associated with the Funds use of futures contracts and related options, including the following: (1) the success of a hedging strategy may depend on the Advisers or Sub-Advisers ability to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect or no correlation between the changes in market value of the securities held by the Fund and the prices of futures and options on futures; (3) there may not be a liquid secondary market for a futures contract or option; (4) trading restrictions or limitations may be imposed by an exchange; and (5) government regulations may restrict trading in futures contracts and options on futures. In addition, some strategies reduce the Funds exposure to price fluctuations, while others tend to increase its market exposure.
Illiquid Securities. Illiquid securities are securities that cannot be sold or disposed of in the ordinary course of business (within seven days) at approximately the prices at which they are valued. Because of their illiquid nature, illiquid securities must be priced at fair value as determined in good faith pursuant to procedures approved by the Companys Board of Directors. Despite such good faith efforts to determine fair value prices, the Funds illiquid securities are subject to the risk that the securitys fair value price may differ from the actual price which the Fund may ultimately realize upon its sale or disposition. Difficulty in selling illiquid securities may result in a loss or may be costly to the Fund. Under the supervision of the Companys Board of Directors, the Adviser and the Sub-Advisers determine the liquidity of the Funds investments. In determining the liquidity of the Funds investments, the Adviser and Sub-Advisers may consider various factors, including: (1) the frequency and volume of trades and quotations; (2) the number of dealers and prospective purchasers in the marketplace; (3) dealer undertakings to make a market; and (4) the nature of the security and the market in which it trades (including any demand, put or tender features, the mechanics and other requirements for transfer, any letters of credit or other credit enhancement features, any ratings, the number of holders, the method of soliciting offers, the time required to dispose of the security, and the ability to assign or offset the rights and obligations of the security). The Fund will not hold more than 15% of its net assets in illiquid securities.
Inflation-Protected Securities. The Fund may invest in inflation-protected securities issued by the U.S. Treasury, known as TIPs or Treasury Inflation-Protected Securities, which are debt securities whose principal and interest payments are adjusted for inflation and interest is paid on the adjusted amount. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index (CPI). A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of your investment. Inflation-protected securities normally will decline in price when real interest rates rise. (A real interest rate is calculated by subtracting the inflation rate from a nominal interest rate. For example, if a 10-year Treasury note is yielding 5% and inflation is 2%, the real interest rate is 3%.) If inflation is negative, the principal and income of an inflation-protected security will decline and could result in losses for the Fund.
Any increase in principal for an inflation-protected security resulting from inflation adjustments is considered by IRS regulations to be taxable income in the year it occurs. For direct holders of an inflation-protected security, this means that taxes must be paid on principal adjustments even though these amounts are not received until the bond matures. By contrast, the Fund holding these securities distributes both interest income and the income attributable to principal adjustments in the form of cash or reinvested shares, which are taxable to shareholders.
Initial Public Offerings. To the extent consistent with its investment policies and limitations, the Fund may purchase stock in an initial public offering (IPO). An IPO is a companys first offering of stock to the public. Risks associated with IPOs may include considerable fluctuation in the market value of IPO shares due to certain factors, such as the absence of a prior public market, unseasoned trading, a limited number of shares available for trading, lack of information about the issuer and limited operating history. The purchase of IPO shares may involve high transaction costs. When the Funds asset base is small, a significant portion of the Funds performance could be attributable to investments in IPOs, because such investments would have a magnified impact on the underlying investment company. As the Funds assets grow, the effect of the Funds investments in IPOs on the Funds performance probably will decline, which could reduce the Funds performance. Because of the price volatility of IPO shares, the Fund may choose to hold IPO shares for a very short period of time. This may increase the turnover of the Funds portfolio and may lead to increased expenses to the Fund, such as commissions and transaction costs. In addition, the Fund cannot guarantee continued access to IPOs.
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Credit Default Swaps, Interest Rate Swaps, Mortgage Swaps, Currency Swaps, Total Return Swaps, Options on Swaps and Interest Rate Caps, Floors and Collars. The Fund may enter into credit default, interest rate and total return swaps. The Fund may also enter into interest rate caps, floors and collars. In addition, the Fund may enter into mortgage swaps and currency swaps.
The Fund may enter into swap transactions for hedging purposes or to seek to increase total return. As examples, the Fund may enter into swap transactions for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities the Fund anticipates purchasing at a later date, or to gain exposure to certain markets in an economical way.
Swap agreements are two party contracts entered into primarily by institutional investors. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or swapped between the parties are generally calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency or security, or in a basket of securities representing a particular index. As examples, credit default swaps involve the receipt of floating or fixed rate payments in exchange for assuming potential credit losses of an underlying security. Credit default swaps give one party to a transaction the right to dispose of or acquire an asset (or group of assets), or the right to receive from or make a payment to the other party, upon the occurrence of specified credit events. Interest rate swaps involve the exchange by the Fund with another party of their respective commitments to pay or receive interest, such as an exchange of fixed-rate payments for floating rate payments. Mortgage swaps are similar to interest rate swaps in that they represent commitments to pay and receive interest. The notional principal amount, however, is tied to a reference pool or pools of mortgages. Currency swaps involve the exchange of the parties respective rights to make or receive payments in specified currencies. Total return swaps are contracts that obligate a party to pay or receive interest in exchange for payment by the other party of the total return generated by a security, a basket of securities, an index, or an index component.
The purchase of an interest rate cap entitles the purchaser, to the extent that a specified index exceeds a predetermined interest rate, to receive payment of interest on a notional principal amount from the party selling such interest rate cap. The purchase of an interest rate floor entitles the purchaser, to the extent that a specified index falls below a predetermined interest rate, to receive payments of interest on a notional principal amount from the party selling the interest rate floor. An interest rate collar is the combination of a cap and a floor that preserves a certain return within a predetermined range of interest rates.
A great deal of flexibility is possible in the way swap transactions are structured. However, generally the Fund will enter into credit default, interest rate, total return and mortgage swaps on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Credit default, interest rate, total return and mortgage swaps do not normally involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of loss with respect to credit default, interest rate, total return and mortgage swaps is normally limited to the net amount of payments that the Fund is contractually obligated to make. If the other party to a credit default, interest rate, total return or mortgage swap defaults, the Funds risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. In contrast, currency swaps may involve the delivery of the entire principal amount of one designated currency in exchange for the other designated currency. Therefore, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations.
A credit default swap may have as reference obligations one or more securities that may, or may not, be currently held by the Fund. The protection buyer in a credit default swap is generally obligated to pay the protection seller an upfront or a periodic stream of payments over the term of the swap provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the par value (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash settled. The Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly
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decreased. As a seller, the Fund generally receives an up front payment or a rate of income throughout the term of the swap provided that there is no credit event. As the seller, a Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap. If a credit event occurs, the value of any deliverable obligation received by the Fund as seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Fund.
To the extent that the Funds exposure in a transaction involving a swap or an interest rate floor, cap or collar is covered by the segregation of cash or liquid assets, or is covered by other means in accordance with SEC guidance, the Fund and the Adviser believe that the transactions do not constitute senior securities under the Act and, accordingly, will not treat them as being subject to the Funds borrowing restrictions.
The Fund will not enter into any credit default, interest rate, total return or mortgage swap transactions unless the unsecured commercial paper, senior debt or claims-paying ability of the other party thereto is rated investment grade by S&Ps or Moodys, or, if unrated by such rating organization, determined to be of comparable quality by the Adviser or applicable Sub-Adviser. If there is a default by the other party to such a transaction, the Fund will have contractual remedies pursuant to the agreements related to the transaction.
The use of credit default, interest rate, mortgage, total return and currency swaps, as well as interest rate caps, floors and collars, is a highly specialized activity which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index but also of the swap itself, without the benefit of observing the performance of the swap under all possible market conditions. If the Adviser or applicable Sub-Adviser is incorrect in its forecasts of market values, credit quality, interest rates and currency exchange rates, the investment performance of the Fund would be less favorable than it would have been if these investment instruments were not used.
Investing in Emerging Countries, including Asia and Eastern Europe. The Fund may invest in securities of issuers located in emerging countries. The securities markets of emerging countries are less liquid and subject to greater price volatility, and have a smaller market capitalization, than the U.S. securities markets. In certain countries, there may be fewer publicly traded securities and the market may be dominated by a few issues or sectors. Issuers and securities markets in such countries are not subject to as extensive and frequent accounting, financial and other reporting requirements or as comprehensive government regulations as are issuers and securities markets in the U.S. In particular, the assets and profits appearing on the financial statements of emerging country issuers may not reflect their financial position or results of operations in the same manner as financial statements for U.S. issuers. Substantially less information may be publicly available about emerging country issuers than is available about issuers in the United States.
Emerging country securities markets are typically marked by a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of ownership of such securities by a limited number of investors. The markets for securities in certain emerging countries are in the earliest stages of their development. Even the markets for relatively widely traded securities in emerging countries may not be able to absorb, without price disruptions, a significant increase in trading volume or trades of a size customarily undertaken by institutional investors in the securities markets of developed countries. The limited size of many of these securities markets can cause prices to be erratic for reasons apart from factors that affect the soundness and competitiveness of the securities issuers. For example, prices may be unduly influenced by traders who control large positions in these markets. Additionally, market making and arbitrage activities are generally less extensive in such markets, which may contribute to increased volatility and reduced liquidity of such markets. The limited liquidity of emerging country securities may also affect the Funds ability to accurately value its portfolio securities or to acquire or dispose of securities at the price and time it wishes to do so or in order to meet redemption requests.
With respect to investments in certain emerging market countries, antiquated legal systems may have an adverse impact on the Fund. For example, while the potential liability of a shareholder in a U.S. corporation with respect to acts of the corporation is generally limited to the amount of the shareholders investment, the notion of limited liability is less clear in certain emerging market countries. Similarly, the rights of investors in emerging market companies may be more limited than those of shareholders in U.S. corporations.
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Transaction costs, including brokerage commissions or dealer mark-ups, in emerging countries may be higher than in the United States and other developed securities markets. In addition, existing laws and regulations are often inconsistently applied. As legal systems in emerging countries develop, foreign investors may be adversely affected by new or amended laws and regulations. In circumstances where adequate laws exist, it may not be possible to obtain swift and equitable enforcement of the law.
Foreign investment in the securities markets of certain emerging countries is restricted or controlled to varying degrees. These restrictions may limit the Funds investment in certain emerging countries and may increase the expenses of the Fund. Certain emerging countries require governmental approval prior to investments by foreign persons or limit investment by foreign persons to only a specified percentage of an issuers outstanding securities or a specific class of securities which may have less advantageous terms (including price) than securities of the company available for purchase by nationals. In addition, the repatriation of both investment income and capital from emerging countries may be subject to restrictions which require governmental consents or prohibit repatriation entirely for a period of time. Even where there is no outright restriction on repatriation of capital, the mechanics of repatriation may affect certain aspects of the operation of the Fund. The Fund may be required to establish special custodial or other arrangements before investing in certain emerging countries.
Emerging countries may be subject to a substantially greater degree of economic, political and social instability and disruption than is the case in the United States, Japan and most Western European countries. This instability may result from, among other things, the following: (i) authoritarian governments or military involvement in political and economic decision making, including changes or attempted changes in governments through extra-constitutional means; (ii) popular unrest associated with demands for improved political, economic or social conditions; (iii) internal insurgencies; (iv) hostile relations with neighboring countries; (v) ethnic, religious and racial disaffection or conflict; and (vi) the absence of developed legal structures governing foreign private investments and private property. Such economic, political and social instability could disrupt the principal financial markets in which the Fund may invest and adversely affect the value of the Funds assets. The Funds investments can also be adversely affected by any increase in taxes or by political, economic or diplomatic developments.
The Fund may seek investment opportunities within former east bloc countries in Eastern Europe. Most Eastern European countries had a centrally planned, socialist economy for a substantial period of time. The governments of many Eastern European countries have more recently been implementing reforms directed at political and economic liberalization, including efforts to decentralize the economic decision-making process and move towards a market economy. However, business entities in many Eastern European countries do not have an extended history of operating in a market-oriented economy, and the ultimate impact of Eastern European countries attempts to move toward more market-oriented economies is currently unclear. In addition, any change in the leadership or policies of Eastern European countries may halt the expansion of or reverse the liberalization of foreign investment policies now occurring and adversely affect existing investment opportunities.
The economies of emerging countries may differ unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments. Many emerging countries have experienced in the past, and continue to experience, high rates of inflation. In certain countries inflation has at times accelerated rapidly to hyperinflationary levels, creating a negative interest rate environment and sharply eroding the value of outstanding financial assets in those countries. Other emerging countries, on the other hand, have recently experienced deflationary pressures and are in economic recessions. The economies of many emerging countries are heavily dependent upon international trade and are accordingly affected by protective trade barriers and the economic conditions of their trading partners. In addition, the economies of some emerging countries are vulnerable to weakness in world prices for their commodity exports. The Funds income and, in some cases, capital gains from foreign stocks and securities will be subject to applicable taxation in certain of the countries in which it invests, and treaties between the U.S. and such countries may not be available in some cases to reduce the otherwise applicable tax rates. See Taxes.
Foreign markets also have different clearance and settlement procedures, and in certain markets there have been times when settlements have been unable to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Such delays in settlement could result in temporary periods when a portion of the assets of the Fund remain uninvested and no return is earned on such assets. The inability of the Fund to make intended security purchases or sales due to settlement problems could result either in losses to the Fund due to subsequent declines in value of the portfolio securities or, if the Fund has entered into a contract to sell the securities, could result in possible liability to the purchaser.
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Investment Company Shares. The Fund may invest in shares of other investment companies to the extent permitted by applicable law and subject to certain restrictions. These investment companies typically incur fees that are separate from those fees incurred directly by the Fund. The Funds purchase of such investment company securities results in the layering of expenses, such that shareholders would indirectly bear a proportionate share of the operating expenses of such investment companies, including advisory fees, in addition to paying the Funds expenses. Unless an exception is available, Section 12(d)(1)(A) of the 1940 Act prohibits a fund from (i) acquiring more than 3% of the voting shares of any one investment company, (ii) investing more than 5% of its total assets in any one investment company, and (iii) investing more than 10% of its total assets in all investment companies combined, including its ETF investments.
For hedging or other purposes, the Fund may invest in investment companies that seek to track the composition and/or performance of specific indexes or portions of specific indexes. Certain of these investment companies, known as exchange-traded funds, are traded on a securities exchange. The market prices of index-based investments will fluctuate in accordance with changes in the underlying portfolio securities of the investment company and also due to supply and demand of the investment companys shares on the exchange upon which the shares are traded. Index-based investments may not replicate or otherwise match the composition or performance of their specified index due to transaction costs, among other things.
Pursuant to orders issued by the SEC to each of certain iShares, Vanguard, ProShares, PowerShares and SPDR exchange-traded funds (collectively, the "ETFs") and procedures approved by the Board, the Fund may invest in the ETFs in excess of the 3% limit described above, provided that the Fund has described the ETF investments in its prospectus and otherwise complies with the conditions of the SEC, as it may be amended, and any other applicable investment limitations. Neither the ETFs nor their investment advisers make any representations regarding the advisability of investing in the ETFs.
Mortgage-Backed Securities. The Fund may invest in mortgage pass-through certificates and multiple-class pass-through securities, such as real estate mortgage investment conduits (REMIC), pass-through certificates and collateralized mortgage obligations (CMOs).
Guaranteed mortgage pass-through securities represent participation interests in pools of residential mortgage loans and are issued by U.S. governmental or private lenders and guaranteed by the U.S. government or one of its agencies or instrumentalities, including but not limited to the Government National Mortgage Association (Ginnie Mae), the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac). Ginnie Mae certificates are guaranteed by the full faith and credit of the U.S. government for timely payment of principal and interest on the certificates. Fannie Mae and Freddie Mac certificates are not backed by the full faith and credit of the U.S. government. Fannie Mae certificates are guaranteed by Fannie Mae, a federally chartered and privately owned corporation, for full and timely payment of principal and interest on the certificates. Fannie Mae is authorized to borrow from the U.S. Treasury to meet its obligations. Freddie Mac certificates are guaranteed by Freddie Mac, a corporate instrumentality of the U.S. government, for timely payment of interest and the ultimate collection of all principal of the related mortgage loans.
In September 2008, the U.S. Treasury Department and the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac would be placed in conservatorship under the FHFA. The effect that this conservatorship will have on Fannie Mae and Freddie Macs debt and equity and on securities guaranteed by Fannie Mae and Freddie Mac is unclear. There is risk that the U.S. Government will not provide financial support to its agencies, authorities, instrumentalities or sponsored enterprises. A Fund may purchase U.S. Government securities that are not backed by the full faith and credit of the United States, such as those issued by Fannie Mae and Freddie Mac. The maximum potential liability of the issuers of some U.S. Government securities held by a Fund may greatly exceed their current resources, including their legal right to support from the U.S. Treasury. It is possible that these issuers will not have the funds to meet their payment obligations in the future.
CMOs and REMIC pass-through or participation certificates may be issued by, among others, U.S. government agencies and instrumentalities as well as private lenders. CMOs and REMIC certificates are issued in multiple classes and the principal of and interest on the mortgage assets may be allocated among the several classes of CMOs or REMIC certificates in various ways. Each class of CMOs or REMIC certificates, often referred to as a tranche, is issued at a specific adjustable or fixed interest rate and must be fully retired no later than its final distribution date. Generally, interest is paid or accrues on all classes of CMOs or REMIC certificates on a monthly basis.
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Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or Freddie Mac certificates but also may be collateralized by other mortgage assets such as whole loans or private mortgage pass-through securities. Debt service on CMOs is provided from payments of principal and interest on collateral of mortgaged assets and any reinvestment income thereon.
A REMIC is a CMO that qualifies for special tax treatment under the Code and invests in certain mortgages primarily secured by interests in real property and other permitted investments. Investors may purchase regular and residual interest shares of beneficial interest in REMIC trusts, although the Fund does not intend to invest in residual interests.
The Fund may invest in mortgage-backed securities issued by trusts or other entities formed or sponsored by private originators of and institutional investors in mortgage loans and other non-governmental entities (or representing custodial arrangements administered by such institutions). These private originators and institutions include savings and loan associations, mortgage bankers, commercial banks, insurance companies, investment banks and special purpose subsidiaries of the foregoing.
Privately issued mortgage-backed securities are generally backed by pools of conventional ( i.e. , non-government guaranteed or insured) mortgage loans. Since such mortgage-backed securities normally are not guaranteed by an entity having the credit standing of Ginnie Mae, Fannie Mae or Freddie Mac, in order to receive a high quality rating from the rating organizations ( e.g. , S&Ps or Moodys), they often are structured with one or more types of credit enhancement. Such credit enhancement falls into two categories: (1) liquidity protection and (2) protection against losses resulting after default by a borrower and liquidation of the collateral ( e.g. , sale of a house after foreclosure). Liquidity protection refers to the payment of cash advances to holders of mortgage-backed securities when a borrower on an underlying mortgage fails to make its monthly payment on time. Protection against losses resulting after default and liquidation is designed to cover losses resulting when, for example, the proceeds of a foreclosure sale are insufficient to cover the outstanding amount on the mortgage. Such protection may be provided through guarantees, insurance policies or letters of credit, through various means of structuring the securities or through a combination of such approaches.
Examples of credit enhancement arising out of the structure of the transaction include senior-subordinated securities (multiple class securities with one or more classes entitled to receive payment before other classes, with the result that defaults on the underlying mortgages are borne first by the holders of the subordinated class), creation of spread accounts or reserve funds (where cash or investments are held in reserve against future losses) and over-collateralization (where the scheduled payments on the underlying mortgages in a pool exceed the amount required to be paid on the mortgage-backed securities). The degree of credit enhancement for a particular issue of mortgage-backed securities is based on the level of credit risk associated with the particular mortgages in the related pool. Losses on a pool in excess of anticipated levels could nevertheless result in losses to security holders since credit enhancement rarely covers every dollar owed on a pool.
Investing in mortgage-backed securities (such as those described above) involves certain risks, including the failure of a counter-party to meet its commitments, adverse interest rate changes and the effects of prepayments on mortgage cash flows. Further, the yield characteristics of mortgage-backed securities differ from those of traditional fixed income securities. The major differences typically include more frequent interest and principal payments (usually monthly), the adjustability of interest rates, and the possibility that prepayments of principal may be made substantially earlier than their final distribution dates.
Prepayment rates are influenced by changes in current interest rates and a variety of economic, geographic, social and other factors and cannot be predicted with certainty. Both adjustable rate mortgage loans and fixed rate mortgage loans may be subject to a greater rate of principal prepayments in a declining interest rate environment and to a lesser rate of principal prepayments in an increasing interest rate environment. Under certain interest rate and prepayment rate scenarios, the Fund may fail to recoup fully its investment in mortgage-backed securities notwithstanding any direct or indirect governmental or agency guarantee. When the Fund reinvests amounts representing payments and unscheduled prepayments of principal, it may receive a rate of interest that is lower than the rate on existing adjustable rate mortgage pass-through securities. Thus, mortgage-backed securities, and adjustable rate mortgage pass-through securities in particular, may be less effective than other types of U.S. government securities as a means of locking in interest rates.
Conversely, in a rising interest rate environment, a declining prepayment rate will extend the average life of many mortgage-backed securities. This possibility is often referred to as extension risk. Extending the average life of a mortgage-backed security increases the risk of depreciation due to future increases in market interest rates. The market for certain types of mortgage-backed securities ( i.e. , certain CMOs) may not be liquid under all interest rate scenarios, which may prevent the Fund from selling such securities held in its portfolio at times or prices that it desires.
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Different types of derivative debt securities are subject to different combinations of prepayment, extension and/or interest rate risk. Conventional mortgage pass-through securities and sequential pay CMOs are subject to all of these risks, but are typically not leveraged. Thus, the magnitude of exposure may be less than for more leveraged mortgage-backed securities.
Planned amortization class (PAC) and target amortization class (TAC) CMO bonds involve less exposure to prepayment, extension and interest rate risk than other mortgage-backed securities, provided that prepayment rates remain within expected prepayment ranges or collars. To the extent that prepayment rates remain within these prepayment ranges, the residual or support tranches of PAC and TAC CMOs assume the extra prepayment extension and interest rate risk associated with the underlying mortgage assets.
The Fund may invest in floating rate securities based on the Cost of Funds Index (COFI floaters), other lagging rate floating rate securities, floating rate securities that are subject to a maximum interest rate (capped floaters), and mortgage-backed securities purchased at a discount. The primary risks associated with these derivative debt securities are the potential extension of average life and/or depreciation due to rising interest rates.
Recently, rating agencies have placed on credit watch or downgraded the ratings previously assigned to a large number of mortgage-related securities (which may include certain of the mortgage-related securities in which the Fund may have invested or may in the future be invested), and may continue to do so in the future. In the event that any mortgage-related security held by the Fund is placed on credit watch or downgraded, the value of such mortgage-related security may decline and the Fund may consequently experience losses in respect of such mortgage-related security.
Mortgage Dollar Roll Transactions. The Fund may enter into mortgage dollar roll transactions in which the Fund sells securities for delivery in the current month and simultaneously contracts with the same counterparty to repurchase similar (same type, coupon and maturity), but not identical securities, on a specified future date.
During the roll period, the Fund would forgo principal and interest paid on such securities. The Fund would benefit to the extent of any difference between the price received for the securities sold and the lower forward price for the future purchase (often referred to as the drop) or fee income plus the interest on the cash proceeds of the securities sold until the settlement date of the forward purchase. Unless such benefits exceed the income, capital appreciation and gain or loss due to mortgage prepayments that would have been realized on the securities sold as part of the mortgage dollar roll, the use of this technique will diminish the investment performance of the Fund compared with what such performance would have been without the use of mortgage dollar rolls. The Fund will hold and maintain in a segregated account until the settlement date cash or liquid, high-grade debt securities in an amount equal to the forward purchase price. Any benefits derived from the use of mortgage dollar rolls may depend upon mortgage prepayment assumptions, which will be affected by changes in interest rates. There is no assurance that mortgage dollar rolls can be successfully employed. For additional information on dollar rolls, please refer to the section entitled Dollar Rolls in this SAI.
Municipal Obligations. The Fund may invest in municipal obligations. Municipal obligations are issued by or on behalf of states, territories and possessions of the United States and their political subdivisions, agencies and instrumentalities to obtain funds for various public purposes. The interest on most of these obligations is generally exempt from regular federal income tax in the hands of most individual investors, although it may be subject to the individual and corporate alternative minimum tax. The two principal classifications of municipal obligations are notes and bonds.
Municipal notes are generally used to provide for short-term capital needs and generally have maturities of one year or less. Municipal notes include tax anticipation notes, revenue anticipation notes, bond anticipation notes, and construction loan notes. Tax anticipation notes are sold to finance working capital needs of municipalities. They are generally payable from specific tax revenues expected to be received at a future date. Revenue anticipation notes are issued in expectation of receipt of other types of revenue such as federal revenues available under the Federal Revenue Sharing Program. Tax anticipation notes and revenue anticipation notes are generally issued in anticipation of various seasonal revenues such as income, sales, use, and business taxes. Bond anticipation notes are sold to provide interim financing.
These notes are generally issued in anticipation of long-term financing in the market. In most cases, these monies provide for the
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repayment of the notes. Construction loan notes are sold to provide construction financing. After the projects are successfully completed and accepted, many projects receive permanent financing through the Federal Housing Administration under Fannie Mae or Ginnie Mae. There are, of course, a number of other types of notes issued for different purposes and secured differently from those described above.
Municipal bonds, which meet longer term capital needs and generally have maturities of more than one year when issued, have two principal classifications, general obligation bonds and revenue bonds. Issuers of general obligation bonds include states, counties, cities, towns and regional districts. The proceeds of these obligations are used to fund a wide range of public projects including the construction or improvement of schools, highways and roads, water and sewer systems and a variety of other public purposes. The basic security of general obligation bonds is the issuers pledge of its faith, credit, and taxing power for the payment of principal and interest. The taxes that can be levied for the payment of debt service may be limited or unlimited as to rate or amount or special assessments.
The principal security for a revenue bond is generally the net revenues derived from a particular facility or group of facilities or, in some cases, from the proceeds of a special excise or other specific revenue source. Revenue bonds have been issued to fund a wide variety of capital projects including: electric, gas, water and sewer systems; highways, bridges and tunnels; port and airport facilities; colleges and universities; and hospitals. Revenue obligations are not backed by the credit and taxing authority of the issuer but are payable solely from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source. In addition, revenue obligations may be backed by a letter of credit, guarantee or insurance. Revenue obligations include private activity bonds, resource recovery bonds, certificates of participation and certain municipal notes. Although the principal security behind these bonds varies widely, many provide additional security in the form of a debt service reserve fund whose monies may also be used to make principal and interest payments on the issuers obligations. Housing finance authorities have a wide range of security including partially or fully insured, rent subsidized and/or collateralized mortgages, and/or the net revenues from housing or other public projects. In addition to a debt service reserve fund, some authorities provide further security in the form of a states ability (without obligation) to make up deficiencies in the debt service reserve fund. Lease rental revenue bonds issued by a state or local authority for capital projects are secured by annual lease rental payments from the state or locality to the authority sufficient to cover debt service on the authoritys obligations.
Industrial development bonds (now a subset of a class of bonds known as private activity bonds), although nominally issued by municipal authorities, are generally not secured by the taxing power of the municipality but are secured by the revenues of the authority derived from payments by the industrial user.
There is, in addition, a variety of hybrid and special types of municipal obligations as well as numerous differences in the security of municipal obligations both within and between the two principal classifications above. An entire issue of municipal obligations may be purchased by one or a small number of institutional investors such as the Fund. Thus, the issue may not be said to be publicly offered. Unlike securities which must be registered under the Securities Act of 1993, as amended (the Securities Act), prior to offer and sale unless an exemption from such registration is available, municipal obligations which are not publicly offered may nevertheless be readily marketable. A secondary market exists for municipal obligations that were not publicly offered initially.
The Adviser or Sub-Adviser, as applicable, determines whether a municipal obligation is readily marketable based on whether it may be sold in a reasonable time consistent with the customs of the municipal markets (usually seven days) at a price (or interest rate), which accurately reflects its value. In addition, stand-by commitments and demand obligations also enhance marketability.
For the purpose of the Funds investment restrictions, the identification of the issuer of municipal obligations that are not general obligation bonds is made by the Adviser or Sub-Adviser, as applicable, on the basis of the characteristics of the obligation as described above, the most significant of which is the source of funds for the payment of principal of and interest on such obligations.
Yields on municipal obligations depend on a variety of factors, including money market conditions, municipal bond market conditions, the size of a particular offering, the maturity of the obligation and the quality of the issue. High grade municipal obligations tend to have a lower yield than lower rated obligations. Municipal obligations are subject to the provisions of
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bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the Federal Bankruptcy Code and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations or municipalities to levy taxes. There is also the possibility that as a result of litigation or other conditions the power or ability of any one or more issuers to pay when due principal of and interest on its or their municipal obligations may be materially affected.
Economic, business or political developments might affect all municipal obligations of a similar type. The Fund believes that the most important consideration affecting risk is the quality of particular issues of municipal obligations rather than factors affecting all, or broad classes of, municipal obligations.
The Fund may invest in variable, floating rate and other municipal securities on which the interest may fluctuate based on changes in market rates. The interest rates payable on variable rate securities are adjusted at designated intervals ( e.g. , daily, monthly, semi-annually), and the interest rates payable on, floating rate securities are adjusted whenever there is a change in the market rate of interest on which the interest payable is based. The interest rate on variable and floating rate securities is ordinarily determined by reference to or is a percentage of a banks prime rate, the 90-day U.S. Treasury bill rate, the rate of return on commercial paper or bank certificates of deposit, an index of short-term interest rates, or some other objective measure. The value of floating and variable rate securities generally is more stable than that of fixed rate securities in response to changes in interest rate levels. The Fund may consider the maturity of a variable or floating rate municipal security to be shorter than its ultimate maturity if the Fund has the right to demand prepayment of its principal at specified intervals prior to the securitys ultimate maturity.
The Fund may invest in municipal leases and certificates of participation in municipal leases. A municipal lease is an obligation in the form of a lease or installment purchase which is issued by a state or local government to acquire equipment and facilities. Certificates of participation represent undivided interests in municipal leases, installment purchase agreements or other instruments. The certificates are typically issued by a trust or other entity, which has received an assignment of the payments to be made by the state or political subdivision under such leases or installment purchase agreements. The primary risk associated with municipal lease obligations and certificates of participation is that the governmental lessee will fail to appropriate funds to enable it to meet its payment obligations under the lease. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly and may result in a delay in recovering, or the failure to fully recover, the Funds original investment. To the extent that the Fund invests in unrated municipal leases or participates in such leases, the Adviser or applicable Sub-Adviser will monitor on an ongoing basis the credit quality rating and risk of cancellation of such unrated leases. Certain municipal lease obligations and certificates of participation may be deemed illiquid for the purposes of the limitation on investments in illiquid securities.
The Fund may invest in pre-refunded municipal securities. The principal of and interest on pre-refunded municipal securities are no longer paid from the original revenue source for the securities. Instead, the source of such payments is typically an escrow fund consisting of U.S. government securities. The assets in the escrow fund are derived from the proceeds of refunding bonds issued by the same issuer as the pre-refunded municipal securities. Issuers of municipal securities use this advance refunding technique to obtain more favorable terms with respect to securities that are not yet subject to call or redemption by the issuer. For example, advance refunding enables an issuer to refinance debt at lower market interest rates, restructure debt to improve cash flow or eliminate restrictive covenants in the indenture or other governing instrument for the pre-refunded municipal securities. Except for a change in the revenue source from which principal and interest payments are made, the pre-refunded municipal securities remain outstanding on their original terms until they mature or are redeemed by the issuer. Pre-refunded municipal securities are usually purchased at a price, which represents a premium over their face value.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of U.S. Banks. The Fund may invest in obligations issued by banks and other savings institutions. Investments in bank obligations include obligations of domestic branches of foreign banks and foreign branches of domestic banks. Such investments in domestic branches of foreign banks and foreign branches of domestic banks may involve risks that are different from investments in securities of domestic branches of U.S. banks. These risks may include future unfavorable political and economic developments, possible withholding taxes on interest income, seizure or nationalization of foreign deposits, currency controls, interest limitations, or other governmental restrictions which might affect the payment of principal or interest on the securities held by the Fund. Additionally, these institutions may be subject to less stringent reserve requirements and to different accounting, auditing, reporting and recordkeeping requirements than those applicable to domestic branches of U.S. banks. Bank obligations include the following:
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Bankers Acceptances . Bankers acceptances are bills of exchange or time drafts drawn on and accepted by a commercial bank. Corporations use bankers acceptances to finance the shipment and storage of goods and to furnish dollar exchange. Maturities are generally six months or less. |
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Certificates of Deposit . Certificates of deposit are interest-bearing instruments with a specific maturity. They are issued by banks and savings and loan institutions in exchange for the deposit of funds and normally can be traded in the secondary market prior to maturity. Certificates of deposit with penalties for early withdrawal will be considered illiquid. |
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Time Deposits. Time deposits are non-negotiable receipts issued by a bank in exchange for the deposit of funds. Like a certificate of deposit, it earns a specified rate of interest over a definite period of time; however, it cannot be traded in the secondary market. Time deposits with a withdrawal penalty or that mature in more than seven days are considered to be illiquid securities. |
Options. The Fund may purchase and write put and call options on indices and enter into related closing transactions. A put option on a security gives the purchaser of the option the right to sell, and the writer of the option the obligation to buy, the underlying security at any time during the option period. A call option on a security gives the purchaser of the option the right to buy, and the writer of the option the obligation to sell, the underlying security at any time during the option period. The premium paid to the writer is the consideration for undertaking the obligations under the option contract.
The Fund may purchase and write put and call options on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter markets) to manage its exposure to exchange rates. Call options on foreign currency written by the Fund will be covered, which means that the Fund will own an equal amount of the underlying foreign currency.
Put and call options on indices are similar to options on securities except that options on an index give the holder the right to receive, upon exercise of the option, an amount of cash if the closing level of the underlying index is greater than (or less than, in the case of puts) the exercise price of the option. This amount of cash is equal to the difference between the closing price of the index and the exercise price of the option, expressed in dollars multiplied by a specified number. Thus, unlike options on individual securities, all settlements are in cash, and gain or loss depends on price movements in the particular market represented by the index generally, rather than the price movements in individual securities.
All options written on indices or securities must be covered. When the Fund writes an option on a security, an index or a foreign currency, it will establish a segregated account containing cash or liquid securities in an amount at least equal to the market value of the option and will maintain the account while the option is open or will otherwise cover the transaction.
The Fund may trade put and call options on securities, securities indices and currencies, as the Adviser or applicable Sub-Adviser determines is appropriate in seeking the Funds investment objective, and except as restricted by the Funds investment limitations. See Investment Limitations.
The initial purchase (sale) of an option contract is an opening transaction. In order to close out an option position, the Fund may enter into a closing transaction, which is simply the sale (purchase) of an option contract on the same security with the same exercise price and expiration date as the option contract originally opened. If the Fund is unable to effect a closing purchase transaction with respect to an option it has written, it will not be able to sell the underlying security until the option expires or the Fund delivers the security upon exercise.
The Fund may purchase put and call options on securities to protect against a decline in the market value of the securities in its portfolio or to anticipate an increase in the market value of securities that the Fund may seek to purchase in the future. The Fund purchasing put and call options pays a premium therefor. If price movements in the underlying securities are such that exercise of the options would not be profitable for the Fund, loss of the premium paid may be offset by an increase in the value of the Funds securities or by a decrease in the cost of acquisition of securities by the Fund.
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The Fund may write covered call options on securities as a means of increasing the yield on its assets and as a means of providing limited protection against decreases in its market value. When the Fund writes an option, if the underlying securities do not increase or decrease to a price level that would make the exercise of the option profitable to the holder thereof, the option generally will expire without being exercised and the Fund will realize as profit the premium received for such option. When a call option of which the Fund is the writer is exercised, the Fund will be required to sell the underlying securities to the option holder at the strike price, and will not participate in any increase in the price of such securities above the strike price. When a put option of which the Fund is the writer is exercised, the Fund will be required to purchase the underlying securities at a price in excess of the market value of such securities.
The Fund may purchase and write options on an exchange or over-the-counter. Over-the-counter options (OTC options) differ from exchange-traded options in several respects. They are transacted directly with dealers and not with a clearing corporation, and therefore entail the risk of non-performance by the dealer. OTC options are available for a greater variety of securities and for a wider range of expiration dates and exercise prices than are available for exchange-traded options. Because OTC options are not traded on an exchange, pricing is done normally by reference to information from a market maker. It is the SECs position that OTC options are generally illiquid.
The market value of an option generally reflects the market price of an underlying security. Other principal factors affecting market value include supply and demand, interest rates, the pricing volatility of the underlying security and the time remaining until the expiration date.
Risks associated with options transactions include: (1) the success of a hedging strategy may depend on an ability to predict movements in the prices of individual securities, fluctuations in markets and movements in interest rates; (2) there may be an imperfect correlation between the movement in prices of options and the securities underlying them; (3) there may not be a liquid secondary market for options; and (4) while the Fund will receive a premium when it writes covered call options, it may not participate fully in a rise in the market value of the underlying security.
Pay-in-Kind Securities, Zero Coupon and Capital Appreciation Bonds. To the extent consistent with its investment objective, the Fund may invest in pay-in-kind (PIK) securities. PIK securities may be debt obligations or preferred shares that provide the issuer with the option of paying interest or dividends on such obligations in cash or in the form of additional securities rather than cash. Similarly, zero coupon and capital appreciation bonds are debt securities issued or sold at a discount from their face value and do not entitle the holder to any periodic payment of interest prior to maturity or a specified date. The amount of the discount varies depending on the time remaining until maturity or cash payment date, prevailing interest rates, the liquidity of the security and the perceived credit quality of the issuer. These securities also may take the form of debt securities that have been stripped of their unmatured interest coupons, the coupons themselves or receipts or certificates representing interests in such stripped debt obligations or coupons. A portion of the discount with respect to stripped tax-exempt securities or their coupons may be taxable. Such securities are designed to give an issuer flexibility in managing cash flow. PIK securities that are debt securities can either be senior or subordinated debt and generally trade flat ( i.e. , without accrued interest). The trading price of PIK debt securities generally reflects the market value of the underlying debt plus an amount representing accrued interest since the last interest payment.
PIK securities, zero coupon bonds and capital appreciation bonds do not pay interest periodically to maturity, and, therefore, they involve the additional risk that the Fund will not realize any cash until a specified future payment date unless a portion of such securities is sold, and, if the issuer of such securities defaults, the Fund may not obtain any return at all on its investment. In addition, even though such securities may not provide for the payment of current interest in cash, the Fund is nonetheless required to accrue income on such investments for each taxable year and generally is required to distribute such accrued amounts (net of deductible expenses, if any) to avoid being subject to tax. Because cash generally is not received at the time of the accrual, the Fund may be required to liquidate other portfolio securities to obtain sufficient cash to satisfy federal tax distribution requirements applicable to the Fund. Additionally, the market prices of PIK securities, zero coupon bonds and capital appreciation bonds generally are more volatile than the market prices of interest bearing securities and are likely to respond to a greater degree to changes in interest rates than interest bearing securities having similar maturities and credit quality.
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Real Estate Investment Trust Securities. The Fund may invest in real estate investment trusts (REITs). REITs generally invest directly in real estate, in mortgages or in some combination of the two. Individual REITs may own a limited number of properties and may concentrate in a particular region or property type. A REIT is a corporation, or a business trust that would otherwise be taxed as a corporation, which meets the definitional requirements of the Code. The Code permits a qualifying REIT to deduct dividends paid, thereby effectively eliminating corporate level federal income tax and making the REIT a pass-through vehicle for federal income tax purposes. To meet the definitional requirements of the Code, a REIT must, among other things, invest substantially all of its assets in interests in real estate (including mortgages and other REITs) or cash and government securities, derive most of its income from rents from real property or interest on loans secured by mortgages on real property and distribute to shareholders annually a substantial portion of its otherwise taxable income.
Generally, REITs can be classified as equity REITs, mortgage REITs and hybrid REITs. Equity REITs invest the majority of their assets directly in real property and derive their income primarily from rents and capital gains from appreciation realized through property sales. Mortgage REITs invest the majority of their assets in real estate mortgages and derive their income primarily from interest payments. Hybrid REITs combine the characteristics of both equity and mortgage REITs. The values of securities issued by REITs are affected by tax and regulatory requirements and by perceptions of management skill. They also are subject to heavy cash flow dependency, defaults by borrowers or tenants, self-liquidation and the possibility of failing to qualify for tax-free status under the Code or to maintain exemption from the 1940 Act.
REITs may be affected by economic forces and other factors related to the real estate industry. REITs are sensitive to factors such as changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use and rents, and management skill and creditworthiness of the issuer. Companies in the real estate industry may also be subject to liabilities under environmental and hazardous waste laws. REITS whose underlying assets include long-term health care properties, such as nursing, retirement and assisted living homes, may be affected by federal regulations concerning the health care industry. The Fund will indirectly bear its proportionate share of expenses, including management fees, paid by each REIT in which it invests in addition to the expenses of the Fund. The Fund is also subject to the risk that the REITs in which it invests will fail to qualify for tax-free pass-through of income under the Code and/or fail to qualify for an exemption from registration as an investment company under the 1940 Act. Mortgage REITs may be affected by the quality of the credit extended. A REITs return may be adversely affected when interest rates are high or rising.
Investing in REITs may involve risks similar to those associated with investing in small capitalization companies. REITs may have limited financial resources, may trade less frequently and in a limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks included in the S&P 500 ® .
Repurchase Agreements. The Fund may enter into repurchase agreements with financial institutions. A repurchase agreement is an agreement under which the Fund acquires a fixed income security (generally a security issued by the U.S. government or an agency thereof, a bankers acceptance, or a certificate of deposit) from a commercial bank, broker, or dealer, and simultaneously agrees to resell such security to the seller at an agreed upon price and date (normally, the next business day). Because the security purchased constitutes collateral for the repurchase obligation, a repurchase agreement may be considered a loan that is collateralized by the security purchased. The acquisition of a repurchase agreement may be deemed to be an acquisition of the underlying securities as long as the obligation of the seller to repurchase the securities is collateralized fully. The Fund follows certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with creditworthy financial institutions whose condition will be continually monitored by the Adviser or applicable Sub-Adviser. The repurchase agreements entered into by the Fund will provide that the underlying collateral at all times shall have a value at least equal to 102% of the resale price stated in the agreement and consist only of securities permissible under Section 101(47)(A)(i) of the Bankruptcy Code (the Adviser or Sub-Adviser, as applicable, monitors compliance with this requirement). Under all repurchase agreements entered into by the Fund, the custodian or its agent must take possession of the underlying collateral. In the event of a default or bankruptcy by a selling financial institution, the Fund will seek to liquidate such collateral. However, the exercising of the Funds right to liquidate such collateral could involve certain costs or delays and, to the extent that proceeds from any sale upon a default of the obligation to repurchase were less than the repurchase price, the Fund could suffer a loss. It is the current policy of the Fund, not to invest in repurchase agreements that do not mature within seven days if any such investment, together with any other illiquid assets held by that Fund, amounts to more than 15% of the Funds total assets. The investments of the Fund in repurchase agreements, at times, may be substantial when, in the view of the Adviser or applicable Sub-Advisers, liquidity or other considerations so warrant.
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Restricted and Illiquid Securities. The Fund may not invest more than 15% of its net assets in illiquid securities, including securities that are illiquid by virtue of the absence of a readily available market or legal or contractual restrictions on resale. Illiquid securities include: repurchase agreements and time deposits with a notice or demand period of more than seven days; interest rate; currency and mortgage swaps; interest rate caps; floors and collars; municipal leases; certain restricted securities, such as those purchased in a private placement of securities, unless it is determined, based upon a review of the trading markets for a specific restricted security, that such restricted security is liquid; and certain over-the-counter options. Securities that have legal or contractual restrictions on resale but have a readily available market are not considered illiquid for purposes of this limitation.
Mutual funds do not typically hold a significant amount of restricted or other illiquid securities because of the potential for delays on resale and uncertainty in valuation. Limitations on resale may have an adverse effect on the marketability of portfolio securities and a mutual fund might be unable to dispose of restricted or other illiquid securities promptly or at reasonable prices and might thereby experience difficulty in satisfying redemptions within seven days. A mutual fund might also have to register such restricted securities in order to dispose of them resulting in additional expense and delay. Adverse market conditions could impede such a public offering of securities.
The Fund may purchase securities which are not registered under the Securities Act but which may be sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act (Restricted Securities). These securities will not be considered illiquid so long as it is determined by the Adviser or applicable Sub-Adviser that an adequate trading market exists for the securities. This investment practice could have the effect of increasing the level of illiquidity in an underlying investment company during any period that qualified institutional buyers become uninterested in purchasing restricted securities.
The Adviser or applicable Sub-Adviser will monitor the liquidity of Restricted Securities held by the portion of the assets of the Fund it manages. In reaching liquidity decisions, the Adviser or Sub-Adviser may consider, among others, the following factors: (1) the unregistered nature of the security; (2) the frequency of trades and quotes for the security; (3) the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; (4) dealer undertakings to make a market in the security; and (5) the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers and the mechanics of the transfer).
The purchase price and subsequent valuation of Restricted Securities normally reflect a discount from the price at which such securities trade when they are not restricted, since the restriction makes them less liquid. The amount of the discount from the prevailing market price is expected to vary depending upon the type of security, the character of the issuer, the party who will bear the expenses of registering the Restricted Securities and prevailing supply and demand conditions.
As consistent with the Funds investment objectives, the Fund may also invest in Section 4(2) commercial paper. Section 4(2) commercial paper is issued in reliance on an exemption from registration under Section 4(2) of the Act and is generally sold to institutional investors who purchase for investment. Any resale of such commercial paper must be in an exempt transaction, usually to an institutional investor through the issuer or investment dealers who make a market in such commercial paper. The Company believes that Section 4(2) commercial paper is liquid to the extent it meets the criteria established by the Companys Board of Directors. The Company intends to treat such commercial paper as liquid and not subject to the investment limitations applicable to illiquid securities or restricted securities.
Reverse Repurchase Agreements. The Fund may enter into reverse repurchase agreements with respect to portfolio securities for temporary purposes (such as to obtain cash to meet redemption requests) when the liquidation of portfolio securities is deemed disadvantageous or inconvenient by the Adviser or applicable Sub-Adviser. Reverse repurchase agreements involve the sale of securities held by the Fund subject to the Funds agreement to repurchase the securities at an agreed-upon price, date and rate of interest. Such agreements are considered to be borrowings under the 1940 Act and may be entered into only for temporary or emergency purposes. While reverse repurchase transactions are outstanding, the Fund will maintain in a segregated account with the Funds custodian or a qualified sub-custodian, cash or liquid securities of an amount at least equal to the market value of the securities, plus accrued interest, subject to the agreement and will monitor the account to ensure that such
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value is maintained. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the price of the securities the Fund is obligated to repurchase and the interest received on the cash exchanged for the securities.
Rights Offerings and Purchase Warrants
Rights offerings and purchase warrants are privileges issued by a corporation which enable 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. Subscription rights normally have a short lifespan to expiration. The purchase of rights or warrants involves the risk that the Fund could lose the purchase value of a right or warrant if the right to subscribe to additional shares is not executed prior to the rights or warrants expiration. Also, the purchase of rights and/or warrants involves the risk that the effective price paid for the right and/or warrant added to the subscription price of the related security may exceed the value of the subscribed securitys market price such as when there is no movement in the level of the underlying security.
Risk Considerations of Medium Grade Securities. Obligations in the lowest investment grade ( i.e. , BBB or Baa), referred to as medium grade obligations, have speculative characteristics, and changes in economic conditions and other factors are more likely to lead to weakened capacity to make interest payments and repay principal on these obligations than is the case for higher rated securities. In the event that a security purchased by the Fund is subsequently downgraded below investment grade, the Adviser and Sub-Advisers will consider such event in its determination of whether the Fund should continue to hold the security.
Risk Considerations of Lower Rated Securities. The Fund may invest in fixed income securities that are not investment grade but are rated as low as B by Moodys or B by S&P ® (or their equivalents or, if unrated, determined by the Adviser or applicable Sub-Adviser to be of comparable credit quality). In the case of a security that is rated differently by two or more rating services, the higher rating is used in connection with the foregoing limitation. In the event that the rating on a security held in the Funds portfolio is downgraded by a rating service, such action will be considered by the Adviser or applicable Sub-Adviser in its evaluation of the overall investment merits of that security, but will not necessarily result in the sale of the security. The widespread expansion of government, consumer and corporate debt within the U.S. economy has made the corporate sector, especially cyclically sensitive industries, more vulnerable to economic downturns or increased interest rates. An economic downturn could severely disrupt the market for high yield fixed income securities and adversely affect the value of outstanding fixed income securities and the ability of the issuers to repay principal and interest.
The Fund may invest in high yield debt obligations, such as bonds and debentures, issued by corporations and other business organizations. The Fund will invest in high yield debt instruments when the Fund believes that such instruments offer a better risk/reward profile than comparable equity opportunities. High yield fixed income securities (commonly known as junk bonds) are considered speculative investments while generally providing greater income than investments in higher rated securities, involve greater risk of loss of principal and income (including the possibility of default or bankruptcy of the issuers of such securities) and may involve greater volatility of price (especially during periods of economic uncertainty or change) than securities in the higher rating categories. Since yields vary over time, no specific level of income can ever be assured.
The prices of high yield fixed income securities have been found to be less sensitive to interest rate changes than higher-rated investments but more sensitive to adverse economic changes or individual corporate developments. Also, during an economic downturn or substantial period of rising interest rates, highly leveraged issuers may experience financial stress, which would adversely affect their ability to service their principal and interest payment obligations, to meet projected business goals and to obtain additional financing. If the issuer of a fixed income security owned by the Fund defaulted, the Fund could incur additional expenses in attempting to obtain a recovery. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of high yield fixed income securities and the Funds NAV to the extent it holds such securities.
High yield fixed income securities also present risks based on payment expectations. For example, high yield fixed income securities may contain redemption or call provisions. If an issuer exercises these provisions in a declining interest rate market, the Fund may, to the extent it holds such fixed income securities, have to replace the securities with a lower yielding security, which may result in a decreased return for investors. Conversely, a high yield fixed income securitys value will decrease in a
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rising interest rate market, as will the value of the Funds assets, to the extent it holds such fixed income securities. In addition, to the extent that there is no established retail secondary market, there may be thin trading of high yield fixed income securities, and this may have an impact on the Advisers and Sub-Advisers ability to accurately value such securities and the Funds assets and on the Funds ability to dispose of such securities. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield fixed income securities, especially in a thinly traded market.
New laws proposed or adopted from time to time may have an impact on the market for high yield securities.
Finally, there are risks involved in applying credit or dividend ratings as a method for evaluating high yield securities. For example, ratings evaluate the safety of principal and interest or dividend payments, not market value risk of high yield securities. Also, since rating agencies may fail to timely change the credit ratings to reflect subsequent events, the Fund will continuously monitor the issuers of high yield securities in its portfolio, if any, to determine if the issuers will have sufficient cash flow and profits to meet required principal and interest payments, and to assure the securitys liquidity so the Fund can meet redemption requests.
Securities Lending. The Fund may lend portfolio securities to brokers, dealers and other financial organizations that meet capital and other credit requirements or other criteria established by the Companys Board of Directors. These loans, if and when made, may not exceed 33 1/3% of the total asset value of the Fund (including the loan collateral). The Fund will not lend portfolio securities to the Adviser, any Sub-Adviser or their affiliates unless permissible under the 1940 Act and the rules and promulgations thereunder. Loans of portfolio securities will be fully collateralized by cash, letters of credit or U.S. government securities, and the collateral will be maintained in an amount equal to at least 100% of the current market value of the loaned securities by marking to market daily. Any gain or loss in the market price of the securities loaned that might occur during the term of the loan would be for the account of the Fund.
The Fund may pay a part of the interest earned from the investment of collateral, or other fee, to an unaffiliated or, to the extent consistent with the 1940 Act or the rules and SEC interpretations thereunder, affiliated third party for acting as the Funds securities lending agent.
By lending its securities, the Fund may increase its income by receiving payments from the borrower that reflect the amount of any interest or any dividends payable on the loaned securities as well as by either investing cash collateral received from the borrower in short-term instruments or obtaining a fee from the borrower when U.S. government securities or letters of credit are used as collateral. The Fund will adhere to the following conditions whenever its portfolio securities are loaned: (i) the Fund must receive at least 100% cash collateral or equivalent securities of the type discussed in the preceding paragraph from the borrower; (ii) the borrower must increase such collateral whenever the market value of the securities rises above the level of such collateral; (iii) the Fund must be able to terminate the loan on demand; (iv) the Fund must receive reasonable interest on the loan, as well as any dividends, interest or other distributions on the loaned securities and any increase in market value; (v) the Fund may pay only reasonable fees in connection with the loan (which fees may include fees payable to the lending agent, the borrower, the Funds administrator and the custodian); and (vi) voting rights on the loaned securities may pass to the borrower, provided, however, that if a material event adversely affecting the investment occurs, the Fund must terminate the loan and regain the right to vote the securities. The Board has adopted procedures reasonably designed to ensure that the foregoing criteria will be met. Loan agreements involve certain risks in the event of default or insolvency of the borrower, including possible delays or restrictions upon the Funds ability to recover the loaned securities or dispose of the collateral for the loan, which could give rise to loss because of adverse market action, expenses and/or delays in connection with the disposition of the underlying securities.
Securities of Unseasoned Issuers. The Fund may invest in securities of unseasoned issuers, including equity securities of unseasoned issuers which are not readily marketable. The term unseasoned refers to issuers which, together with their predecessors, have been in operation for less than three years.
Short Sales. As consistent with the Funds investment objectives, the Fund may engage in short sales that are either uncovered or against the box. A short sale is against the box if at all times during which the short position is open, the Fund owns at least an equal amount of the securities or securities convertible into, or exchangeable without further consideration for, securities of the same issue as the securities that are sold short. A short sale against the box is a taxable transaction to the Fund with respect to the securities that are sold short.
22
Uncovered short sales are transactions under which the Fund sells a security it does not own. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at the market price at the time of the replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. Until the security is replaced, the Fund is required to pay the lender amounts equal to any dividends or interest that accrue during the period of the loan. To borrow the security, the Fund also may be required to pay a premium, which would increase the cost of the security sold. The proceeds of the short sale will be retained by the broker, to the extent necessary to meet margin requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed security, the Fund will: (a) maintain a segregated account containing cash or liquid securities at such a level that (i) the amount deposited in the account plus the amount deposited with the broker as collateral will equal the current value of the security sold short; and (ii) the amount deposited in the segregated account plus the amount deposited with the broker as collateral will not be less than the market value of the security at the time the security was sold short; or (b) otherwise cover the Funds short position.
Special Note Regarding Market Events. Events in the financial sector over the past year have resulted in reduced liquidity in credit and fixed income markets and in an unusually high degree of volatility in the financial markets, both domestically and internationally. While entire markets have been impacted, issuers that have exposure to the real estate, mortgage and credit markets have been particularly affected. These events and the potential for continuing market turbulence may have an adverse effect on the underlying investment companies investments. It is uncertain how long these conditions will continue.
The instability in the financial markets has led the U.S. government to take a number of unprecedented actions designed to support certain financial institutions and certain segments of the financial markets. Federal, state and foreign governments, regulatory agencies, and self-regulatory organizations may take actions that affect the regulation of the instruments in which the Fund invests, or the issuers of such instruments, in ways that are unforeseeable. Such legislation or regulation could limit or preclude an underlying investment companys, and thus a Funds, ability to achieve its investment objective.
Governments or their agencies may also acquire distressed assets from financial institutions and acquire ownership interests in those institutions. The implications of government ownership and disposition of these assets are unclear, and such ownership or disposition may have positive or negative effects on the liquidity, valuation and performance of the underlying investment companies holdings.
Special Situation Companies. The Fund may invest in Special Situations. The term Special Situation shall be deemed to refer to a security of a company in which an unusual and possibly non-repetitive development is taking place which, in the opinion of the Adviser, may cause the security to attain a higher market value independently, to a degree, of the trend in the securities market in general. The particular development (actual or prospective), which may qualify a security as a Special Situation, may be one of many different types.
Such developments may include, among others, a technological improvement or important discovery or acquisition which, if the expectation for it materialized, would effect a substantial change in the companys business; a reorganization; a recapitalization or other development involving a security exchange or conversion; a merger, liquidation or distribution of cash, securities or other assets; a breakup or workout of a holding company; litigation which, if resolved favorably, would improve the value of the companys stock; a new or changed management; or material changes in management policies. A Special Situation may often involve a comparatively small company, which is not well known, and which has not been closely watched by investors generally, but it may also involve a large company. The fact, if it exists, that an increase in the companys earnings, dividends or business is expected, or that a given security is considered to be undervalued, would not in itself be sufficient to qualify as a Special Situation. The Fund may invest in securities (even if not Special Situations) which, in the opinion of the Adviser, are appropriate investments for the Fund, including securities which the Adviser believes are undervalued by the market.
Structured Securities. The Fund may invest in structured securities to the extent consistent with its investment objective. The value of the principal of and/or interest on structured securities is determined by reference to changes in the value of specific
23
currencies, commodities, securities, indices or other financial indictors (the Reference) or the relative change in two or more References. The interest rate or the principal amount payable upon maturity or redemption may be increased or decreased depending upon changes in the applicable Reference. Examples of structured securities include, but are not limited to, notes where the principal repayment at maturity is determined by the value of the relative change in two or more specified securities or securities indices.
The terms of some structured securities may provide that in certain circumstances no principal is due at maturity and, therefore, the Fund could suffer a total loss of its investment. Structured securities may be positively or negatively indexed, so that appreciation of the Reference may produce an increase or decrease in the interest rate or value of the security at maturity. In addition, changes in the interest rate or the value of the security at maturity may be a multiple of the changes in the value of the Reference. Consequently, structured securities may entail a greater degree of market risk than other types of securities. Structured securities may also be more volatile, less liquid and more difficult to accurately price than less complex securities due to their derivative nature.
Swap Agreements. The Fund may enter into equity index or interest rate swap agreements for purposes of attempting to gain exposure to the stocks making up an index of securities in a market without actually purchasing those stocks, or to hedge a position. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a day to more than one-year. In a standard swap transaction, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross returns to be exchanged or swapped between the parties are calculated with respect to a notional amount, i.e. , the return on or increase in value of a particular dollar amount invested in a basket of securities representing a particular index. Forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or cap, interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified level, or floor, and interest rate dollars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
Most swap agreements entered into by the Fund calculate the obligations of the parties to the agreement on a net basis. Consequently, the Funds current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the net amount). The Funds current obligations under a swap agreement will be accrued daily (offset against any amounts owing to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by segregating assets determined to be liquid. Obligations under swap agreements so covered will not be construed to be senior securities for purposes of the Funds investment restriction concerning senior securities. Because they are two party contracts and because they may have terms of greater than seven days, swap agreements may be considered to be illiquid for the Funds illiquid investment limitation. The Fund will not enter into any swap agreement unless the Adviser or applicable Sub-Adviser believes that the other party to the transaction is creditworthy. The Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty.
The Fund may enter into swap agreements to invest in a market without owning or taking physical custody of securities in circumstances in which direct investment is restricted for legal reasons or is otherwise impracticable. The counterparty to any swap agreement will typically be a bank, investment banking firm or broker/dealer. The counter-party will generally agree to pay the Fund the amount, if any, by which the notional amount of the swap agreement would have increased in value had it been invested in the particular stocks, plus the dividends that would have been received on those stocks. The Fund will agree to pay to the counter-party a floating rate of interest on the notional amount of the swap agreement plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such stocks. Therefore, the return to the Fund on any swap agreement should be the gain or loss on the notional amount plus dividends on the stocks less the interest paid by the Fund on the notional amount.
Swap agreements typically are settled on a net basis, which means that the two payment streams are netted out, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. Payments may be made at the conclusion of a swap agreement or periodically during its term. Swap agreements do not involve the delivery of securities or other underlying assets. Accordingly, the risk of loss with respect to swap agreements is limited to the net amount of payments that the Fund is
24
contractually obligated to make. If the other party to a swap agreement defaults, the Funds risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. The net amount of the excess, if any, of the Funds obligations over its entitlements with respect to each equity swap will be accrued on a daily basis and an amount of cash or liquid assets, having an aggregate net asset value at least equal to such accrued excess will be maintained in a segregated account by the Funds custodian. Inasmuch as these transactions are entered into for hedging purposes or are offset by segregated cash of liquid assets, as permitted by applicable law, the Fund and the Adviser believe that these transactions do not constitute senior securities under the 1940 Act and, accordingly, will not treat them as being subject to a Funds borrowing restrictions.
The Adviser and Sub-Advisers, under the supervision of the Board, are responsible for determining and monitoring the liquidity of Fund transactions in swap agreements. The use of equity swaps is a highly specialized activity, which involves investment techniques and risks different from those associated with ordinary portfolio securities transactions.
U.S. Government Securities. The Fund may invest in U.S. government securities. Securities issued or guaranteed by the U.S. government or its agencies or instrumentalities include U.S. Treasury securities, which are backed by the full faith and credit of the U.S. Treasury and which differ only in their interest rates, maturities, and times of issuance. U.S. Treasury bills have initial maturities of one-year or less; U.S. Treasury notes have initial maturities of one to ten years; and U.S. Treasury bonds generally have initial maturities of greater than ten years. Certain U.S. government securities are issued or guaranteed by agencies or instrumentalities of the U.S. government including, but not limited to, obligations of U.S. government agencies or instrumentalities such as the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Government National Mortgage Association ("Ginnie Mae"), the Small Business Administration, the Federal Farm Credit Administration, the Federal Home Loan Banks, Banks for Cooperatives (including the Central Bank for Cooperatives), the Federal Land Banks, the Federal Intermediate Credit Banks, the Tennessee Valley Authority, the Export-Import Bank of the United States, the Commodity Credit Corporation, the Federal Financing Bank, the Student Loan Marketing Association, the National Credit Union Administration and the Federal Agricultural Mortgage Corporation (Farmer Mac).
Some obligations issued or guaranteed by U.S. government agencies and instrumentalities, including, for example, Ginnie Mae pass-through certificates, are supported by the full faith and credit of the U.S. Treasury. Other obligations issued by or guaranteed by federal agencies, such as those securities issued by Fannie Mae, are supported by the discretionary authority of the U.S. government to purchase certain obligations of the federal agency, while other obligations issued by or guaranteed by federal agencies, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Treasury, while the U.S. government provides financial support to such U.S. government-sponsored federal agencies, no assurance can be given that the U.S. government will always do so, since the U.S. government is not so obligated by law. U.S. Treasury notes and bonds typically pay coupon interest semi-annually and repay the principal at maturity.
See Mortgage-Backed Securities above for additional information about the September 7, 2008 federal takeover of Fannie Mae and Freddie Mac.
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U.S. Treasury Obligations. U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S. Treasury and separately traded interest and principal component parts of such obligations that are transferable through the federal book-entry system known as Separately Traded Registered Interest and Principal Securities (STRIPS) and Treasury Receipts (TRs). |
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Receipts. Interests in separately traded interest and principal component parts of U.S. government obligations that are issued by banks or brokerage firms and are created by depositing U.S. government obligations into a special account at a custodian bank. The custodian holds the interest and principal payments for the benefit of the registered owners of the certificates or receipts. The custodian arranges for the issuance of the certificates or receipts evidencing ownership and maintains the register. TRs and STRIPS are interests in accounts sponsored by the U.S. Treasury. Receipts are sold as zero coupon securities. |
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U.S. Government Zero Coupon Securities. STRIPS and receipts are sold as zero coupon securities, that is, fixed income securities that have been stripped of their unmatured interest coupons. Zero coupon securities are sold at a (usually |
25
substantial) discount and redeemed at face value at their maturity date without interim cash payments of interest or principal. The amount of this discount is accreted over the life of the security, and the accretion constitutes the income earned on the security for both accounting and tax purposes. Because of these features, the market prices of zero coupon securities are generally more volatile than the market prices of securities that have similar maturity but that pay interest periodically. Zero coupon securities are likely to respond to a greater degree to interest rate changes than are non-zero coupon securities with similar maturity and credit qualities. |
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U.S. Government Agencies. Some obligations issued or guaranteed by agencies of the U.S. government are supported by the full faith and credit of the U.S. Treasury, others are supported by the right of the issuer to borrow from the Treasury, while still others are supported only by the credit of the instrumentality. Guarantees of principal by agencies or instrumentalities of the U.S. government may be a guarantee of payment at the maturity of the obligation so that in the event of a default prior to maturity there might not be a market and thus no means of realizing on the obligation prior to maturity. Guarantees as to the timely payment of principal and interest do not extend to the value or yield of these securities nor to the value of the Funds shares. |
The Fund has adopted the following fundamental investment limitations which may not be changed with respect to the Fund without the affirmative vote of the holders of a majority of the Funds outstanding shares (as defined in Section 2(a) (42) of the 1940 Act). As used in this SAI and in the Prospectuses, shareholder approval and a majority of the outstanding shares of the Fund means, with respect to the approval of an investment advisory agreement, a distribution plan or a change in a fundamental investment limitation, the lesser of (1) 67% of the shares of the Fund represented at a meeting at which the holders of more than 50% of the outstanding shares of the Fund are present in person or by proxy, or (2) more than 50% of the outstanding shares of the Fund. The Funds investment goals and strategies described in the Prospectuses may be changed by the Companys Board of Directors without the approval of the Funds shareholders.
The Fund may not:
1. |
Borrow money or issue senior securities, except that the Fund may borrow from banks and enter into reverse repurchase agreements provided that there is at least 300% asset coverage for the borrowings of the Fund. The Fund may not mortgage, pledge or hypothecate any assets, except in connection with any such borrowing and then in amounts not in excess of one-third of the value of the Funds total assets at the time of such borrowing. However, the amount shall not be in excess of lesser of the dollar amounts borrowed or 33 1/3% of the value of the Funds total assets at the time of such borrowing, provided that: (a) short sales and related borrowings of securities are not subject to this restriction; and (b) for the purposes of this restriction, collateral arrangements with respect to options, short sales, stock index, interest rate, currency or other futures, options on futures contracts, collateral arrangements with respect to initial and variation margin and collateral arrangements with respect to swaps and other derivatives are not deemed to be a pledge or other encumbrance of assets. Securities held in escrow or separate accounts in connection with the Funds investment practices are not considered to be borrowings or deemed to be pledged for purposes of this limitation; |
2. |
Act as an underwriter of securities within the meaning of the Securities Act, except insofar as it might be deemed to be an underwriter upon disposition of certain portfolio securities acquired within the limitation on purchases of restricted securities; |
3. |
Purchase or sell real estate (including real estate limited partnership interests), provided that the Fund may invest: (a) in securities secured by real estate or interests therein or issued by companies that invest in real estate or interests therein; or (b) in real estate investment trusts; |
4. |
Purchase or sell commodities or commodity contracts, except that the Fund may deal in forward foreign exchanges between currencies of the different countries in which it may invest and purchase and sell stock index and currency options, stock index futures, financial futures and currency futures contracts and related options on such futures; |
26
5. |
Make loans, except through loans of portfolio securities and repurchase agreements, provided that for purposes of this restriction the acquisition of bonds, debentures or other debt instruments or interests therein and investment in government obligations, loan participations and assignments, short-term commercial paper, certificates of deposit and bankers acceptances shall not be deemed to be the making of a loan; |
6. |
Invest 25% or more of its total assets, taken at market value at the time of each investment, 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 (i) instruments issued or guaranteed by the United States, any state, territory or possession of the United States, the District of Columbia or any of their authorities, agencies, instrumentalities or political subdivisions, and (ii) repurchase agreements secured by the instruments described in clause (i); (b) wholly-owned finance companies will be considered to be in the industries of their parents if their activities are primarily related to financing the activities of the parents; and (c) utilities will be divided according to their services, for example, gas, gas transmission, electric and gas, electric and telephone will each be considered a separate industry; or |
7. |
Purchase the securities of any one issuer, other than securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, if immediately after and as a result of such purchase, more than 5% of the value of the Funds total assets would be invested in the securities of such issuer, or more than 10% of the outstanding voting securities of such issuer would be owned by the Fund, except that up to 25% of the value of the Funds total assets may be invested without regard to such limitations. |
In addition to the fundamental investment limitations specified above, the Fund is subject to the following non-fundamental limitations. These non-fundamental restrictions may be changed without shareholder approval, in compliance with applicable law and regulatory policy. The Fund may not:
1. |
Make investments for the purpose of exercising control or management, but investments by the Fund in wholly-owned investment entities created under the laws of certain countries will not be deemed the making of investments for the purpose of exercising control or management; or |
2. |
Purchase securities on margin, except that the Fund may use margin to the extent necessary to engage in short sales and may obtain such short-term credits as are necessary for the clearance of portfolio transactions; and provided that margin deposits in connection with options, futures contracts, options on futures contracts, transactions in currencies or other derivative instruments shall not constitute purchasing securities on margin. |
The Fund may invest in securities issued by other investment companies within the limits prescribed by the 1940 Act. As a shareholder of another investment company, the Fund would bear, along with other shareholders, its pro rata portion of the other investment companys expenses, including advisory fees. These expenses would be in addition to the advisory and other expenses that the Fund bears directly in connection with its own operations.
Securities held by the Fund generally may not be purchased from, sold or loaned to the Adviser, any Sub-Adviser or their affiliates or any of their directors, officers or employees, acting as principal, unless pursuant to a rule or exemptive order under the 1940 Act.
If a percentage restriction under one of the Funds investment policies or limitations or the use of assets is adhered to at the time a transaction is effected, later changes in percentages resulting from changing values will not be considered a violation (except with respect to any restrictions that may apply to borrowings or senior securities issued by the Fund).
DISCLOSURE OF PORTFOLIO HOLDINGS
The Company has adopted, on behalf of the Fund, a policy relating to the disclosure of the Funds portfolio holdings to ensure that disclosure of information about portfolio holdings is in the best interests of Fund shareholders. The policies relating to the disclosure of the Funds portfolio holdings are designed to allow disclosure of portfolio holdings information where necessary to the Funds operation without compromising the integrity or performance of the Fund. It is the policy of the Company that disclosure of the Funds portfolio holdings to a select person or persons prior to the release of such holdings to the public (selective disclosure) is prohibited, unless there are legitimate business purposes for selective disclosure.
27
The Company discloses portfolio holdings information as required in regulatory filings and shareholder reports, discloses portfolio holdings information as required by federal and state securities laws and may disclose portfolio holdings information in response to requests by governmental authorities. As required by the federal securities laws, including the 1940 Act, the Company will disclose the Funds portfolio holdings in applicable regulatory filings, including shareholder reports, reports on Form N-CSR and Form N-Q or such other filings, reports or disclosure documents as the applicable regulatory authorities may require.
The Company may distribute or authorize the distribution of information about the Funds portfolio holdings that is not publicly available to its third-party service providers, which include PFPC Trust Company, the custodian; BNY Mellon Investment Servicing (US) Inc. (BNY), the administrator, accounting agent and transfer agent; [ ], the Funds independent registered public accounting firm; Drinker Biddle & Reath LLP, legal counsel; R.R. Donnelly, the financial printer; and , the Funds proxy voting service. These service providers are required to keep such information confidential, and are prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the Fund. Such holdings are released on conditions of confidentiality, which include appropriate trading prohibitions. Conditions of confidentiality include confidentiality terms included in written agreements, implied by the nature of the relationship (e.g. attorney-client relationship), or required by fiduciary or regulatory principles (e.g., custody services provided by financial institutions).
Portfolio holdings may also be disclosed, upon authorization by a designated officer of the Adviser, to certain independent reporting agencies recognized by the SEC as acceptable agencies for the reporting of industry statistical information. Disclosures to financial consultants are also subject to a confidentiality agreement and/or trading restrictions as well as a 15 - day time lag. The foregoing disclosures are made pursuant to the Companys policy on selective disclosure of portfolio holdings. The Board of Directors of the Company or a committee thereof may, in limited circumstances, permit other selective disclosure of portfolio holdings subject to a confidentiality agreement and/or trading restrictions. Portfolio holdings may also be provided earlier to shareholders and their agents who receive redemptions in kind that reflect a pro rata allocation of all securities held in the Funds portfolio.
The Adviser reserves the right to refuse to fulfill any request for portfolio holdings information from a shareholder or non-shareholder if it believes that providing such information will be contrary to the best interests of the Fund.
Any violations of the policy set forth above as well as any corrective action undertaken to address such violations must be reported by
the Adviser, director, officer or third party service provider to the Companys Chief Compliance Officer, who will determine whether the violation should be reported immediately to the Board of Directors of the Company or at its next quarterly
The business and affairs of the Company are managed under the direction of the Companys Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors are responsible for deciding matters of overall policy and overseeing the actions of the Companys service providers. The officers of the Company conduct and supervise the Companys daily business operations.
The Directors and executive officers of the Company, their dates of birth, business addresses and principal occupations during the past five years are set forth below.
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Name, Address, and Date of Birth |
Position(s)
|
Term of
|
Principal Occupation(s) During Past 5 Years |
Number
|
Other Directorships Held by Director |
|||||
DISINTERESTED DIRECTORS |
||||||||||
Nicholas A. Giordano 103 Bellevue Parkway Wilmington, DE 19809 DOB: 03/43 |
Director | 2006 to present | Consultant, financial services organizations from 1997 to present. | 18 | Kalmar Pooled Investment Trust; (registered investment company) WT Mutual Fund; (registered investment company) Independence Blue Cross; IntriCon Corporation (body worn device company) | |||||
Francis J. McKay 103 Bellevue Parkway Wilmington, DE 19809 DOB: 12/35 |
Director | 1988 to present | Retired; Vice President, Fox Chase Cancer Center (biomedical research and medical care) (2000-2004). | 18 | None | |||||
Arnold M. Reichman 103 Bellevue Parkway Wilmington, DE 19809 DOB: 5/48 |
Chairman | 2005 to present | Director, Gabelli Group Capital Partners, L.P. (an investment partnership) from 2000 to 2006. | 18 | None | |||||
Director |
1991 to present |
|||||||||
Marvin E. Sternberg 103 Bellevue Parkway Wilmington, DE 19809 DOB: 3/34 |
Director | 1991 to present | Since 1974, Chairman, Director and President, MTI Holding Group, Inc. (formerly known as Moyco Technologies, Inc.) (manufacturer of precision coated and industrial abrasives). | 18 | MTI Holding Group, Inc. (formerly known as Moyco Technologies, Inc.) |
29
Name, Address, and Date of Birth |
Position(s)
|
Term of
Office and
Served 1 |
Principal Occupation(s) During Past 5 Years |
Number
|
Other Directorships Held by Director |
|||||
Robert A. Straniere 103 Bellevue Parkway Wilmington, DE 19809 DOB: 3/41 |
Director | 2006 to present | Founding Partner, Straniere Law Firm (1980 to date); Partner, Gotham Strategies (consulting firm) (2005 to date); Partner, The Gotham Global Group (consulting firm) (2005 to date); President, The New York City Hot Dog Company (2005 to date); Partner, Kanter-Davidoff (law firm) (2006 to present). Since 2009, Administrative Law Judge, New York City. | 18 | Reich and Tang Group (asset management); The SPARX Asia Funds Group (registered investment company) | |||||
INTERESTED DIRECTORS 2 | ||||||||||
Julian A. Brodsky 103 Bellevue Parkway Wilmington, DE 19809 DOB: 7/33 |
Director | 1988 to present | Since 1969, Director and Vice Chairman, Comcast Corporation (cable television and communications). | 18 | Comcast Corporation; AMDOCS Limited (service provider to telecommunications companies) | |||||
Robert Sablowsky 103 Bellevue Parkway Wilmington, DE 19809 DOB: 4/38 |
Director | 1991 to present | Since July 2002, Senior Vice President and prior thereto, Executive Vice President of Oppenheimer & Co., Inc., formerly Fahnestock & Co., Inc. (a registered broker-dealer). Since November 2004, Director of Kensington Funds. | 18 |
Kensington Funds (registered investment company) 6 Portfolios |
|||||
J. Richard Carnall 103 Bellevue Parkway Wilmington, DE 19809 DOB: 9/38 |
Director | 2002 to present | Director of Haydon Bolts, Inc. (bolt manufacturer) and Parkway Real Estate Company (subsidiary of Haydon Bolts, Inc.) since 1984; and Director of Cornerstone Bank since March 2004. | 18 | Cornerstone Bank | |||||
OFFICERS | ||||||||||
Salvatore Faia, Esquire, CPA Vigilant Compliance Services 713 Chelsea Road Mullica Hill, NJ 08062 DOB: 12/62 |
President and Chief Compliance Officer |
President June 2009 to present and Chief Compliance Officer 2004 to present | President, Vigilant Compliance Services since 2004; Senior Legal Counsel, PNC Global Investment Servicing (U.S.), Inc. (now, BNY Mellon Investment Servicing (US) Inc.) from 2002 to 2004; and Director of Energy Income Partnership since 2005. | N/A | N/A | |||||
Joel Weiss 103 Bellevue Parkway Wilmington, DE 19809 DOB: 1/63 |
Treasurer | June 2009 to present | Vice President and Managing Director, BNY Mellon Investment Servicing (US) Inc. (f/k/a PNC Global Investment Servicing (U.S.) Inc.) since 1993 | N/A | N/A |
30
Name, Address, and Date of Birth |
Position(s)
|
Term of
|
Principal Occupation(s) During Past 5 Years |
Number
|
Other Directorships Held by Director |
|||||
Jennifer Rogers 301 Bellevue Parkway Wilmington, DE 19809 DOB: 7/74 |
Secretary | 2007 to present |
Since 2005, Vice President and Counsel, BNY Mellon Investment Servicing (US) Inc. (f/k/a PNC Global Investment Servicing (U.S.) Inc.); Associate, Stradley, Ronon, Stevens & Young, LLC (law firm) from 1999 to 2005. |
N/A | N/A | |||||
James G. Shaw 103 Bellevue Parkway Wilmington, DE 19809 DOB: 10/60 |
Assistant Treasurer | 2005 to present |
Since 1995, Vice President of BNY Mellon Investment Servicing (US) Inc. (f/k/a PNC Global Investment Servicing (U.S.) Inc.) |
N/A | N/A | |||||
Michael P. Malloy One Logan Square 18 th and Cherry Streets Philadelphia, PA 19103 DOB: 07/59 |
Assistant Secretary |
1999 to present |
Partner, Drinker Biddle & Reath LLP (law firm) since 1993 |
N/A | N/A |
* |
Each Director oversees eighteen portfolios of the Company that are currently offered for sale. |
1. |
Subject to the Companys Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until the last day of year 2011, whichever is later, or until his successor is elected and qualified or his death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. Each officer holds office at the pleasure of the Board of Directors until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. |
2. |
Messrs. Brodsky, Carnall and Sablowsky are considered interested persons of the Company as that term is defined in the 1940 Act and are referred to as Interested Directors. Mr. Brodsky is an Interested Director of the Company because a family foundation and certain family trusts own shares of JPMorgan Chase & Co. The investment adviser to the Companys Bear Stearns CUFS MLP Mortgage Portfolio, Bear Stearns Asset Management, Inc., is an indirect subsidiary of JPMorgan Chase. Mr. Carnall is an Interested Director of the Company because he owns shares of The PNC Financial Services Group, Inc. The investment adviser to the Companys Money Market Portfolio, BlackRock Institutional Management Corporation is an indirect subsidiary of The PNC Financial Services Group, Inc. Mr. Sablowsky is considered an Interested Director of the Company by virtue of his position as an officer of Oppenheimer & Co., Inc., a registered broker-dealer. |
Director Experience, Qualifications, Attributes and/or Skills [to be provided by amendment]
31
The Board and Standing Committees
Board Leadership Structure. [to be updated by amendment] The Board of Directors is comprised of eight individuals, three of whom are considered Interested Directors as defined by the 1940 Act. The remaining Directors are referred to as Disinterested or Independent Directors. The Board meets at least quarterly to review the investment performance of each portfolio in the mutual fund family and other operational matters, including policies and procedures with respect to compliance with regulatory and other requirements. Currently, the Board of Directors has an Audit Committee, an Executive Committee, a Nominating and Governance Committee and a Regulatory Oversight Committee. Each Committee meets periodically to perform its delegated oversight functions and reports its findings and recommendations to the Board. The responsibilities of each committee and its members are described below.
Audit Committee. The Board has an Audit Committee comprised of one Interested Director and three Independent Directors. The current members of the Audit Committee are Messrs. Brodsky, Giordano, McKay and Sternberg. The Audit Committee, among other things, reviews results of the annual audit and approves the firm(s) to serve as independent auditors.
Executive Committee. The Board has an Executive Committee comprised of one Interested Director and three Independent Directors. The current members of the Executive Committee are Messrs. Giordano, Reichman, Sablowsky and Sternberg. The Executive Committee may generally carry on and manage the business of the Company when the Board of Directors is not in session.
Nominating and Governance Committee. The Board has a Nominating and Governance Committee comprised only of Independent Directors. The current members of the Nominating and Governance Committee are Messrs. Giordano, McKay and Reichman. The Nominating and Governance Committee recommends to the Board of Directors all persons to be nominated as Directors of the Company. The Nominating and Governance Committee will consider nominees recommended by shareholders. Recommendations should be submitted to the Committee care of the Companys Secretary.
Regulatory Oversight Committee . The Board has a Regulatory Oversight Committee compromised of two Interested Directors and two Independent Directors. The current members of the Regulatory Oversight Committee are Messrs. Carnall, Reichman, Sablowsky and Straniere. The Regulatory Oversight Committee monitors regulatory developments in the mutual fund industry and focuses on various regulatory aspects of the operation of the Company.
Risk Oversight [to be provided by amendment]
32
Director Ownership of Shares of the Company
The following table sets forth the dollar range of equity securities beneficially owned by each Director in the Fund and in all of the portfolios (which for each Director comprise all registered investment companies within the Companys family of investment companies overseen by him), as of December 31, 2009.
Name of Director |
Dollar Range of Equity Securities in the Fund |
Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Director within the Family of Investment Companies |
||
INDEPENDENT DIRECTORS | ||||
Nicholas A. Giordano |
None | |||
Francis J. McKay |
None | |||
Arnold M. Reichman |
None | |||
Marvin E. Sternberg |
None | |||
Robert A. Straniere |
None | |||
INTERESTED DIRECTORS | ||||
Julian A. Brodsky |
None | |||
J. Richard Carnall |
None | |||
Robert Sablowsky |
None |
33
Directors and Officers Compensation
Effective January 1, 2010, the Company pays each Director a retainer of at the rate of $17,500 annually, $3,500 for each regular meeting of the Board of Directors, $1,500 for each special meeting of the Board of Directors and Committee meeting attended in person and $1,000 for each special meeting of the Board of Directors and Committee meeting attended telephonically. From July 1, 2009 to January 1, 2010, the Company paid each Director a retainer at the rate of $17,500 annually, $3,000 for each regular meeting of the Board of Directors, $1,500 for each special meeting of the Board of Directors attended in person, $1,000 for each Committee meeting attended in person, $1,000 for each special meeting of the Board of Directors and Committee meeting attended telephonically lasting one hour or longer and $500 for each special meeting of the Board of Directors or Committee meeting attended telephonically lasting for less than one hour. From October 1, 2008 to July 1, 2009, the Company paid each Director a retainer at the rate of $17,500 annually, $3,500 for each regular meeting of the Board of Directors, $1,500 for each special meeting of the Board of Directors and Committee meeting attended in person and $1,000 for each special meeting of the Board of Directors and Committee meeting attended telephonically. From March 1, 2008 to October 1, 2008 the Company paid each Director a retainer at the rate of $17,500 annually, $3,500 for each regular meeting of the Board of Directors and $500 for each special meeting of the Board of Directors and Committee meeting lasting up to one hour or $1,500 for each special meeting of the Board of Directors and Committee meeting lasting over one hour attended by a Director or in which he participated, whether or not it was held in conjunction with a Board meeting. From May 23, 2007 to March 1, 2008 the Company paid each Director a retainer at the rate of $17,500 annually, $3,500 per meeting of the Board of Directors and $500 for each committee meeting lasting up to one hour or $1,500 for each committee meeting lasting over one hour attended by a Director or in which he participates, whether or not it is held in conjunction with a Board meeting. Prior to November 15, 2007, no Director was paid for a committee meeting if it was held in conjunction with a Board meeting. The Chairman of the Board receives an additional fee of $12,000 per year for his services in this capacity, and each Chairman of the Audit Committee, Nominating and Governance Committee and Regulatory Oversight Committee receives an additional fee of $4,000 per year for his services.
Directors are reimbursed for any reasonable out-of-pocket expenses incurred in attending meetings of the Board of Directors or any committee thereof. The Company also compensates its President and Chief Compliance Officer for his services to the Company. For the fiscal year ended August 31, 2010, each of the following members of the Board of Directors and the President, Treasurer and Chief Compliance Officer received compensation from the Company in the following amounts:
Name of Director/Officer |
Aggregate
Compensation from Registrant |
Pension or
Retirement Benefits Accrued as Part of Fund Expenses |
Estimated
Annual Benefits Upon Retirement |
Total
Compensation From Fund and Fund Complex Paid to Directors or Officers |
||||
Independent Directors: |
||||||||
Nicholas A. Giordano, Director |
$ [ ] | N/A | N/A | $ [ ] | ||||
Francis J. McKay, Director |
$ [ ] | N/A | N/A | $ [ ] | ||||
Arnold M. Reichman, Director and Chairman |
$ [ ] | N/A | N/A | $ [ ] | ||||
Marvin E. Sternberg, Director |
$ [ ] | N/A | N/A | $ [ ] | ||||
Robert A. Straniere, Director |
$ [ ] | N/A | N/A | $ [ ] | ||||
Interested Directors: |
||||||||
Julian A. Brodsky, Director |
$ [ ] | N/A | N/A | $ [ ] |
34
Name of Director/Officer |
Aggregate
Compensation from Registrant |
Pension or
Retirement Benefits Accrued as Part of Fund Expenses |
Estimated
Annual Benefits Upon Retirement |
Total
Compensation From Fund and Fund Complex Paid to Directors or Officers |
||||
J. Richard Carnall, Director |
$ [ ] | N/A | N/A | $ [ ] | ||||
Robert Sablowsky, Director |
$ [ ] | N/A | N/A | $ [ ] | ||||
Officers: |
||||||||
Salvatore Faia, Esquire, CPA Chief Compliance Officer and President |
$ [ ] | N/A | N/A | $ [ ] |
As of December 31, 2009, the Independent Directors and their respective immediate family members (spouse or dependent children) did not own beneficially or of record any securities of the Companys investment advisers or distributor, or of any person directly or indirectly controlling, controlled by, or under common control with the investment advisers or distributor.
On October 24, 1990, the Company adopted, as a participating employer, the Fund Office Retirement Profit-Sharing Plan
and Trust Agreement, a retirement plan for employees, pursuant to which the Company will contribute on a quarterly basis amounts equal to 10% of the quarterly compensation of each eligible employee. Edward J. Roach, who served as President and
Treasurer until June 1, 2009, has been the only employee who has participated in the Fund Office Retirement Profit-Sharing Plan and Trust Agreement. No officer, Director or employee of the Adviser, any Sub-Adviser or the distributor currently
The Company, the Adviser, certain Sub-Advisers and BNY Mellon Distributors Inc. (BNY Distributors) have each adopted a code of ethics under Rule 17j-1 of the 1940 Act that permits personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Company. Blue Lion Capital Management, LLC and Starwood Real Estate Securities, LLC have each adopted a code of ethics under Rule 17j-1 of the 1940 Act that does not permit personnel subject to the codes to invest in securities that may be purchased or held by the Fund.
PROXY VOTING [Will Sub-Advisers have proxy voting authority?]
The Board of Directors has delegated the responsibility of voting proxies with respect to the portfolio securities purchased and/or held by the Fund to the Funds Adviser, subject to the Boards continuing oversight. In exercising its voting obligations, the Adviser is guided by its general fiduciary duty to act prudently and in the interest of the Fund. The Adviser will consider factors affecting the value of the Funds investments and the rights of shareholders in its determination on voting portfolio securities.
The Adviser will vote proxies in accordance with its proxy policies and procedures, which are included in Appendix B to this SAI.
The Company is required to disclose annually the Funds complete proxy voting record on Form N-PX. The Funds proxy voting record for the most recent 12 month period ended June 30th will be available upon request by calling [ ] or by writing to the Fund S1 Fund, P.O. Box [ ], [ADDRESS]. The Funds Form N-PX will also be available on the SECs website at www.sec.gov.
35
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
The Fund was not previously in operation and consequently, there are no shareholders as of the date of this SAI.
Simple Alternatives, LLC (SA or the Adviser) is a professional investment management firm registered with the SEC under the Investment Advisers Act of 1940. The Adviser was established in October 2009. James Dilworth owns 100% of the voting securities of the Adviser.
Advisory Agreement with the Company. The Adviser renders advisory services to the Fund pursuant to an Investment Advisory Agreement (Advisory Agreement) dated as of [ ], 2010.
Subject to the supervision of the Companys Board of Directors, the Adviser will provide for the overall management of the Fund including (i) the provision of a continuous investment program for the Fund, including investment research and management with respect to all securities, investments, cash and cash equivalents, (ii) the determination from time to time of what securities and other investments will be purchased, retained, or sold by the Fund, and (iii) the placement from time to time of orders for all purchases and sales made for the Fund. The Adviser will provide the services rendered by it in accordance with the Funds investment objective, restrictions and policies as stated in the Prospectuses and in this SAI. The Adviser will not be liable for any error of judgment, mistake of law, or for any loss suffered by the Fund in connection with the performance of the Advisory Agreement, except a loss resulting from a breach of fiduciary duty with respect to the receipt of compensation for services or a loss resulting from willful misfeasance, bad faith or gross negligence on the part of the Adviser in the performance of its duties, or from reckless disregard of its obligations and duties under the Advisory Agreement.
For its services to the Fund, the Adviser is entitled to receive a monthly advisory fee at an annual rate of [2.75]% of the Funds average daily net assets.
The Adviser will pay all expenses incurred by it in connection with its activities under the Advisory Agreement. The Fund bears all of its own expenses not specifically assumed by the Adviser. General expenses of the Company not readily identifiable as belonging to a portfolio of the Company are allocated among all investment portfolios by or under the direction of the Companys Board of Directors in such manner as it deems to be fair and equitable. Expenses borne by the Fund include, but are not limited to the following (or the Funds share of the following): (a) the cost (including brokerage commissions) of securities purchased or sold by the Fund and any losses incurred in connection therewith; (b) fees payable to and expenses incurred on behalf of the Fund by the Adviser; (c) filing fees and expenses relating to the registration and qualification of the Company and the Funds shares under federal and/or state securities laws and maintaining such registrations and qualifications; (d) fees and salaries payable to the Company's Directors and officers; (e) taxes (including any income or franchise taxes) and governmental fees; (f) costs of any liability and other insurance or fidelity bonds; (g) any costs, expenses or losses arising out of a liability of or claim for damages or other relief asserted against the Company or the Fund for violation of any law; (h) legal, accounting and auditing expenses, including legal fees of special counsel for the independent Directors; (i) charges of custodians and other agents; (j) expenses of setting in type and printing prospectuses, statements of additional information and supplements thereto for existing shareholders, reports, statements, and confirmations to shareholders and proxy material that are not attributable to a class; (k) costs of mailing prospectuses, statements of additional information and supplements thereto to existing shareholders, as well as reports to shareholders and proxy materials that are not attributable to a class; (1) any extraordinary expenses; (m) fees, voluntary assessments and other expenses incurred in connection with membership in investment company organizations; (n) costs of mailing and tabulating proxies and costs of shareholders' and Directors' meetings; (o) costs of independent pricing services to value a portfolio's securities; and (p) the costs of investment company literature and other publications provided by the Company to its Directors and officers. Distribution expenses, transfer agency expenses, expenses of preparation, printing and mailing prospectuses, statements of additional information, proxy statements and reports to shareholders, and organizational expenses and registration fees, identified as belonging to a particular class of the Company, are allocated to such class.
36
Disclosure relating to the material factors and the conclusions with respect to those factors that formed the basis for the Board of Directors approval of the Funds investment advisory agreement will be available in the Funds semi-annual report for the fiscal period ending January 31, 2011, which may be obtained by calling [ ] or visiting the SECs website at www.sec.gov .
The Advisory Agreement provides that the Adviser shall at all times have all rights in and to the Funds name and all investment models used by or on behalf of the Fund. The Adviser may use the Funds name or any portion thereof in connection with any other mutual fund or business activity without the consent of any shareholder, and the Company has agreed to execute and deliver any and all documents required to indicate its consent to such use.
Each Sub-Adviser shall, subject to the supervision and oversight of the Adviser, manage the investment and reinvestment of such portion of the assets of the Fund, as the Adviser may from time to time allocate to such Sub-Adviser for management. The Adviser pays the Sub-Advisers out of its advisory fees.
[The Fund has received an exemptive order from the SEC that permits the Adviser to engage or terminate a Sub-Adviser, and to enter into and materially amend an existing Sub-Advisory Agreement, upon the approval of the Board of Directors, without obtaining shareholder approval. Shareholders will be notified of any changes in Sub-Advisers. The Adviser will select Sub-Advisers based upon the Sub-Advisers skills in managing assets pursuant to particular investment styles and strategies. The Adviser will monitor existing Sub-Advisers based on their investment styles, strategies, and results in managing assets for specific asset classes. Each Sub-Adviser will have discretion to select portfolio securities for its portion of the Fund, but must select those securities according to the Funds investment objectives and restrictions.]
The Adviser does not determine what investments will be purchased or sold for the Fund with respect to the portions of the Fund managed by the Sub-Advisers. Because each Sub-Adviser manages its portion of the Fund independently from the others, the same security may be held in two or more different portions of the Fund or may be acquired for one portion at a time when a Sub-Adviser of another portion deems it appropriate to dispose of the security from that other portion. Similarly, under some market conditions, one or more of the Sub-Advisers may believe that temporary, defensive investments in short-term instruments or cash are appropriate when another Sub-Adviser or Sub-Advisers believe continued exposure to the broader securities market is appropriate. [Because each Sub-Adviser directs the trading for its portion of the Fund and does not aggregate its transactions with those of the other Sub-Advisers, the Fund may incur higher brokerage costs than would be the case if a single adviser or Sub-Adviser were managing the Fund.]
37
The current Sub-Advisers to the Fund are set forth below.
Sub-Advisory Agreements with the Adviser. Each of the Sub-Advisory Agreements provides that the Sub-Adviser will manage the investment and reinvestment of such portion of the assets of the Fund as the Adviser may from time to time allocate to the Sub-Adviser in accordance with the Funds objective, policies and restrictions and any investment guidelines established by the Adviser. Each Sub-Adviser will, subject to the supervision and control of the Adviser, determine in its discretion which issuers and securities will be purchased, held, sold or exchanged by the Fund, and will place orders with and give instruction to brokers and dealers to cause the execution of such transactions. The Sub-Advisers are required to furnish at their own expense all investment facilities necessary to perform its obligations under the Sub-Advisory Agreements.
38
Generally, each Sub-Advisory Agreement may be terminated without penalty by vote of the Companys Board of Directors or by vote of a majority of the outstanding voting securities of the Fund, upon 60 days written notice, or by the Adviser immediately upon notice to the Sub-Adviser, and each such agreement terminates automatically in the event of an assignment (as defined in the 1940 Act). Each Sub-Advisory Agreement also may be terminated by a Sub-Adviser upon 30 days written notice and automatically terminates upon termination of the Advisory Agreement.
This section includes information about the Funds portfolio managers, including information about other accounts they manage, the
SA
Other Accounts. In addition to the Fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or Team
|
Type of Accounts |
Total
# of Accounts Managed |
Total Assets |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. James Dilworth |
Other Registered Investment Companies: |
0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: |
0 | $ | 0 | 0 | $ | 0 | ||||||
Other Accounts: |
0 | $ | 0 | 0 | $ | 0 | ||||||
2 Bruce MacDonald |
Other Registered Investment Companies: |
0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: |
0 | $ | 0 | 0 | $ | 0 | ||||||
Other Accounts: |
0 | $ | 0 | 0 | $ | 0 |
Compensation. The Adviser compensates the Funds portfolio managers for their management of the Fund. Each of the portfolio managers compensation consists of a cash base salary and a discretionary performance bonus paid in cash that is based on overall profitability of the Adviser and performance of the Fund, and therefore in part based on the value of the Funds net assets and other client accounts they are managing.
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with their management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby a portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, the Adviser has established policies and procedures to ensure that the purchase and sale of securities among all accounts it manages are fairly and equitably allocated.
Argonaut Management
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or Team
|
Type of Accounts |
Total
# of Accounts Managed |
Total
Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. David Gerstenhaber |
Other Registered Investment Companies: |
0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 4 | $ | 810.8mm | 4 | $ | 810.8mm | ||||||
Other Accounts: | 6 | $ | 152.7mm | 6 | $ | 152.7mm |
* |
Total assets under management for Argonaut Management were approximately $963.5 million. |
39
Compensation. Argonaut Management compensates the Funds portfolio manager for his management of the Fund. Mr. Gerstenhaber receives an annual salary from Argonaut Management and, as a partner, he shares in the profits of the business.
Conflicts of Interests.
The portfolio managers management of other accounts may give rise to potential conflicts of interest
in connection with his management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of
interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and
possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, Argonaut Management has established policies and procedures to ensure that
Blue Lion
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or
|
Type of Accounts |
Total
# of
|
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Charles W. Griege, Jr. |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: |
1 | $ | 22mm | 1 | $ | 22mm | ||||||
Other Accounts: |
0 | $ | 0 | 0 | $ | 0 |
* |
Total assets under management for Blue Lion were approximately $26.1 million. |
Compensation. Blue Lion compensates the Funds portfolio manager for his management of the Fund. The portfolio managers compensation consists of a cash base salary and a bonus paid in cash that is based on overall profitability of the Blue Lion and performance of the Fund, and therefore in part based on the value of the Funds net assets and other client accounts they are managing.
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with his management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, Blue Lion has established policies and procedures to ensure that the purchase and sale of securities among all accounts it manages are fairly and equitably allocated.
Courage Capital
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
40
Name of Portfolio Manager or
|
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Richard C. Patton |
Other Registered Investment Companies: |
0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: |
6 | $ | 556mm | 6 | $ | 455mm | ||||||
Other Accounts: |
2 | $ | 20mm | 0 | $ | 0 |
* |
Total assets under management for Courage Capital were approximately $588 million. |
Compensation. Courage Capital compensates the Funds portfolio manager for his management of the Fund. Courage Capital pays the portfolio manager out of its total revenues and other resources including the advisory fee earned with respect to the Fund. The portfolio managers compensation includes a fixed base salary and incentive components. It is expected that the portfolio manager will receive an incentive payment based on the revenues earned by Courage Capital from the Fund and from any other client accounts. It is expected that the incentive compensation component with respect to all portfolios managed by the portfolio manager can, and typically will, represent a significant portion of the portfolio managers overall compensation and can vary significantly from year to year.
Conflicts of Interests.
The portfolio manager manages multiple portfolios for multiple clients. These accounts presently include
private pooled investment vehicles and other separately managed accounts. The portfolio manager may have responsibility for managing multiple accounts with a common investment strategy or several investment strategies. Accordingly, client portfolios
may have investment objectives, strategies, time horizons, tax considerations, and risk profiles that differ from those of the Fund. The portfolio manager makes investment decisions for the Fund based on its investment objective, policies,
practices, cash flows, and other relevant investment considerations. Consequently, the portfolio manager may purchase or sell securities for one client portfolio and not another client portfolio, and the performance of securities purchased for one
portfolio may vary from the performance of securities purchased for other portfolios. The portfolio manager may place transactions on behalf of other clients that are directly or indirectly contrary to investment decisions made on behalf of the
Fund, which has the potential to adversely impact the Fund, depending on market conditions. In addition, some of these other client account structures may have fee structures, such as performance based fees, that differ (and may be higher than) the
Fund. Accordingly conflicts of interest may arise when Courage Capital has a particular financial incentive, such as a performance-based fee relating an account. In recognition of the fact that conflicts of interest are inherent in the investment
management business, Courage Capital has adopted policies and procedures reasonably designed to identify and manage the effects of actual or potential conflicts of interest in the areas of employee personal trading, managing multiple accounts for
CRM
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010, except as noted.
Name of Portfolio Manager or
|
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Jay Abramson |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 7 | $ | 4590mm | 0 | $ | 0 | ||||||
Other Accounts: | 3 | $ | 72.6mm | 3 | $ | 72.6mm |
* |
Total assets under management for CRM were approximately $11.18 billion as of June 30, 2010. |
Compensation. CRM compensates its employees with competitive salaries and yearly bonuses based on personal and firm performance. All employees are offered a standard 401(k) plan and receive annual discretionary contribution from the firm. All investments are voluntary; however, every employee has the option to invest in some of the CRM mutual funds through the plan.
The investment professionals at CRM are compensated with a bonus based on an internal scorecard. This scorecard evaluates the individuals investment performance versus their industry peers: a combination of specific stock selection, sector team
41
performance, portfolio performance, firm performance and good corporate citizenry. An analysts scorecard is heavily weighted towards their specific securities in the various strategies, as well as the performance of the sector team(s) they contribute to. By compensating our analysts for the performance of the overall sector team(s), this aligns the interest of the entire team in selecting and managing the stock positions as a team. The portfolio managers scorecard is more heavily weighted towards their overall strategys performance versus both the benchmark and peers. Another significant weighting for a portfolio manager is the performance of the sector teams they lead.
Investment professionals at CRM also participate in a profit sharing plan with the firm. This allows the individuals to participate in the net profits of the firm, with benefits being paid on a two year deferred program. In addition, there are currently 19 active employees with ownership at CRM. The majority of these individuals are investment research professionals.
In regards to compensation, CRMs management regularly reviews our structure with the assistance of McLagan in Stamford, Connecticut. We will continue to monitor industry best practices and while we do not anticipate any imminent changes, it is something that is reviewed consistently.
Conflicts of Interests. CRM recognizes that conflicts of interest are an inherent part of the investment advisory business and has implemented policies and procedures in order to manage such conflicts and ensure that all clients of the firm (as well as all investors of the firms products) are treated in a fair and equitable fashion. CRM has adopted the following specific policies to address these conflicts of interest. CRM also advises its employees that they also must be alert for conflicts of interest that are not covered by these policies and handle them according to the fundamental notion of putting CRMs clients interests ahead of its own in all matters.
Code of Ethics : Among other things, this code governs employees personal investing activity and is designed to help employees comply with legal restrictions on personal investments while honoring their duties to CRM clients.
Trade Allocation Policy : This policy governs how securities trades and investment opportunities are allocated among different client accounts. It is designed to assure that all clients are treated fairly.
Policy Statement on Insider Trading : This policy aids employees in the handling of any material, non-public information of which they may become aware.
Soft Dollar Policy : This policy addresses CRMs policies in this area and is intended so that CRMs use of soft dollars is done in compliance with applicable law and in the best interests of our clients and for the benefit of our clients.
EverKey
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or
|
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Jeffrey Everett |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 2 | $ | 170 | 2 | $ | 170 | ||||||
Other Accounts: | 2 | $ | 0 | 2 | $ | 0 |
* |
Total assets under management for EverKey were approximately $280 million. |
Compensation. EverKey compensates the Funds portfolio manager for his management of the Fund. Management and performance fess received by EverKey comprise one unified compensation pool. The portfolio managers compensation is comprised of an annual base salary and additional annual performance-based compensation if available.
42
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with his management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, EverKey has established policies and procedures designed to address such conflicts, including, among others, policies and procedures relating to allocation of investment opportunities, soft dollars and aggregation of trades.
LT
Other Accounts. In addition to the Fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or Team Member |
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Lauren C. Templeton |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 1 | $ | 54.4mm | 1 | $ | 54.4mm | ||||||
Other Accounts: | 8 | $ | 55.6mm | 8 | $ | 55.6mm | ||||||
2 Scott Phillips |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 1 | $ | 54.4mm | 1 | $ | 54.4mm | ||||||
Other Accounts: | 8 | $ | 55.6mm | 8 | $ | 55.6mm |
* |
Total assets under management for LT were approximately $110 million. |
Compensation. LT compensates the Funds portfolio managers for their management of the Fund. As members of the firm, each portfolio manager shares in the profits of the business and is not compensated with any fixed compensation, such as a salary.
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with their management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby a portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, LT has established policies and procedures designed to address such conflicts, including, among others, policies and procedures relating to allocation of investment opportunities, soft dollars and aggregation of trades.
Moab
Other Accounts. In addition to the Fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or Team Member |
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||
1. Michael M. Rothenberg |
Other Registered Investment Companies: | 0 | $0 | 0 | $0 | |||||
Other Pooled Investment Vehicles: | 1 | $4mm | 1 | $4mm | ||||||
Other Accounts: | 1 | $12mm | 1 | $12mm | ||||||
2 David A. Sackler |
Other Registered Investment Companies: | 0 | $0 | 0 | $0 | |||||
Other Pooled Investment Vehicles: | 1 | $4mm | 1 | $4mm | ||||||
Other Accounts: | 1 | $12mm | 1 | $12mm |
* |
Total assets under management for Moab were approximately $190 million. |
43
Compensation. Moab compensates the Funds portfolio managers for their management of the Fund. Each of the portfolio managers compensation consists of a cash base salary and a discretionary performance bonus paid in cash that is based on overall profitability of Moab and performance of the Fund, and therefore in part based on the value of the Funds net assets and other client accounts they are managing. Each of the portfolio managers own equity in Moab and share in the profits of the firm.
Conflicts of Interests.
The portfolio managers management of other accounts may give rise to potential conflicts of interest
in connection with their management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of
interest may arise as a result of the identical investment objectives, whereby a portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and
possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, Moab has established policies and procedures to ensure that the purchase
Sandler Capital
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or Team
|
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Andrew Sandler |
Other Registered Investment Companies: |
0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: |
4 | $ | 430mm | 4 | $ | 360mm | ||||||
Other Accounts: |
1 | $ | 30mm | 1 | $ | 30mm |
* |
Total assets under management for Sandler Capital were approximately $950 million. |
Compensation. Sandler Capital compensates the Funds portfolio manager for his management of the Fund. As owner of the firm, the portfolio manager shares in the profits of the business and is not compensated with any fixed compensation, such as a salary.
Conflicts of Interests.
The portfolio manager is currently responsible for managing other accounts that employ investment
strategies substantially identical to those of the Fund. SRES has established policies and procedures designed to address any conflicts, including, among others, policies and procedures relating to allocation of investment opportunities, soft
SRES
Other Accounts. In addition to the Fund, the portfolio manager is responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or
|
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of Accounts
Managed that Advisory Fee Based on Performance |
Total Assets that
Advisory Fee Based on Performance |
|||||||
1. Matthew C. Gilman |
Other Registered Investment Companies: |
0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: |
7 | $ | 276.6mm | 7 | $ | 276.6mm | ||||||
Other Accounts: |
0 | $ | 0 | 0 | $ | 0 |
* |
Total assets under management for SRES were approximately $276.6 million. |
Compensation. SRES compensates the Funds portfolio manager for its management of the Fund. The portfolio managers compensation consists of a cash base salary, a discretionary performance bonus paid in cash that is based on overall profitability of SRES and performance of the Fund, an allocation as a general partner in the firm and profit participation in the firm.
44
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with his management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby the portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, SRES has established policies and procedures designed to address such conflicts, including, among others, policies and procedures relating to allocation of investment opportunities, soft dollars and aggregation of trades.
Trellus
Other Accounts. In addition to the Fund, the portfolio managers are responsible for the day-to-day management of certain other accounts, as listed below. The information below is provided as of May 31, 2010.
Name of Portfolio Manager or Team Member |
Type of Accounts |
Total
# of Accounts Managed |
Total Assets* |
# of
Accounts Managed that Advisory Fee Based on Performance |
Total Assets
that Advisory Fee Based on Performance |
|||||||
1. Adam Usdan |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 5 | $ | 392mm | 5 | $ | 392mm | ||||||
Other Accounts: | 2 | $ | 24mm | 2 | $ | 24mm | ||||||
2 John Alderman |
Other Registered Investment Companies: | 0 | $ | 0 | 0 | $ | 0 | |||||
Other Pooled Investment Vehicles: | 5 | $ | 392mm | 5 | $ | 392mm | ||||||
Other Accounts: | 2 | $ | 24mm | 2 | $ | 24mm |
* |
Total assets under management for Trellus were approximately $418 million. |
Compensation. Trellus compensates the Funds portfolio managers for their management of the Fund. As partners, each portfolio manager shares in the profits of the business and is not compensated with any fixed compensation, such as a salary.
Conflicts of Interests. The portfolio managers management of other accounts may give rise to potential conflicts of interest in connection with their management of the Funds investments, on the one hand, and the investments of the other accounts, on the other. The other accounts may have the same investment objective as the Fund. Therefore, a potential conflict of interest may arise as a result of the identical investment objectives, whereby a portfolio manager could favor one account over another. Another potential conflict could include the portfolio managers knowledge about the size, timing and possible market impact of Fund trades, whereby a portfolio manager could use this information to the advantage of other accounts and to the disadvantage of the Fund. However, Trellus has established policies and procedures designed to address such conflicts, including, among others, policies and procedures relating to allocation of investment opportunities, soft dollars and aggregation of trades.
Fund Shares Owned by Portfolio Managers. The Fund is required to show the dollar amount range of the portfolio managers beneficial ownership of shares of the Fund as of the end of the most recently completed fiscal year. Dollar amount ranges disclosed are established by the SEC. Beneficial ownership is determined in accordance with Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended (the 1934 Act). The Fund was not in operation prior to the date of this SAI. Consequently, the portfolio managers owned no securities issued by the Fund.
45
ADMINISTRATION AND ACCOUNTING AGREEMENT
BNY serves as administrator to the Fund pursuant to administration and accounting services agreements dated [ , 2010] with respect to the Fund (the Administration Agreements). BNY has agreed to furnish to the Fund statistical and research data, clerical, accounting and bookkeeping services, and certain other services required by the Fund. In addition, BNY has agreed to prepare and file various reports with the appropriate regulatory agencies and prepare materials required by the SEC or any state securities commission having jurisdiction over the Fund. The Administration Agreement provides that BNY shall be obligated to exercise care and diligence in the performance of its duties, to act in good faith and to use its best efforts, within reasonable limits, in performing services thereunder. BNY shall be responsible for failure to perform its duties under the Administration Agreement arising out of its willful misfeasance, bad faith, gross negligence or reckless disregard. For its services to the Fund, BNY is entitled to receive a fee calculated at an annual rate of [ ]:
The minimum monthly fee will be [$ ] per month, exclusive of Rule 38a-1 base compliance support services fees, costs of obtaining independent security market quotes, data repository and analytics suite access fees and out-of-pocket expenses.
The Administration Agreement provides that BNY shall not be liable for any error of judgment or mistake of law or any loss suffered by the Company or the Fund in connection with the performance of the agreement, except a loss resulting from willful misfeasance, gross negligence or reckless disregard by it of its duties and obligations thereunder.
On June 1, 2003, the Company entered into a regulatory administration services agreement with BNY. Under this agreement, BNY has agreed to provide regulatory administration services to the Company. These services include the preparation and coordination of the Companys annual post-effective amendment filing and supplements to the Funds registration statement, the preparation and assembly of board meeting materials, and certain other services necessary to the Companys regulatory administration. BNY receives an annual fee based on the average daily net assets of the portfolios of the Company.
PFPC Trust Company (PFPC Trust) 8800 Tinicum Boulevard, Suite 200, Philadelphia, Pennsylvania 19153, is custodian of the Funds assets pursuant to a Custodian Agreement dated August 16, 1988, as amended. Under the Custodian Agreement, PFPC Trust: (a) maintains a separate account or accounts in the name of the Fund; (b) holds and transfers portfolio securities on account of the Fund; (c) accepts receipts and makes disbursements of money on behalf of the Fund; (d) collects and receives all income and other payments and distributions on account of the Funds portfolio securities; and (e) makes periodic reports to the Companys Board of Directors concerning the Funds operations. PFPC Trust is authorized to select one or more banks or trust companies to serve as sub-custodian on behalf of the Fund, provided that PFPC Trust remains responsible for the performance of all of its duties under the Custodian Agreement and holds the Fund harmless from the acts and omissions of any sub-custodian. For its services to the Fund under the Custodian Agreement, PFPC Trust receives a fee of % of average daily gross assets of the Fund calculated daily and payable monthly, exclusive of transaction charges and out-of-pocket expenses, which are also charged to the Fund.
BNY, 301 Bellevue Parkway, Wilmington, Delaware 19809, an affiliate of BNY Distributors, serves as the transfer and dividend disbursing agent for the Fund pursuant to a transfer agency agreement dated November 5, 1991, as supplemented (the Transfer Agency Agreement), under which BNY: (a) issues and redeems shares of the Fund; (b) addresses and mails all communications by the Fund to record owners of the shares, including reports to shareholders, dividend and distribution notices and proxy materials for its meetings of shareholders; (c) maintains shareholder accounts and, if requested, sub-accounts; and (d) makes periodic reports to the Companys Board of Directors concerning the operations of the Fund. BNY may, on 30 days notice to the Company, assign its duties as transfer and dividend disbursing agent to any affiliate. For its services to the Fund under the Transfer Agency Agreement, BNY receives a fee at the annual rate of $20.00 per direct account, $8.00 per network level 3 account and $0.30 per inactive account in the Fund, with a minimum monthly fee of $4,166 per class payable monthly on a pro rata basis, exclusive of out-of-pocket expenses, and also receives reimbursement of its out-of-pocket expenses.
46
BNY also provides services relating to the implementation of the Companys Anti-Money Laundering Program. The Company pays an annual fee, ranging from $3,000 - $50,000, based on the number of open accounts in each portfolio of the Company. In addition, BNY provides services relating to the implementation of the Funds Customer Identification Program, including verification of required customer information and the maintenance of records with respect to such verification. [The Fund will pay BNY $ per customer verification and $ per month per record result maintained.]
DISTRIBUTION AGREEMENT AND PLAN OF DISTRIBUTION
BNY Distributors, whose principal business address is 760 Moore Road, King of Prussia, Pennsylvania 19406, serves as the underwriter to the Fund pursuant to the terms of a distribution agreement, dated as of January 2, 2001, as supplemented (the Distribution Agreement). Pursuant to the Distribution Agreement and the related Plan of Distribution for R Shares (the Plan), which was adopted by the Company in the manner prescribed by Rule 12b-1 under the 1940 Act, BNY Distributors will use appropriate efforts to solicit orders for the sale of the Funds shares. Payments to BNY Distributors under the Plan are to compensate it for distribution assistance and expenses assumed and activities intended to result in the sale of R Shares including advertising, printing and mailing of prospectuses to others than current shareholders, compensation to underwriters, compensation to broker-dealers, compensation to sales personnel, and interest, carrying or other financing changes. The Distributor engages in a continuous offering of shares of the Fund. As compensation for its distribution services, BNY Distributors receives, pursuant to the terms of the Distribution Agreement, a distribution fee under the Plan, to be calculated daily and paid monthly by the R Shares of the Fund, at the annual rate set forth in the R Shares Prospectus. The Adviser pays an annual fee to BNY Distributors as compensation for underwriting services rendered to the Fund pursuant to the Distribution Agreement.
PAYMENTS TO FINANCIAL INTERMEDIARIES
The Adviser and/or its affiliates, at their discretion, may make payments from their own resources and not from Fund assets to affiliated or unaffiliated brokers, dealers, banks (including bank trust departments), trust companies, registered investment advisers, financial planners, retirement plan administrators, insurance companies, and any other institution having a service, administration, or any similar arrangement with the Fund, its service providers or their respective affiliates, as incentives to help market and promote the Fund and/or in recognition of their distribution, marketing, administrative services, and/or processing support.
These additional payments may be made to financial intermediaries that sell Fund shares or provide services to the Fund, the Distributor or shareholders of the Fund through the financial intermediarys retail distribution channel and/or fund supermarkets. Payments may also be made through the financial intermediarys retirement, qualified tuition, fee-based advisory, wrap fee bank trust, or insurance (e.g., individual or group annuity) programs. These payments may include, but are not limited to, placing the Fund in a financial intermediarys retail distribution channel or on a preferred or recommended fund list; providing business or shareholder financial planning assistance; educating financial intermediary personnel about the Fund; providing access to sales and management representatives of the financial intermediary; promoting sales of Fund shares; providing marketing and educational support; maintaining share balances and/or for sub-accounting, administrative or shareholder transaction processing services. A financial intermediary may perform the services itself or may arrange with a third party to perform the services.
The Adviser and/or its affiliates may also make payments from their own resources to financial intermediaries for costs associated with the purchase of products or services used in connection with sales and marketing, participation in and/or presentation at conferences or seminars, sales or training programs, client and investor entertainment and other sponsored events. The costs and expenses associated with these efforts may include travel, lodging, sponsorship at educational seminars and conferences, entertainment and meals to the extent permitted by law.
Revenue sharing payments may be negotiated based on a variety of factors, including the level of sales, the amount of Fund assets attributable to investments in the Fund by financial intermediaries customers, a flat fee or other measures as determined from time to time by the Adviser and/or its affiliates. A significant purpose of these payments is to increase the sales of Fund shares, which in turn may benefit the Adviser through increased fees as Fund assets grow.
47
Subject to policies established by the Board of Directors and applicable rules, the Adviser and Sub-Advisers are responsible for the execution of portfolio transactions and the allocation of brokerage transactions for the Fund. In executing portfolio transactions, the Adviser and Sub-Advisers seek to obtain the best price and most favorable execution for the Fund, taking into account such factors as the price (including the applicable brokerage commission or dealer spread), size of the order, difficulty of execution and operational facilities of the firm involved. While the Adviser and Sub-Advisers generally seek reasonably competitive commission rates, payment of the lowest commission or spread is not necessarily consistent with obtaining the best price and execution in particular transactions.
Brokerage Transactions.
Generally, equity securities, both listed and over-the-counter, are bought and sold through brokerage transactions for which commissions are payable. Purchases from underwriters will include the underwriting commission or concession, and purchases from dealers serving as market makers will include a dealers mark-up or reflect a dealers mark-down. Money market securities and other debt securities are usually bought and sold directly from the issuer or an underwriter or market maker for the securities. Generally, the Fund will not pay brokerage commissions for such purchases. When a debt security is bought from an underwriter, the purchase price will usually include an underwriting commission or concession. The purchase price for securities bought from dealers serving as market makers will similarly include the dealers mark up or reflect a dealers mark down. When the Fund executes transactions in the over-the-counter market, it will generally deal with primary market makers unless prices that are more favorable are otherwise obtainable.
In addition, the Adviser and Sub-Advisers may place a combined order for two or more accounts they manage, including the Fund, engaged in the purchase or sale of the same security if, in its judgment, joint execution is in the best interest of each participant and will result in best price and execution. Transactions involving commingled orders are allocated in a manner deemed equitable to each account or fund. Although it is recognized that, in some cases, the joint execution of orders could adversely affect the price or volume of the security that a particular account or the Fund may obtain, it is the opinion of the Adviser, the Sub-Advisers and the Companys Board of Directors that the advantages of combined orders outweigh the possible disadvantages of separate transactions. Nonetheless, the Adviser and Sub-Advisers believe that the ability of the Fund to participate in higher volume transactions will generally be beneficial to the Fund.
Brokerage Selection.
The Company does not expect to use one particular broker or dealer, and when one or more brokers is believed capable of providing the best combination of price and execution, the Funds Adviser and Sub-Advisers may select a broker based upon brokerage or research services provided to the Adviser or applicable Sub-Adviser. The Adviser and Sub-Advisers may pay a higher commission than otherwise obtainable from other brokers in return for such services only if a good faith determination is made that the commission is reasonable in relation to the services provided.
Section 28(e) of the 1934 Act permits an investment adviser or sub-adviser, under certain circumstances, to cause a fund to pay a broker or dealer a commission for effecting a transaction in excess of the amount of commission another broker or dealer would have charged for effecting the transaction in recognition of the value of brokerage and research services provided by the broker or dealer. In addition to agency transactions, certain Sub-Advisers may receive brokerage and research services in connection with certain riskless principal transactions, in accordance with applicable SEC guidance. Brokerage and research services include: (1) furnishing advice as to the value of securities, the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; (2) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and (3) effecting securities transactions and performing functions incidental thereto (such as clearance, settlement, and custody). In the case of research services, the applicable Sub-Advisers believe that access to independent investment research is beneficial to their investment decision-making processes and, therefore, to the Fund.
To the extent research services may be a factor in selecting brokers, such services may be in written form or through direct contact with individuals and may include information as to particular companies and securities as well as market, economic, or
48
institutional areas and information which assists in the valuation and pricing of investments. Examples of research-oriented services for which the applicable Sub-Advisers might utilize Fund commissions include research reports and other information on the economy, industries, sectors, groups of securities, individual companies, statistical information, political developments, technical market action, pricing and appraisal services, credit analysis, risk measurement analysis, performance and other analysis. The Sub-Advisers may use research services furnished by brokers in servicing all client accounts and not all services may necessarily be used in connection with the account that paid commissions to the broker providing such services. Information so received by the Sub-Advisers will be in addition to and not in lieu of the services required to be performed by the Sub-Adviser under its Sub-Advisory Agreement. Any advisory or other fees paid to the Sub-Advisers are not reduced as a result of the receipt of research services.
In some cases a Sub-Adviser may receive a service from a broker that has both a research and a non-research use. When this occurs, the applicable Sub-Adviser makes a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions, while the applicable Sub-Adviser will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the Sub-Adviser faces a potential conflict of interest, but each applicable Sub-Adviser believes that its allocation procedures are reasonably designed to ensure that it appropriately allocates the anticipated use of such services to their research and non-research uses.
From time to time, the Fund may purchase new issues of securities for clients in a fixed price offering. In these situations, the seller may be a member of the selling group that will, in addition to selling securities, provide the Adviser and Sub-Advisers with research services. The Financial Industry Regulatory Authority (FINRA) has adopted rules expressly permitting these types of arrangements under certain circumstances. Generally, the seller will provide research credits in these situations at a rate that is higher than that which is available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e).
PURCHASE AND REDEMPTION INFORMATION
You may purchase shares through an account maintained by your brokerage firm and you may also purchase shares directly by mail or wire. The Company reserves the right, if conditions exist which make cash payments undesirable, to honor any request for redemption or repurchase of a Funds shares by making payment in whole or in part in securities chosen by the Company and valued in the same way as they would be valued for purposes of computing the Funds NAV. If payment is made in securities, a shareholder may incur transaction costs in converting these securities into cash. A shareholder will also bear any market risk or tax consequences as a result of a payment in securities. The Company has elected, however, to be governed by Rule 18f-1 under the 1940 Act so that the Fund is obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1% of its NAV during any 90-day period for any one shareholder of the Fund. A shareholder will bear the risk of a decline in market value and any tax consequences associated with a redemption in securities.
Under the 1940 Act, the Company may suspend the right to redemption or postpone the date of payment upon redemption for any period during which the New York Stock Exchange, Inc. (the NYSE) is closed (other than customary weekend and holiday closings), or during which the SEC restricts trading on the NYSE or determines an emergency exists as a result of which disposal or valuation of portfolio securities is not reasonably practicable, or for such other periods as the SEC may permit. (The Company may also suspend or postpone the recordation of the transfer of its shares upon the occurrence of any of the foregoing conditions).
Shares of the Company are subject to redemption by the Company, at the redemption price of such shares as in effect from time to time, including, without limitation: (1) to reimburse a Fund for any loss sustained by reason of the failure of a shareholder to make full payment for shares purchased by the shareholder or to collect any charge relating to a transaction effected for the benefit of a shareholder as provided in the Prospectuses from time to time; (2) if such redemption is, in the opinion of the Companys Board of Directors, desirable in order to prevent the Company or any Fund from being deemed a personal holding company within the meaning of the Code; (3) or if the net income with respect to any particular class of common stock should be negative or it should otherwise be appropriate to carry out the Companys responsibilities under the 1940 Act.
49
The Fund has the right to redeem your shares at current NAV at any time and without prior notice if, and to the extent that, such redemption is necessary to reimburse the Fund for any loss sustained by reason of your failure to make full payment for shares of the Fund you previously purchased or subscribed for.
Other Purchase Information
If shares of the Fund are held in a street name account with an Authorized Dealer, all recordkeeping, transaction processing and payments of distributions relating to the beneficial owners account will be performed by the Authorized Dealer, and not by the Fund and its Transfer Agent. Since the Fund will have no record of the beneficial owners transactions, a beneficial owner should contact the Authorized Dealer to purchase, redeem or exchange shares, to make changes in or give instructions concerning the account or to obtain information about the account. The transfer of shares in a street name account to an account with another dealer or to an account directly with the Fund involves special procedures and will require the beneficial owner to obtain historical purchase information about the shares in the account from the Authorized Dealer.
TELEPHONE TRANSACTION PROCEDURES
The Companys telephone transaction procedures include the following measures: (1) requiring the appropriate telephone transaction privilege forms; (2) requiring the caller to provide the names of the account owners, the account social security number and name of the Fund, all of which must match the Companys records; (3) requiring the Companys service representative to complete a telephone transaction form, listing all of the above caller identification information; (4) permitting exchanges (if applicable) only if the two account registrations are identical; (5) requiring that redemption proceeds be sent only by check to the account owners of record at the address of record, or by wire only to the owners of record at the bank account of record; (6) sending a written confirmation for each telephone transaction to the owners of record at the address of record within five (5) business days of the call; and (7) maintaining tapes of telephone transactions for six months, if the Company elects to record shareholder telephone transactions. For accounts held of record by broker-dealers (other than BNY Distributors), financial institutions, securities dealers, financial planners and other industry professionals, additional documentation or information regarding the scope of a callers authority is required. Finally, for telephone transactions in accounts held jointly, additional information regarding other account holders is required. Telephone transactions will not be permitted in connection with IRA or other retirement plan accounts or by
Subject to the approval of the Companys Board of Directors, the Fund may employ outside organizations, which may use a matrix or formula method that takes into consideration market indices, matrices, yield curves and other specific adjustments in determining the approximate market value of portfolio investments. This may result in the securities being valued at a price that differs from the price that would have been determined had the matrix or formula method not been used. All cash, receivables, and current payables are carried on the Funds books at their face value. Other assets, if any, are valued at fair value as determined in good faith by the Funds Valuation Committee under the direction of the Companys Board of Directors.
General
The following summarizes certain additional tax considerations generally affecting the Fund and its shareholders that are not described in the Prospectuses. No attempt is made to present a detailed explanation of the tax treatment of the Fund or its shareholders, and the discussions here and in the Prospectuses are not intended as a substitute for careful tax planning. Potential investors should consult their tax advisers with specific reference to their own tax situations.
The discussions of the federal tax consequences in the Prospectuses and this SAI are based on the Code and the regulations issued under it, and court decisions and administrative interpretations, as in effect on the date of this SAI. Future legislative or administrative changes or court decisions may significantly change the statements included herein, and such changes may be retroactive.
50
The Fund qualified during its last taxable year and intends to continue to qualify as a regulated investment company under Subchapter M of Subtitle A, Chapter 1, of the Code. As such, the Fund generally will be exempt from federal income tax on its net investment income and realized capital gains that it distributes to shareholders. To qualify for treatment as a regulated investment company, it must meet three important tests each year.
First, the Fund must derive with respect to each taxable year at least 90% of its 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, other income derived with respect to the Funds business of investing in stock, securities or currencies, or net income derived from interests in qualified publicly traded partnerships.
Second, generally, at the close of each quarter of the Funds taxable year, at least 50% of the value of the Funds assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers as to which the Fund has not invested more than 5% of the value of its total assets in securities of the issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of the issuer, and no more than 25% of the value of the Funds total assets may be invested in the securities of (1) any one issuer (other than U.S. government securities and securities of other regulated investment companies), (2) two or more issuers that the Fund controls and which are engaged in the same or similar trades or businesses or (3) one or more qualified publicly traded partnerships.
Third, the Fund must distribute an amount equal to at least the sum of 90% of its investment company taxable income (net investment income and the excess of net short-term capital gain over net long-term capital loss) and 90% of its tax-exempt income, if any, for the year.
The Fund intends to comply with these requirements. If the Fund were to fail to make sufficient distributions, it could be liable for corporate income tax and for excise tax in respect of the shortfall or, if the shortfall is large enough, the Fund could be disqualified as a regulated investment company. If for any taxable year the Fund were not to qualify as a regulated investment company, all its taxable income would be subject to tax at regular corporate rates without any deduction for distributions to shareholders. In that event, shareholders would recognize dividend income on distributions to the extent of the Funds current and accumulated earnings and profits, and corporate shareholders could be eligible for the dividends-received deduction.
The Code imposes a nondeductible 4% excise tax on regulated investment companies that fail to distribute each year an amount equal to specified percentages of their ordinary taxable income and capital gain net income (excess of capital gains over capital losses). The Fund intends to make sufficient distributions or deemed distributions each year to avoid liability for this excise tax.
State and Local Taxes
Although the Fund expects to qualify as a regulated investment company and to be relieved of all or substantially all federal income taxes, depending upon the extent of its activities in states and localities in which its offices are maintained, in which its agents or independent contractors are located or in which it is otherwise deemed to be conducting business, the Fund may be subject to the tax laws of such states or localities.
Taxation of Certain Investments
The tax principles applicable to transactions in financial instruments, such as futures contracts and options, that may be engaged in by the Fund, and investments in passive foreign investment companies (PFICs), are complex and, in some cases, uncertain. Such transactions and investments may cause the Fund to recognize taxable income prior to the receipt of cash, thereby requiring the Fund to liquidate other positions, or to borrow money, so as to make sufficient distributions to shareholders to avoid corporate-level tax. Moreover, some or all of the taxable income recognized may be ordinary income or short-term capital gain, so that the distributions may be taxable to shareholders as ordinary income.
In addition, in the case of any shares of a PFIC in which the Fund invests, the Fund may be liable for corporate-level tax on any ultimate gain or distributions on the shares if the Fund fails to make an election to recognize income annually during the period of its ownership of the shares.
51
ADDITIONAL INFORMATION CONCERNING COMPANY SHARES
[The Company has authorized capital of 100 billion shares of common stock at a par value of $0.001 per share. Currently, 78.973 billion shares have been classified into 120 classes, however, the Company only has 28 active share classes that have begun investment operations. Under the Companys charter, the Board of Directors has the power to classify and reclassify any unissued shares of common stock from time to time.]
Each share that represents an interest in the Fund has an equal proportionate interest in the assets belonging to such Fund with each other share that represents an interest in such Fund, even where a share has a different class designation than another share representing an interest in that Fund. Shares of the Company do not have preemptive or conversion rights. When issued for payment as described in the Prospectuses, shares of the Company will be fully paid and non-assessable.
The Company does not currently intend to hold annual meetings of shareholders except as required by the 1940 Act or other applicable law. The Companys amended By-Laws provide that shareholders owning at least ten percent of the outstanding shares of all classes of Common Stock of the Company have the right to call for a meeting of shareholders to consider the removal of one or more directors. To the extent required by law, the Company will assist in shareholder communication in such matters.
Holders of shares of each class of the Company will vote in the aggregate and not by class on all matters, except where otherwise required by law. Further, shareholders of the Company will vote in the aggregate and not by portfolio except as otherwise required by law or when the Board of Directors determines that the matter to be voted upon affects only the interests of the shareholders of a particular portfolio or class of shares. Rule 18f-2 under the 1940 Act provides that any matter required to be submitted by the provisions of such Act or applicable state law, or otherwise, to the holders of the outstanding voting securities of an investment company such as the Company shall not be deemed to have been effectively acted upon unless approved by the holders of a majority of the outstanding voting securities of each portfolio affected by the matter. Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a matter unless it is clear that the interests of each portfolio in the matter are identical or that the matter does not affect any interest of the portfolio. Under Rule 18f-2 the approval of an investment advisory agreement or distribution agreement or any change in a fundamental investment objective or fundamental investment policy would be effectively acted upon with respect to a portfolio only if approved by the holders of a majority of the outstanding voting securities of such portfolio. However, the Rule also provides that the ratification of the selection of independent public accountants and the election of directors are not subject to the separate voting requirements and may be effectively acted upon by shareholders of an investment company voting without regard to a portfolio. Shareholders of the Company are entitled to one vote for each full share held (irrespective of class or portfolio) and fractional votes for fractional shares held. Voting rights are not cumulative and, accordingly, the holders of more than 50% of the aggregate shares of common stock of the Company may elect all of the Directors.
Notwithstanding any provision of Maryland law requiring a greater vote of shares of the Companys common stock (or of any class voting as a class) in connection with any corporate action, unless otherwise provided by law (for example by Rule 18f-2 discussed above), or by the Companys Articles of Incorporation and By-Laws, the Company may take or authorize such action upon the favorable vote of the holders of more than 50% of all of the outstanding shares of Common Stock voting without regard to class (or portfolio).
Shareholder Approvals. As used in this SAI and in the Prospectuses, shareholder approval and a majority of the outstanding shares of the Fund or a particular class of shares of the Fund means, with respect to the approval of the Advisory Agreement, Sub-Advisory Agreements, Distribution Plan or a change in the Funds investment objective or a fundamental investment limitation, the lesser of (1) 67% of the shares of the Fund or share class represented at a meeting at which the holders of more than 50% of the outstanding shares of the Fund or share class are present in person or by proxy, or (2) more than 50% of the outstanding shares of the Fund or share class.
52
Counsel
The law firm of Drinker Biddle & Reath LLP, One Logan Square, Ste. 2000, Philadelphia, Pennsylvania 19103-6996, serves as independent counsel to the Company and the Disinterested Directors.
Independent Registered Public Accounting Firm
, serves as the Funds independent registered public accounting firm.
53
DESCRIPTION OF SECURITIES RATINGS
Short-Term Credit Ratings
A Standard & Poors short-term issue credit rating is a current opinion of the creditworthiness of an obligor with respect to a specific financial obligation having an original maturity of no more than 365 days. The following summarizes the rating categories used by Standard & Poors for short-term issues:
A-1 Obligations are rated in the highest category and indicate that the obligors capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligors capacity to meet its financial commitment on these obligations is extremely strong.
A-2 The obligors capacity to meet its financial commitment on the obligation is satisfactory. Obligations are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in the highest rating category.
A-3 Obligor has adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B An obligation is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitment on the obligation; however, it faces major ongoing uncertainties which could lead to the obligors inadequate capacity to meet its financial commitment on the obligation. Ratings of B1, B-2 and B-3 may be assigned to indicate finer distinctions within the B category.
B-1 A short-term obligation rated B-1 is regarded as having significant speculative characteristics, but the obligor has a relatively stronger capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
B-2 A short-term obligation rated B-2 is regarded as having significant speculative characteristics, and the obligor has an average speculative-grade capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
B-3 A short-term obligation rated B-3 is regarded as having significant speculative characteristics, and the obligor has a relatively weaker capacity to meet its financial commitments over the short-term compared to other speculative-grade obligors.
A-1
C Obligations are currently vulnerable to nonpayment and are dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
R An obligor rated R is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.
SD and D an obligor rated SD (selective default) or D has failed to pay one or more of its financial obligations (rated or unrated) when it came due. A D rating is assigned when Standard & Poors believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An SD rating is assigned when Standard & Poors believes that the obligor has selectively defaulted on a specific issue or class of obligations, excluding those that qualify as regulatory capital but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner.
NR An issuer designated NR is not rated.
Local Currency and Foreign Currency Risks - Country risk considerations are a standard part of Standard & Poors analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligors capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign governments own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.
Moodys Investors Service (Moodys) short-term ratings are opinions of the ability of issuers to honor short-term financial obligations. Ratings may be assigned to issuers, short-term programs or to individual short-term debt instruments. Such obligations generally have an original maturity not exceeding thirteen months, unless explicitly noted.
Moodys employs the following designations to indicate the relative repayment ability of rated issuers:
P-1 Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.
P-2 Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.
P-3 Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.
A-2
NP Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
Fitch, Inc. / Fitch Ratings Ltd. (Fitch) short-term ratings scale is based in all cases on the short-term vulnerability to default of the rated entity or security stream, and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-term ratings are assigned to obligations whose initial maturity is viewed as short-term based on market convention. Typically, this means up to 13 months for corporate, structured and sovereign obligations, and up to 36 months for obligations in U.S. public finance markets. The following summarizes the rating categories used by Fitch for short-term obligations:
F1 Securities possess the highest short-term credit quality. This designation indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added + to denote any exceptionally strong credit feature.
F2 Securities possess good short-term credit quality. This designation indicates good intrinsic capacity for timely payment of financial commitments.
F3 Securities possess fair short-term credit quality. This designation indicates that the intrinsic capacity for timely payment of financial commitments is adequate.
B Securities possess speculative short-term credit quality. This designation indicates minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C Securities possess high short-term default risk. Default is a real possibility.
RD Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations. Applicable to entity ratings only.
D Default. Indicates a broad-based default for an entity, or the default of a specific short-term obligation.
The following summarizes the ratings used by Dominion Bond Rating Service Limited (DBRS) for commercial paper and short-term debt:
R-1 (high) - Short-term debt rated R-1 (high) is of the highest credit quality, and indicates an entity possessing unquestioned ability to repay current liabilities as they fall due. Entities rated in this category normally maintain strong liquidity positions, conservative debt levels, and profitability that is both stable and above average. Companies achieving an R-1 (high) rating are normally leaders in structurally sound industry segments with proven track records, sustainable positive future results, and no substantial qualifying negative factors. Given the extremely tough definition DBRS has established for an R-1 (high), few entities are strong enough to achieve this rating.
A-3
R-1 (middle) Short-term debt rated R-1 (middle) is of superior credit quality and, in most cases, ratings in this category differ from R-1 (high) credits by only a small degree. Given the extremely tough definition DBRS has established for the R-1 (high) category, entities rated R-1 (middle) are also considered strong credits, and typically exemplify above average strength in key areas of consideration for the timely repayment of short-term liabilities.
R-1 (low) Short-term debt rated R-1 (low) is of satisfactory credit quality. The overall strength and outlook for key liquidity, debt, and profitability ratios is not normally as favorable as with higher rating categories, but these considerations are still respectable. Any qualifying negative factors that exist are considered manageable, and the entity is normally of sufficient size to have some influence in its industry.
R-2 (high) Short-term debt rated R-2 (high) is considered to be at the upper end of adequate credit quality. The ability to repay obligations as they mature remains acceptable, although the overall strength and outlook for key liquidity, debt, and profitability ratios is not as strong as credits rated in the R-1 (low) category. Relative to the latter category, other shortcomings often include areas such as stability, financial flexibility, and the relative size and market position of the entity within its industry.
R-2 (middle) Short-term debt rated R-2 (middle) is considered to be of adequate credit quality. Relative to the R-2 (high) category, entities rated R-2 (middle) typically have some combination of higher volatility, weaker debt or liquidity positions, lower future cash flow capabilities, or are negatively impacted by a weaker industry. Ratings in this category would be more vulnerable to adverse changes in financial and economic conditions.
R-2 (low) Short-term debt rated R-2 (low) is considered to be at the lower end of adequate credit quality, typically having some combination of challenges that are not acceptable for an R-2 (middle) credit. However, R-2 (low) ratings still display a level of credit strength that allows for a higher rating than the R-3 category, with this distinction often reflecting the issuers liquidity profile.
R-3 Short-term debt rated R-3 is considered to be at the lowest end of adequate credit quality, one step up from being speculative. While not yet defined as speculative, the R-3 category signifies that although repayment is still expected, the certainty of repayment could be impacted by a variety of possible adverse developments, many of which would be outside the issuers control. Entities in this area often have limited access to capital markets and may also have limitations in securing alternative sources of liquidity, particularly during periods of weak economic conditions.
R-4 Short-term debt rated R-4 is speculative. R-4 credits tend to have weak liquidity and debt ratios, and the future trend of these ratios is also unclear. Due to its speculative nature, companies with R-4 ratings would normally have very limited access to alternative sources of liquidity. Earnings and cash flow would typically be very unstable, and the level of overall profitability of the entity is also likely to be low. The industry environment may be weak, and strong negative qualifying factors are also likely to be present.
A-4
R-5 Short-term debt rated R-5 is highly speculative. There is a reasonably high level of uncertainty as to the ability of the entity to repay the obligations on a continuing basis in the future, especially in periods of economic recession or industry adversity. In some cases, short term debt rated R-5 may have challenges that if not corrected, could lead to default.
D A security rated D implies the issuer has either not met a scheduled payment or the issuer has made it clear that it will be missing such a payment in the near future. In some cases, DBRS may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is discontinued or reinstated by DBRS.
Long-Term Credit Ratings
The following summarizes the ratings used by Standard & Poors for long-term issues:
AAA An obligor rated AAA has extremely strong capacity to meet its financial commitments. AAA is the highest issuer credit rating assigned by Standard & Poors.
AA An obligor rated AA has very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree.
A An obligor rated A has strong capacity to meet its financial commitments but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
BBB An obligor rated BBB has adequate capacity to meet its financial commitments. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitments.
BB, B, CCC and CC Obligors rated BB, B, CCC and CC are regarded as having significant speculative characteristics. BB indicates the least degree of speculation and CC the highest. While such obligors will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.
BB An obligor rated BB is less vulnerable in the near term than other lower-rated obligors. However, it faces major ongoing uncertainties and exposure to adverse business, financial, or economic conditions which could lead to the obligors inadequate capacity to meet its financial commitments.
B An obligor rated B is more vulnerable than the obligors rated BB, but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligors capacity or willingness to meet its financial commitments.
A-5
CCC An obligor rated CCC is currently vulnerable, and is dependent upon favorable business, financial and economic conditions to meet its financial commitments.
CC An obligor rated CC is currently highly vulnerable.
Plus (+) or minus (-) The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.
R An obligor rated R is under regulatory supervision owing to its financial condition. During the pendency of the regulatory supervision the regulators may have the power to favor one class of obligations over others or pay some obligations and not others.
SD and D An obligor rated SD (selective default) or D has failed to pay one or more of its financial obligations (rated or unrated) when it came due. A D rating is assigned when Standard & Poors believes that the default will be a general default and that the obligor will fail to pay all or substantially all of its obligations as they come due. An SD rating is assigned when Standard & Poors believes that the obligor has selectively defaulted on a specific issue or class of obligations, excluding those that qualify as regulatory capital, but it will continue to meet its payment obligations on other issues or classes of obligations in a timely manner. A selective default includes the completion of a distressed exchange offer, whereby one or more financial obligation is either repurchased for an amount of cash or replaced by other instruments having a total value that is less than par.
NR An issuer designated NR is not rated.
Local Currency and Foreign Currency Risks - Country risk considerations are a standard part of Standard & Poors analysis for credit ratings on any issuer or issue. Currency of repayment is a key factor in this analysis. An obligors capacity to repay foreign currency obligations may be lower than its capacity to repay obligations in its local currency due to the sovereign governments own relatively lower capacity to repay external versus domestic debt. These sovereign risk considerations are incorporated in the debt ratings assigned to specific issues. Foreign currency issuer ratings are also distinguished from local currency issuer ratings to identify those instances where sovereign risks make them different for the same issuer.
The following summarizes the ratings used by Moodys for long-term debt:
Aaa Obligations rated Aaa are judged to be of the highest quality, with minimal credit risk.
Aa Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.
A Obligations rated A are considered upper-medium grade and are subject to low credit risk.
A-6
Baa Obligations rated Baa are subject to moderate credit risk. They are considered medium-grade and as such may possess certain speculative characteristics.
Ba Obligations rated Ba are judged to have speculative elements and are subject to substantial credit risk.
B Obligations rated B are considered speculative and are subject to high credit risk.
Caa Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk.
Ca Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.
C Obligations rated C are the lowest rated class of bonds and are typically in default, with little prospect for recovery of principal or interest.
Note: Moodys appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category.
The following summarizes long-term ratings used by Fitch:
AAA Securities considered to be of the highest credit quality. AAA ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA Securities considered to be of very high credit quality. AA ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A Securities considered to be of high credit quality. A ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB Securities considered to be of good credit quality. BBB ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB Securities considered to be speculative. BB ratings indicate that there is an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.
A-7
B Securities considered to be highly speculative. B ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.
CCC, CC and C A CCC rating indicates substantial credit risk, with default a real possibility. A CC rating indicates very high levels of credit risk. Default of some kind appears probable. C ratings signal exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill.
RD indicates an issuer that in Fitch ratings opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased business.
D indicates an issuer that in Fitch ratings opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.
Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a coercive debt exchange.
Imminent default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a coercive debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.
In all cases, the assignment of a default rating reflects the agencys opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuers financial obligations or local commercial practice.
Plus (+) or minus (-) may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the AAA long-term rating category or to categories below B.
A-8
The following summarizes the ratings used by DBRS for long-term debt:
AAA Long-term debt rated AAA is of the highest credit quality, with exceptionally strong protection for the timely repayment of principal and interest. Earnings are considered stable, the structure of the industry in which the entity operates is strong, and the outlook for future profitability is favorable. There are few qualifying factors present which would detract from the performance of the entity. The strength of liquidity and coverage ratios is unquestioned and the entity has established a creditable track record of superior performance. Given the extremely high standard that DBRS has set for this category, few entities are able to achieve a AAA rating.
AA Long-term debt rated AA is of superior credit quality, and protection of interest and principal is considered high. In many cases they differ from long-term debt rated AAA only to a small degree. Given the extremely restrictive definition DBRS has for the AAA category, entities rated AA are also considered to be strong credits, typically exemplifying above-average strength in key areas of consideration and unlikely to be significantly affected by reasonably foreseeable events.
A Long-term debt rated A is of satisfactory credit quality. Protection of interest and principal is still substantial, but the degree of strength is less than that of AA rated entities. While A is a respectable rating, entities in this category are considered to be more susceptible to adverse economic conditions and have greater cyclical tendencies than higher-rated securities.
BBB Long-term debt rated BBB is of adequate credit quality. Protection of interest and principal is considered acceptable, but the entity is fairly susceptible to adverse changes in financial and economic conditions, or there may be other adverse conditions present which reduce the strength of the entity and its rated securities.
BB Long-term debt rated BB is defined to be speculative and non-investment grade, where the degree of protection afforded interest and principal is uncertain, particularly during periods of economic recession. Entities in the BB range typically have limited access to capital markets and additional liquidity support. In many cases, deficiencies in critical mass, diversification, and competitive strength are additional negative considerations.
B Long-term debt rated B is highly speculative and there is a reasonably high level of uncertainty as to the ability of the entity to pay interest and principal on a continuing basis in the future, especially in periods of economic recession or industry adversity.
CCC, CC and C Long-term debt rated in any of these categories is very highly speculative and is in danger of default of interest and principal. The degree of adverse elements present is more severe than long-term debt rated B. Long-term debt rated below B often have features which, if not remedied, may lead to default. In practice, there is little difference between these three categories, with CC and C normally used for lower ranking debt of companies for which the senior debt is rated in the CCC to B range.
D A security rated D implies the issuer has either not met a scheduled payment of interest or principal; that the issuer has made it clear that it will miss such a payment in the near future or in certain
A-9
cases, that there has been a distressed exchange. In some cases, DBRS may not assign a D rating under a bankruptcy announcement scenario, as allowances for grace periods may exist in the underlying legal documentation. Once assigned, the D rating will continue as long as the missed payment continues to be in arrears, and until such time as the rating is discontinued or reinstated by DBRS. Where this scale is used for preferred securities, the nonpayment of a dividend will only be considered as a D if the missed payment constitutes default per the legal documents.
(high, low) Each rating category is denoted by the subcategories high and low. The absence of either a high or low designation indicates the rating is in the middle of the category. The AAA and D categories do not utilize high, middle, and low as differential grades.
Municipal Note Ratings
A Standard & Poors U.S. municipal note rating reflects Standard & Poors opinion about the liquidity factors and market access risks unique to the notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating. The following criteria will be used in making that assessment:
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Amortization schedule-the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and |
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Source of payment-the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note. |
Note rating symbols are as follows:
SP-1 The issuers of these municipal notes exhibit a strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.
SP-2 The issuers of these municipal notes exhibit a satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.
SP-3 The issuers of these municipal notes exhibit speculative capacity to pay principal and interest.
Moodys uses three rating categories for short-term municipal obligations that are considered investment grade. These ratings are designated as Municipal Investment Grade (MIG) and are divided into three levels MIG-1 through MIG-3. In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation. The following summarizes the ratings used by Moodys for these short-term obligations:
A-10
MIG-1 This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG-2 This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.
MIG-3 This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.
SG This designation denotes speculative-grade credit quality. Debt instruments in this category may lack sufficient margins of protection.
In the case of variable rate demand obligations (VRDOs), a two-component rating is assigned; a long or short-term debt rating and a demand obligation rating. The first element represents Moodys evaluation of the degree of risk associated with scheduled principal and interest payments. The second element represents Moodys evaluation of the degree of risk associated with the ability to receive purchase price upon demand (demand feature), using a variation of the MIG rating scale, the Variable Municipal Investment Grade or VMIG rating.
When either the long- or short-term aspect of a VRDO is not rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG-1.
VMIG rating expirations are a function of each issues specific structural or credit features.
VMIG-1 This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG-2 This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
VMIG-3 This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.
SG This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.
Fitch uses the same ratings for municipal securities as described above for other short-term credit ratings.
A-11
About Credit Ratings
A Standard & Poors issue credit rating is a forward-looking opinion about the creditworthiness of an obligor with respect to a specific financial obligation, a specific class of financial obligations, or a specific financial program (including ratings on medium-term note programs and commercial paper programs). It takes into consideration the creditworthiness of guarantors, insurers, or other forms of credit enhancement on the obligation and takes into account the currency in which the obligation is denominated. The opinion reflects Standard & Poors view of the obligors capacity and willingness to meet its financial commitments as they come due, and may assess terms, such as collateral security and subordination, which could affect ultimate payment in the event of default.
Moodys credit ratings must be construed solely as statements of opinion and not statements of fact or recommendations to purchase, sell or hold any securities.
Fitchs credit ratings provide an opinion on the relative ability of an entity to meet financial commitments, such as interest, preferred dividends, repayment of principal, insurance claims or counterparty obligations. Fitch credit ratings are used by investors as indications of the likelihood of receiving the money owed to them in accordance with the terms on which they invested. Fitchs credit ratings cover the global spectrum of corporate, sovereign (including supranational and sub-national), financial, bank, insurance, municipal and other public finance entities and the securities or other obligations they issue, as well as structured finance securities backed by receivables or other financial assets.
DBRS credit ratings are opinions based on the quantitative and qualitative analysis of information sourced and received by DBRS, which information is not audited or verified by DBRS. Ratings are not buy, hold or sell recommendations and they do not address the market price of a security. Ratings may be upgraded, downgraded, placed under review, confirmed and discontinued.
A-12
Proxy Voting Policy
[To be Added by Amendment]
B-1
THE RBB FUND, INC.
PEA 134
PART C: OTHER INFORMATION
Item 28 . EXHIBITS
(a) |
Articles of Incorporation. |
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(1) |
Articles of Incorporation of Registrant are incorporated herein by reference to Registrants Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(2) |
Articles Supplementary of Registrant are incorporated herein by reference to Registrants Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(3) |
Articles of Amendment to Articles of Incorporation of Registrant are incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrants Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(4) |
Articles Supplementary of Registrant are incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrants Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(5) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 3 to the Registrants Registration Statement (No. 33-20827) filed on April 27, 1990, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(6) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 4 to the Registrants Registration Statement (No. 33-20827) filed on May 1, 1990, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(7) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(8) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 8 to the Registrants Registration Statement (No. 33-20827) filed on October 22, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(9) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 13 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1993, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(10) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 13 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1993, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(11) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
(12) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(13) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(14) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrants Registration Statement (No. 33-20827) filed on December 19, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(15) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 27 to the Registrants Registration Statement (No. 33-20827) filed on March 31, 1995. |
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(16) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 34 to the Registrants Registration Statement (No. 33-20827) filed on May 16, 1996. |
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(17) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 39 to the Registrants Registration Statement (No. 33-20827) filed on October 11, 1996. |
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(18) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrants Registration Statement (No. 33-20827) filed on May 9, 1997. |
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(19) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
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(20) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
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(21) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(22) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(23) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
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(24) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
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(25) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
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(26) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrants Registration Statement (No. 33-20827) filed on November 29, 1999. |
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(27) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
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(28) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
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(29) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
(30) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 71 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2000. |
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(31) |
Articles Supplementary of Registrant are incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrants Registration Statement (No. 33-20827) filed on March 15, 2001. |
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(32) |
Articles of Amendment of Registrant ( Boston Partners Bond Fund - Institutional Class and Boston Partners Bond Fund - Investor Class ) are incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrants Registration Statement (No. 33-20827) filed on May 15, 2002. |
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(33) |
Articles Supplementary to Charter of the Registrant ( Boston Partners All-Cap Value Fund - Institutional Class and Boston Partners Bond Fund - Institutional Class ) are incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrants Registration Statement (No. 33-20827) filed on May 15, 2002. |
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(34) |
Articles Supplementary of Registrant ( Schneider Value Fund ) are incorporated herein by reference to Post-Effective Amendment No. 78 to the Registrants Registration Statement (No. 33-20827) filed on May 16, 2002. |
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(35) |
Articles Supplementary of Registrant ( Institutional Liquidity Fund for Credit Unions and Liquidity Fund for Credit Union Members ) are incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2003. |
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(36) |
Articles of Amendment to Charter of the Registrant are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2004. |
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(37) |
Articles Supplementary of Registrant ( Robeco WPG Core Bond Fund - Investor Class, Robeco WPG Core Bond Fund - Institutional Class, Robeco WPG Tudor Fund - Institutional Class, Robeco WPG Large Cap Growth Fund - Institutional Class ) are incorporated herein by reference to Post-Effective Amendment No. 93 to the Registrants Registration Statement (No. 33-20827) filed on March 4, 2005. |
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(38) |
Certificate of Correction of Registrant is incorporated herein by reference to Post-Effective Amendment No. 95 to the Registrants Registration Statement (No. 33-20827) filed on March 23, 2005. |
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(39) |
Articles Supplementary of Registrant ( Robeco WPG Core Bond Fund - Investor Class, Robeco WPG Core Bond Fund - Institutional Class, Robeco WPG Tudor Fund - Institutional Class, Robeco WPG 130/30 Large Cap Core Fund f/k/a Robeco WPG Large Cap Growth Fund - Institutional Class ) are incorporated herein by reference to Post-Effective Amendment No. 95 to the Registrants Registration Statement (No. 33-20827) filed on March 23, 2005. |
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(40) |
Articles Supplementary of Registrant ( Senbanc Fund) are incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrants Registration Statement (No. 33-20827) filed on June 6, 2005. |
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(41) |
Articles of Amendment of Registrant ( Robeco WPG Core Bond Fund - Retirement Class) are incorporated herein by reference to Post-Effective Amendment No. 97 to the Registrants Registration Statement (No. 33-20827) filed on August 19, 2005. |
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(42) |
Articles Supplementary of Registrant ( Robeco WPG Core Bond Fund - Investor Class) are incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrants Registration Statement (No. 33-20827) filed on September 27, 2005. |
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(43) |
Articles Supplementary of Registrant (Bear Stearns CUFS MLP Mortgage Portfolio) are incorporated herein by reference to Post-Effective Amendment No. 104 to the Registrants Registration Statement (No. 33-20827) filed on July 18, 2006. |
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(44) |
Articles of Amendment of Registrant (Bear Stearns CUFS MLP Mortgage Portfolio) are incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
(45) |
Articles Supplementary of Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 109 to Registrants Registration Statement (No. 33-20827) filed on December 15, 2006. |
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(46) |
Articles Supplementary of Registrant (Marvin & Palmer Large Cap Growth Fund) are incorporated herein by reference to Post-Effective Amendment No. 109 to Registrants Registration Statement (No. 33-20827) filed on December 15, 2006. |
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(47) |
Articles of Amendment of Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
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(48) |
Articles Supplementary of Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund) are incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
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(49) |
Articles Supplementary of Registrant (Free Market U.S. Equity Fund, Free Market International Equity Fund, Free Market Fixed-Income Fund) incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrants Registration Statement (No. 33-20827) filed on June 1, 2007. |
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(50) |
Articles Supplementary of Registrant (Robeco WPG 130/30 Large Cap Core Fund - Investor Class) are incorporated herein by reference to Post-Effective Amendment No.113 to the Registrants Registration Statement (No. 33-20827) filed on July 13, 2007. |
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(51) |
Articles Supplementary of Registrant ( SAM Sustainable Water Fund, SAM Sustainable Climate Fund ) are incorporated herein by reference to Post-Effective Amendment No.114 to the Registrants Registration Statement (No. 33-20827) filed on July 17, 2007. |
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(52) |
Articles of Amendment of Registrant (Robeco WPG 130/30 Large Cap Core Fund - Institutional Class) are incorporated herein by reference to Post-Effective Amendment No.116 to the Registrants Registration Statement (No. 33-20827) filed on September 4, 2007. |
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(53) |
Articles Supplementary of Registrant ( Bear Stearns Multifactor 130/30 US Core Equity Fund ) are incorporated herein by reference to Post-Effective Amendment No. 123 to the Registrants Registration Statement (No. 33-20827) filed on December 17, 2007. |
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(54) |
Articles of Amendment of Registrant (Bear Stearns Ultra Short Income Fund f/k/a Bear Stearns Enhanced Income Fund are incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(55) |
Articles Supplementary of Registrant ( SAM Sustainable Global Active Fund, SAM Sustainable Themes Fund ) are incorporated herein by reference to Post-Effective Amendment No. 128 to the Registrants Registration Statement (No. 33-20827) filed on April 23, 2009. |
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(56) |
Articles Supplementary of Registrant ( Perimeter Small Cap Growth Fund) are incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
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(57) |
Articles Supplementary of Registrant ( S1 Fund) are filed herewith. |
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(b) |
By-Laws.
(1) By-Laws, as amended are incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
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(c) |
Instruments Defining Rights of Security Holders. |
(1) |
See Articles VI, VII, VIII, IX and XI of Registrants Articles of 1 Incorporation dated February 17, 1988 which are incorporated herein by reference to Registrants Registration Statement (No. 33-20827) filed on March 24, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
(2) |
See Articles II, III, VI, XIII, and XIV of Registrants By-Laws as amended through August 25, 2004, which are incorporated herein by reference to Post-Effective Amendment No. 89 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2004. |
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(d) |
Investment Advisory Contracts. |
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(1) |
Investment Advisory Agreement (Money Market) between Registrant and Provident Institutional Management Corporation, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(2) |
Sub-Advisory Agreement (Money Market) between Provident Institutional Management Corporation and Provident National Bank, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(3) |
Assumption Agreement (Money Market Fund) between PNC Bank, N.A. and BlackRock Institutional Management Corporation (formerly PNC Institutional Management Corporation) dated April 29, 1998 is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
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(4) |
Investment Advisory Agreement (Boston Partners Mid Cap Value Fund) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrants Registration Statement (No. 33-20827) filed on April 8, 2003. |
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(5) |
Investment Advisory Agreement (Schneider Small Cap Value Fund) between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(6) |
Investment Advisory Agreement (Boston Partners Small Cap Value Fund II (formerly Micro Cap Value)) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrants Registration Statement (No. 33-20827) filed on April 8, 2003. |
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(7) |
Amendment to Investment Advisory Agreement (Boston Partners Small Cap Value Fund II) is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(8) |
Investment Advisory Agreement (Boston Partners Long/Short Equity Fund (formerly Market Neutral)) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 83 to the Registrants Registration Statement (No. 33-20827) filed on April 8, 2003. |
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(9) |
Investment Advisory Agreement (Bogle Small Cap Growth Fund) between Registrant and Bogle Investment Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
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(10) |
Amended and Restated Investment Advisory Agreement (Boston Partners All-Cap Value Fund) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 105 to the Registrants Registration Statement (No. 33-20827) filed on October 30, 2006. |
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(11) |
Investment Advisory Agreement (Schneider Value Fund) between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
(12) |
Investment Advisory Agreement (Senbanc Fund) between Registrant and Hilliard Lyons Research Advisors is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(13) |
Investment Advisory Agreement (Robeco WPG Small Cap Value Fund f/k/a Robeco WPG Tudor Fund) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(14) |
Investment Advisory Agreement (Bear Stearns CUFS MLP Mortgage Portfolio ) between Registrant and Bear Stearns Asset Management Inc. is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(15) |
Investment Advisory and Administration Agreement (Money Market Portfolio ) between Registrant and BlackRock Institutional Management Corp. is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrants Registration Statement (No. 33-20827) filed on June 1, 2007. |
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(16) |
Investment Advisory Agreement (Marvin & Palmer Large Cap Growth Fund ) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(17) |
Investment Advisory Agreement (Free Market U.S. Equity Fund, Free Market International Equity Fund, Free Market Fixed-Income Fund) is incorporated herein by reference to Post-Effective Amendment No. 125 to the Registrants Registration Statement (No. 33-20827) filed on February 27, 2008. |
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(18) |
Investment Advisory Agreement ( SAM Sustainable Water Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(19) |
Investment Advisory Agreement ( SAM Sustainable Climate Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(20) |
Contractual Fee Waiver Agreement (Schneider Small Cap Value Fund) dated November 12, 2009, between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
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(21) |
Contractual Fee Waiver Agreement (Schneider Value Fund) dated November 12, 2009, between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
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(22) |
Contractual Fee Waiver Agreement (Bogle Small Cap Growth Fund) dated November 12, 2009, between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
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(23) |
Form of Contractual Fee Waiver Agreement (Robeco Boston Partners Large Cap Value Fund, Robeco Boston Partners Small Cap Value Fund II, Robeco Boston Partners Mid Cap Value Fund, Robeco Boston Partners All-Cap Value Fund, Robeco Boston Partners Long/Short Equity Fund, Robeco WPG Core Bond Fund, Robeco WPG Small Cap Value Fund and Robeco WPG 130/30 Large Cap Core Fund) is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
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(24) |
Form of Contractual Fee Waiver Agreement ( SAM Sustainable Water Fund, SAM Sustainable Climate Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
(25) |
Contractual Fee Waiver Agreement (Marvin & Palmer Large Cap Growth Fund) dated December 15, 2009, between Registrant and Marvin & Palmer Associates, Inc. is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
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(26) |
Assumption Agreement (Robeco Boston Partners Small Cap Value Fund II, Robeco Boston Partners Long/Short Equity Fund, Robeco Boston Partners Large Cap Value Fund, Robeco Boston Partners Mid Cap Value Fund, Robeco Boston Partners All-Cap Value Fund) between Boston Partners Asset Management and Robeco Investment Management, Inc. dated January 1, 2007 is incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
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(27) |
Assumption Agreement (Robeco WPG Core Bond Fund, Robeco WPG Large Cap Growth Fund, and Robeco WPG Small Cap Value Fund f/k/a Robeco WPG Tudor Fund) between Weiss, Peck, & Greer Investments and Robeco Investment Management, Inc. dated January 1, 2007 is incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
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(28) |
Investment Advisory Agreement ( SAM Sustainable Global Active Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
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(29) |
Investment Advisory Agreement ( SAM Sustainable Themes Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
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(30) |
Contractual Fee Waiver Agreement ( SAM Sustainable Global Active Fund, SAM Sustainable Themes Fund ) between Registrant and Sustainable Asset Management USA, Inc is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
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(31) |
Investment Advisory Agreement (Perimeter Small Cap Growth Fund) between Registrant and Perimeter Capital Management LLC is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
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(32) |
Contractual Fee Waiver Agreement (Perimeter Small Cap Growth Fund) between Registrant and Perimeter Capital Management is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
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(33) |
Form of Investment Advisory Agreement (S1 Fund) between Registrant and Simple Alternatives, LLC to be filed by amendment. |
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(e) |
Underwriting Contracts. |
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(1) |
Distribution Agreement between Registrant and PFPC Distributors, Inc. dated as of January 2, 2001 is incorporated herein by reference to Post-Effective Amendment No. 73 to the Registrants Registration Statement (No. 33-20827) filed on March 15, 2001. |
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(2) |
Distribution Agreement Supplement (Boston Partners All-Cap Value Fund - Investor Class) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
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(3) |
Distribution Agreement Supplement (Boston Partners All-Cap Value Fund - Institutional Class ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
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(4) |
Distribution Agreement Supplement (Schneider Value Fund) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
(5) |
Distribution Agreement Supplement (Senbanc Fund) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(6) |
Distribution Agreement Supplement (Robeco WPG Small Cap Value Fund f/k/a Robeco WPG Tudor Fund - Institutional Class) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2005. |
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(7) |
Distribution Agreement Supplement (Bear Stearns CUFS MLP Mortgage Portfolio) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
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(8) |
Distribution Agreement Supplement (Marvin & Palmer Large Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(9) |
Distribution Agreement Supplements (Free Market U.S. Equity Fund) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(10) |
Distribution Agreement Supplement ( Free Market International Equity Fund ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(11) |
Distribution Agreement Supplement ( Free Market Fixed Income Fund ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(12) |
Form of Distribution Agreement Supplement ( SAM Sustainable Water Fund ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
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(13) |
Form of Distribution Agreement Supplement ( SAM Sustainable Climate Fund ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
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(14) |
Form of Distribution Agreement Supplement ( SAM Sustainable Global Active Fund ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 128 to the Registrants Registration Statement (No. 33-20827) filed on January 26, 2009. |
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(15) |
Form of Distribution Agreement Supplement ( SAM Sustainable Themes Fund ) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 128 to the Registrants Registration Statement (No. 33-20827) filed on January 26, 2009. |
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(16) |
Form of Distribution Agreement Supplement (Perimeter Small Cap Growth Fund) between Registrant and PFPC Distributors, Inc. is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
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(17) |
Form of Distribution Agreement Supplement (S1 Fund) between Registrant and BNY Mellon Distributors, Inc. ( f/k/a PFPC Distributors, Inc.) to be filed by amendment. |
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(f) |
Bonus or Profit Sharing Contracts. |
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(1) |
Fund Office Retirement Profit-Sharing and Trust Agreement, dated as of October 24, 1990, as amended is incorporated herein by reference to Post-Effective Amendment No. 49 to the Registrants Registration Statement (No. 33-20827) filed on December 1, 1997. |
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(2) |
Form of Amendment No. 1 to Fund Office Retirement Profit Sharing Plan and Trust Reflecting EGTRRA is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
(g) |
Custodian Agreements. |
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(1) |
Custodian Agreement between Registrant and Provident National Bank dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(2) |
Sub-Custodian Agreement among The Chase Manhattan Bank, N.A., the Registrant and Provident National Bank, dated as of July 13, 1992, relating to custody of Registrants foreign securities is incorporated herein by reference to Post-Effective Amendment No. 8 to the Registrants Registration Statement (No. 33-20827) filed on October 22, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(3) |
Amendment No. 1 to Custodian Agreement dated August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(4) |
Custodian Contract between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 21 to the Registrants Registration Statement (No. 33-20827) filed on October 28, 1994, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(5) |
Custodian Agreement Supplement between Registrant and PNC Bank, National Association dated October 16, 1996 is incorporated herein by reference to Post-Effective Amendment No. 41 to the Registrants Registration Statement (No. 33-20827) filed on November 27, 1996. |
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(6) |
Custodian Agreement Supplement (Boston Partners Mid Cap Value Fund) between Registrant and PNC Bank, National Association is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
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(7) |
Custodian Agreement Supplement (Schneider Small Cap Value Fund) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(8) |
Custodian Agreement Supplement (Boston Partners Small Cap Value Fund II (formerly Micro Cap Value)) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(9) |
Custodian Agreement Supplement (Boston Partners Long/Short Equity Fund (formerly Market Neutral)) between Registrant and PNC Bank, N.A. is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
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(10) |
Form of Custodian Agreement Supplement (Boston Partners Fund - formerly Long Short Equity) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrants Registration Statement (No. 33-20827) filed on May 19, 1999. |
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(11) |
Custodian Agreement Supplement (Bogle Small Cap Growth Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
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(12) |
Letter Agreement among Registrant, The Chase Manhattan Bank and PFPC Trust Company, dated as of July 2, 2001, relating to custody of Registrants foreign securities is incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrants Registration Statement (No. 33-20827) filed on May 15, 2002. |
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(13) |
Custodian Agreement Supplement (Boston Partners All-Cap Value Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
(14) |
Custodian Agreement Supplement ( Schneider Value Fund ) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
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(15) |
Custodian Agreement (Robeco WPG Core Bond Fund, Robeco WPG 130/30 Large Cap Core Fund f/k/a Robeco WPG Large Cap Growth Fund, and Robeco WPG Small Cap Value Fund f/k/a Robeco WPG Tudor Fund ) between Registrant and Mellon Trust of New England N.A. is incorporated herein by reference to Post-Effective Amendment No. 103 to the Registrants Registration Statement (No. 33-20827) filed on July 18, 2006. |
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(16) |
Custodian Agreement Supplement (Senbanc Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(17) |
Custodian Agreement among Registrant, PFPC Trust Company and Citibank, N.A., dated as of September 13, 2005, relating to custody of Registrants foreign securities is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2005. |
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(18) |
Custodian Agreement Supplement (Bear Stearns CUFS MLP Mortgage Portfolio) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
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(19) |
Custodian Agreement Supplement (Marvin & Palmer Large Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(20) |
Custodian Agreement Supplement (Free Market U.S. Equity Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(21) |
Custodian Agreement Supplement (Free Market International Equity Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(22) |
Custodian Agreement Supplement (Free Market Fixed-Income Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(23) |
Custodian Agreement Supplement ( SAM Sustainable Water Fund ) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(24) |
Custodian Agreement Supplement ( SAM Sustainable Climate Fund ) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(25) |
Amendment No. 2 to Custodian Agreement dated August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 125 to the Registrants Registration Statement (No. 33-20827) filed on February 27, 2008. |
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(26) |
Custodian Agreement Supplement ( Robeco WPG Small Cap Value Fund ) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 127 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2008. |
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(27) |
Custodian Agreement Supplement ( SAM Sustainable Global Active Fund ) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
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(28) |
Custodian Agreement Supplement ( SAM Sustainable Themes Fund ) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
(29) |
Form of Custodian Agreement Supplement (Perimeter Small Cap Growth Fund) between Registrant and PFPC Trust Company is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
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(30) |
Form of Custodian Agreement Supplement ( S1 Fund) between Registrant and PFPC Trust Company to be filed by amendment. |
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(h) |
Other Material Contracts. |
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(1) |
Transfer Agency Agreement (Sansom Street) between Registrant and Provident Financial Processing Corporation, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(2) |
Shareholder Servicing Agreement (Sansom Street Money Market) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(3) |
Shareholder Servicing Agreement (Sansom Street Government Obligations Money Market) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(4) |
Shareholder Services Plan (Sansom Street Money Market) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(5) |
Transfer Agency Agreement (Bedford Money Market) between Registrant and Provident Financial Processing Corporation, dated as of August 16, 1988 is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(6) |
Transfer Agency Agreement and Supplements (Bradford, Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta) between Registrant and Provident Financial Processing Corporation dated as of November 5, 1991 is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
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(7) |
Transfer Agency and Service Agreement between Registrant and State Street Bank and Trust Company and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) dated February 1, 1995 is incorporated herein by reference to Post-Effective Amendment No. 28 to the Registrants Registration Statement (No. 33-20827) filed on October 6, 1995. |
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(8) |
Supplement to Transfer Agency and Service Agreement between Registrant, State Street Bank and Trust Company, Inc. and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) dated April 10, 1995 is incorporated herein by reference to Post-Effective Amendment No. 28 to the Registrants Registration Statement (No. 33-20827) filed on October 6, 1995. |
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(9) |
Amended and Restated Credit Agreement dated December 15, 1994 is incorporated herein by reference to Post-Effective Amendment No. 29 to the Registrants Registration Statement (No. 33-20827) filed on October 25, 1995. |
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(10) |
Transfer Agreement and Service Agreement between Registrant and State Street Bank and Trust Company is incorporated herein by reference to Post-Effective Amendment No. 37 to the Registrants Registration Statement (No. 33-20827) filed on July 30, 1996. |
(11) |
Transfer Agency Agreement Supplement (Boston Partners Mid Cap Value Fund - Institutional Class) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
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(12) |
Transfer Agency Agreement Supplement (Boston Partners Mid Cap Value Fund - Investor Class) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
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(13) |
Administration and Accounting Services Agreement (Boston Partners Mid Cap Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) dated, May 30, 1997 is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
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(14) |
Administration and Accounting Services Agreement (Schneider Small Cap Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(15) |
Transfer Agency Agreement Supplement (Schneider Small Cap Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(16) |
Transfer Agency Agreement Supplement (Boston Partners Small Cap Value Fund II (formerly Micro Cap Value) - Institutional Class) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(17) |
Transfer Agency Agreement Supplement (Boston Partners Small Cap Value Fund II (formerly Micro Cap Value) - Investor Class) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(18) |
Administration and Accounting Services Agreement (Boston Partners Small Cap Value Fund II (formerly Boston Partners Micro Cap Value Fund)) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
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(19) |
Administrative and Accounting Services Agreement (Boston Partners Long/Short Equity Fund (formerly Market Neutral) - Institutional and Investor Classes) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
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(20) |
Transfer Agency Agreement Supplement (Boston Partners Long/Short Equity Fund (formerly Market Neutral) - Institutional and Investor Classes) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
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(21) |
Form of Transfer Agency Agreement Supplement (Boston Partners Fund (formerly Long-Short Equity)) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrants Registration Statement (No. 33-20827) filed on May 19, 1999. |
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(22) |
Form of Administration and Accounting Services Agreement (Boston Partners Fund (formerly Long-Short Equity)) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrants Registration Statement (No. 33-20827) filed on May 19, 1999. |
(23) |
Transfer Agency Agreement Supplement (Bogle Small Cap Growth Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
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(24) |
Non 12b-1 Shareholder Services Plan and Agreement (Bogle Small Cap Growth - Investor Shares) is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
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(25) |
Agreement between E*TRADE Group, Inc., Registrant and Registrants principal underwriter is incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrants Registration Statement (No. 33-20827) filed on December 1, 1999. |
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(26) |
Administration and Accounting Services Agreement (Bogle Small Cap Growth Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 69 to the Registrants Registration Statement (No. 33-20827) filed on December 1, 1999. |
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(27) |
Transfer Agency Supplement (Bear Stearns Money Market Family) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 75 to the Registrants Registration Statement (No. 33-20827) filed on December 4, 2001. |
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(28) |
Form of Transfer Agency Supplement (Boston Partners All-Cap Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
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(29) |
Form of Administration and Accounting Services Agreement (Boston Partners All-Cap Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 77 to the Registrants Registration Statement (No. 33-20827) filed on May 15, 2002. |
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(30) |
Transfer Agency Supplement (Schneider Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
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(31) |
Form of Administration and Accounting Services Agreement (Schneider Value Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 78 to the Registrants Registration Statement (No. 33-20827) filed on May 16, 2002. |
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(32) |
Shareholder Servicing Agreement (Bogle Small Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
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(33) |
Form of Transfer Agency Agreement Supplement (Customer Identification Program) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2003. |
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(34) |
Regulatory Administration Services Agreement between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 84 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2003. |
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(35) |
Administration and Accounting Services Agreement (Robeco WPG Core Bond Fund, Robeco WPG Large Cap Growth Fund, and Robeco WPG Tudor Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
(36) |
Transfer Agency Agreement Supplement (Robeco WPG Tudor Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(37) |
Non-12b-1 Shareholder Services Plan and Related Form of Shareholder Servicing Agreement (Robeco WPG Tudor Fund - Institutional Class) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(38) |
Administration and Accounting Services Agreement (Senbanc Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(39) |
Transfer Agency Agreement Supplement (Senbanc Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(40) |
Amended Schedule A to Regulatory Administration Services Agreement (Senbanc Fund) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
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(41) |
Administration and Accounting Services Agreement (Bear Stearns CUFS MLP Mortgage Portfolio) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
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(42) |
Transfer Agency Agreement Supplement (Bear Stearns CUFS MLP Mortgage Portfolio) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
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(43) |
Amended Schedule A to Regulatory Administration Services Agreement ( Bear Stearns CUFS MLP Mortgage Portfolio) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 108 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 2006. |
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(44) |
Escrow Agreement (Money Market Portfolio) between Registrant, PFPC Trust Company, and BlackRock Institutional Management Corp. is incorporated herein by reference to Post-Effective Amendment No. 105 to the Registrants Registration Statement (No. 33-20827) filed on October 30, 2006. |
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(45) |
Interim Delegation Agreement (Money Market Portfolio) between Registrant, PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.), and BlackRock Institutional Management Corp. is incorporated herein by reference to Post-Effective Amendment No. 105 to the Registrants Registration Statement (No. 33-20827) filed on October 30, 2006. |
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(46) |
Administration and Accounting Services Agreement (Marvin & Palmer Large Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(47) |
Amended Schedule A to Regulatory Administration Services Agreement ( Marvin & Palmer Large Cap Growth Fund ) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(48) |
Transfer Agency Agreement Supplement ( Marvin & Palmer Large Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 24 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
(49) |
Transfer Agency Agreement Supplement (Free Market U.S. Equity Fund) is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
|||
(50) |
Transfer Agency Agreement Supplement (Free Market International Equity Fund ) is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
|||
(51) |
Transfer Agency Agreement Supplement (Free Market Fixed Income Fund ) is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
|||
(52) |
Amended Schedule A to Regulatory Administration Services Agreement (Free Market U.S. Equity Fund, Free Market International Equity Fund, Free Market Fixed-Income Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 126 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 2008. |
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(53) |
Form of Transfer Agency Agreement Supplement ( SAM Sustainable Water Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
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(54) |
Form of Transfer Agency Agreement Supplement ( SAM Sustainable Climate Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(55) |
Form of Amended Schedule A to Regulatory Administration Services Agreement ( SAM Sustainable Water Fund, SAM Sustainable Climate Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(56) |
Services Agreement pursuant to Rule 22c-2 between Registrant and PNC Global Investment Servicing (U.S.) Inc. (f/k/a PFPC Inc.) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
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(57) |
Form of Transfer Agency Agreement Supplement (Red Flags Amendment) between Registrant and PNC Global Investment Servicing (U.S.) Inc. is incorporated herein by reference to Post-Effective Amendment No. 127 to the Registrants Registration Statement (No. 33-20827) filed on December 29, 2008. |
|||
(58) |
Transfer Agency Agreement Supplement ( SAM Sustainable Global Active Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(59) |
Transfer Agency Agreement Supplement ( SAM Sustainable Themes Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(60) |
Amended Schedule A to Regulatory Administration Services Agreement ( SAM Sustainable Global Active Fund, SAM Sustainable Themes Fund ) between Registrant and PNC Global Investment Servicing (U.S.) Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(61) |
Form of Transfer Agency Agreement Supplement (Perimeter Small Cap Growth Fund) between the Registrant and PNC Global Investment Servicing (U.S.) Inc. is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
(62) |
Form of Administration and Accounting Services Agreement (Perimeter Small Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
|||
(63) |
Form of Amended Schedule A to the Regulatory Administration Services Agreement ( Perimeter Small Cap Growth Fund ) between the Registrant and PNC Global Investment Servicing (U.S.) Inc. is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
|||
(64) |
Form of Administrative Services Agreement (S1 Fund) between Registrant and BNY Mellon Investment Servicing (U.S.) Inc. ( f/k/a PNC Global Investment Servicing (U.S.) Inc. ) to be filed by amendment. |
|||
(65) |
Form of Administrative Services Agreement Supplement (S1 Fund) between Registrant and BNY Mellon Investment Servicing (U.S.) Inc. ( f/k/a PNC Global Investment Servicing (U.S.) Inc. ) to be filed by amendment. |
|||
(66) |
Form of Transfer Agency Agreement Supplement (S1 Fund) between Registrant and BNY Mellon Investment Servicing (U.S.) Inc. ( f/k/a PNC Global Investment Servicing (U.S.) Inc. ) to be filed by amendment. |
|||
(67) |
Form of Amended Schedule A to Regulatory Administration Services Agreement (S1 Fund) between Registrant and BNY Mellon Investment Servicing (U.S.) Inc. ( f/k/a PNC Global Investment Servicing (U.S.) Inc. ) to be filed by amendment. |
|||
(i) |
(1) |
Opinion and Consent of Counsel is filed herewith. |
||
(2) |
Consent of Counsel is filed herewith. |
|||
(j) |
None. |
|||
(k) |
None. |
|||
(l) |
Initial Capital Agreements. |
|||
(1) |
Subscription Agreement, relating to Classes A through N, is incorporated herein by reference to Pre-Effective Amendment No. 2 to Registrants Registration Statement (No. 33-20827) filed on July 12, 1988, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(2) |
Subscription Agreement between Registrant and Planco Financial Services, Inc., relating to Classes O and P is incorporated herein by reference to Post-Effective Amendment No. 5 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1990. |
|||
(3) |
Subscription Agreement between Registrant and Planco Financial Services, Inc., relating to Class Q is incorporated herein by reference to Post-Effective Amendment No. 5 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1990. |
|||
(4) |
Subscription Agreement between Registrant and Counsellors Securities Inc. relating to Classes R, S, and Alpha 1 through Theta 4 is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(5) |
Purchase Agreement between Registrant and Boston Partners Asset Management, L.P. relating to Classes TT and UU (Boston Partners Mid Cap Value Fund) is incorporated herein by reference to Post-Effective Amendment No. 46 to the Registrants Registration Statement (No. 33-20827) filed on September 25, 1997. |
|||
(6) |
Purchase Agreement between Registrant and Schneider Capital Management Company relating to Class YY (Schneider Small Cap Value Fund) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
(7) |
Purchase Agreement between Registrant and Boston Partners Asset Management, L.P. relating to Classes DDD and EEE (Boston Partners Small Cap Value Fund II (formerly Micro Cap Value)) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
|||
(8) |
Purchase Agreement between Registrant and Boston Partners Asset Management relating to Classes III and JJJ (Boston Partners Long/Short Equity Fund (formerly Market Neutral)) is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
|||
(9) |
Form of Purchase Agreement between Registrant and Boston Partners Asset Management, L. P. relating to Classes KKK and LLL (Boston Partners Fund (formerly Long-Short Equity)) is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrants Registration Statement (No. 33-20827) filed on May 19, 1999. |
|||
(10) |
Purchase Agreement (Bogle Small Cap Growth Fund) between Registrant and Bogle Investment Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 67 to the Registrants Registration Statement (No. 33-20827) filed on September 30, 1999. |
|||
(11) |
Purchase Agreement (Boston Partners All-Cap Value Fund) between Registrant and Boston Partners Asset Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
|||
(12) |
Purchase Agreement (Schneider Value Fund) between Registrant and Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
|||
(13) |
Purchase Agreement (Robeco WPG Small Cap Value Fund f/k/a Robeco WPG Tudor Fund) between Registrant and Weiss, Peck & Greer Investments is incorporated herein by reference to Post-Effective Amendment No. 96 to the Registrants Registration Statement (No. 33-20827) filed on June 6, 2005. |
|||
(14) |
Purchase Agreement (Senbanc Fund) between Registrant and Hilliard Lyons Research Advisers is incorporated herein by reference to Post-Effective Amendment No. 100 to the Registrants Registration Statement (No. 33-20827) filed on November 25, 2005. |
|||
(15) |
Purchase Agreement (Bear Stearns CUFS MLP Mortgage Portfolio) between Registrant and Bear Stearns Asset Management Inc. is incorporated herein by reference to Post-Effective Amendment No. 111 to the Registrants Registration Statement (No. 33-20827) filed on February 28, 2007. |
|||
(16) |
Purchase Agreement (Marvin & Palmer Large Cap Growth Fund) is incorporated herein by reference to Post-Effective Amendment No. 124 to the Registrants Registration Statement (No. 33-20827) filed on December 28, 2007. |
|||
(17) |
Form of Purchase Agreement (Free Market U.S. Equity Fund) between Registrant and Abundance Technologies, Inc., is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrants Registration Statement (No. 33-20827) filed on June 1, 2007. |
|||
(18) |
Form of Purchase Agreement (Free Market International Equity Fund) between Registrant and Abundance Technologies, Inc., is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrants Registration Statement (No. 33-20827) filed on June 1, 2007. |
|||
(19) |
Form of Purchase Agreement (Free Market Fixed Income Fund) between Registrant and Abundance Technologies, Inc., is incorporated herein by reference to Post-Effective Amendment No. 112 to the Registrants Registration Statement (No. 33-20827) filed on June 1, 2007. |
|||
(20) |
Form of Purchase Agreement ( SAM Sustainable Water Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(21) |
Form of Purchase Agreement ( SAM Sustainable Climate Fund ) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
(22) |
Purchase Agreement (SAM Sustainable Global Active Fund) between Registrant and Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(23) |
Form of Purchase Agreement ( Perimeter Small Cap Growth Fund ) between Registrant and Perimeter Capital Management, LLC is incorporated herein by reference to Post-Effective Amendment No. 134 to the Registrants Registration Statement (No. 33-20827) filed on December 30, 2009. |
|||
(24) |
Form of Purchase Agreement (S1 Fund) between Registrant and Simple Alternatives, LLC to be filed by amendment |
|||
(m) |
Rule 12b-1 Plan. |
|||
(1) |
Plan of Distribution (Bedford Money Market) is incorporated herein by reference to Post-Effective Amendment No. 1 to Registrants Registration Statement (No. 33-20827) filed on March 23, 1989, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(2) |
Amendment No. 1 to Plans of Distribution (Classes A through Q) is incorporated herein by reference to Post-Effective Amendment No. 6 to the Registrants Registration Statement (No. 33-20827) filed on October 24, 1991, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(3) |
Plan of Distribution (Zeta Money Market) is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(4) |
Plan of Distribution (Eta Money Market) is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refiled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(5) |
Plan of Distribution (Theta Money Market) is incorporated herein by reference to Post-Effective Amendment No. 7 to the Registrants Registration Statement (No. 33-20827) filed on July 15, 1992, and refilled electronically with Post-Effective Amendment No. 61 to Registrants Registration Statement filed on October 30, 1998. |
|||
(6) |
Plan of Distribution (Boston Partners Mid Cap Value Fund - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 45 to the Registrants Registration Statement (No. 33-20827) filed on May 9, 1997. |
|||
(7) |
Plan of Distribution (Boston Partners Small Cap Value Fund II (formerly Micro Cap Value) - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 53 to the Registrants Registration Statement (No. 33-20827) filed on April 10, 1998. |
|||
(8) |
Amendment to Plans of Distribution pursuant to Rule 12b-1 is incorporated herein by reference to Post-Effective Amendment No. 63 to the Registrants Registration Statement (No. 33-20827) filed on December 14, 1998. |
|||
(9) |
Plan of Distribution (Boston Partners Long/Short Equity Fund (formerly Market Neutral) - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 62 to the Registrants Registration Statement (No. 33-20827) filed on November 12, 1998. |
|||
(10) |
Plan of Distribution (Principal Money Market) is incorporated herein by reference to Post-Effective Amendment No. 60 to the Registrants Registration Statement (No. 33-20827) filed on October 29, 1998. |
|||
(11) |
Plan of Distribution (Boston Partners Fund (formerly Long Short Equity) - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 65 to the Registrants Registration Statement (No. 33-20827) filed on May 19, 1999. |
(12) |
Plan of Distribution pursuant to Rule 12b-1 (Boston Partners All-Cap Value Fund) is incorporated herein by reference to Post-Effective Amendment No. 80 to the Registrants Registration Statement (No. 33-20827) filed on November 1, 2002. |
|||
(13) |
Plan of Distribution pursuant to Rule 12b-1 (Senbanc Fund) is incorporated herein by reference to Post-Effective Amendment No. 99 to the Registrants Registration Statement (No. 33-20827) filed on September 27, 2005. |
|||
(14) |
Agreement between Registrant, Bear Stearns Securities Corp. and PFPC Distributors, Inc. dated as of November 17, 2005 is incorporated herein by reference to Post-Effective Amendment No. 101 to the Registrants Registration Statement filed on December 29, 2005. |
|||
(15) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Climate Fund - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(16) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Climate Fund - Class A) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(17) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Climate Fund - Class C) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(18) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Water Fund - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(19) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Water Fund - Class A) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(20) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Water Fund - Class C) is incorporated herein by reference to Post-Effective Amendment No. 118 to the Registrants Registration Statement (No. 33-20827) filed on September 28, 2007. |
|||
(21) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Global Active Fund - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 128 to the Registrants Registration Statement (No. 33-20827) filed on April 23, 2009. |
|||
(22) |
Plan of Distribution pursuant to Rule 12b-1 (SAM Sustainable Themes Fund - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 128 to the Registrants Registration Statement (No. 33-20827) filed on April 23, 2009. |
|||
(23) |
Plan of Distribution pursuant to Rule 12b-1 (Perimeter Small Cap Growth Fund - Investor Class) is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
|||
(24) |
Plan of Distribution pursuant to Rule 12b-1 (S1 Fund - R Shares) to be filed by amendment. |
|||
(n) |
Rule 18f-3 Plan. |
|||
(1) |
Amended Rule 18f-3 Plan is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
|||
(p) |
Code of Ethics. |
|||
(1) |
Code of Ethics of the Registrant is incorporated herein by reference to Post-Effective Amendment No. 110 to Registrants Registration Statement (No. 33-20827) filed on December 29, 2006. |
|||
(2) |
Code of Ethics of Robeco Investment Management is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
(3) |
Code of Ethics of Schneider Capital Management Company is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(4) |
Code of Ethics of Bogle Investment Management, L.P. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(5) |
Code of Ethics of PFPC Distributors, Inc is incorporated herein by reference to Post-Effective Amendment No. 103 to the Registrants Registration Statement (No. 33-20827) filed on July 18, 2006. |
|||
(6) |
Code of Ethics of J.J.B. Hilliard W.L. Lyons, Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(7) |
Code of Ethics of Bear Stearns Asset Management Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(8) |
Code of Ethics of Marvin & Palmer Associates, Inc., is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(9) |
Code of Ethics of Abundance Technologies, Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(10) |
Code of Ethics of Sustainable Asset Management USA, Inc. is incorporated herein by reference to Post-Effective Amendment No. 129 to the Registrants Registration Statement (No. 33-20827) filed on July 2, 2009. |
|||
(11) |
Code of Ethics of Perimeter Capital Management LLC is incorporated herein by reference to Post-Effective Amendment No. 132 to the Registration Statement (No. 33-20827) filed on October 22, 2009. |
|||
(12) |
Code of Ethics of Simple Alternatives, LLC to be filed by amendment. |
Item 29. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 30. INDEMNIFICATION
Sections 1, 2, 3 and 4 of Article VIII of Registrants Articles of Incorporation, as amended, incorporated herein by reference as Exhibits (a)(1) and (a)(3), provide as follows:
Section 1. To the fullest extent that limitations on the liability of directors and officers are permitted by the Maryland General Corporation Law, no director or officer of the Corporation shall have any liability to the Corporation or its shareholders for damages. This limitation on liability applies to events occurring at the time a person serves as a director or officer of the Corporation whether or not such person is a director or officer at the time of any proceeding in which liability is asserted.
Section 2. The Corporation shall indemnify and advance expenses to its currently acting and its former directors to the fullest extent that indemnification of directors is permitted by the Maryland General Corporation Law. The Corporation shall indemnify and advance expenses to its officers to the same extent as its directors and to such further extent as is consistent with law. The Board of Directors may by law, resolution or agreement make further provision for indemnification of directors, officers, employees and agents to the fullest extent permitted by the Maryland General Corporation law.
Section 3. No provision of this Article shall be effective to protect or purport to protect any director or officer of the Corporation against any liability to the Corporation or its security holders to which he would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his office.
Section 4. References to the Maryland General Corporation Law in this Article are to the law as from time to time amended. No further amendment to the Articles of Incorporation of the Corporation shall decrease, but may expand, any right of any person under this Article based on any event, omission or proceeding prior to such amendment. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of Registrant pursuant to the foregoing provisions, or otherwise, Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by Registrant of expenses incurred or paid by a director, officer or controlling person of Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
Sections 2 and 3 of the Assumption Agreement between PNC Bank, N.A. (PNC Bank) and BlackRock Institutional Management Corporation (BIMC), dated April 29, 1998 and incorporated herein by reference to exhibit (d)(3), provide for the indemnification of BIMC and PNC Bank against certain losses.
Section 12 of each of the Investment Advisory Agreements between Registrant and Robeco Investment Management, Inc. (Robeco) (f/k/a Boston Partners Asset Management, LLC (Boston Partners) and Weiss, Peck & Greer Investments), incorporated herein by reference to exhibits (d)(4), (d)(6), (d)(8), (d)(10), and (d)(13), provides for the indemnification of Robeco against certain losses.
Section 12 of the Investment Advisory Agreement between Registrant and Bogle Investment Management, L.P. (Bogle), dated September 15, 1999 and incorporated herein by reference to exhibit (d)(9) provides for the indemnification of Bogle against certain losses.
Section 9 of the Distribution Agreement between Registrant and PFPC Distributors, Inc. (PFPC), dated January 2, 2001 and incorporated herein by reference to exhibit (e)(1) provides for the indemnification of PFPC Distributors against certain losses.
Section 12 of the Investment Advisory Agreement between the Registrant and Hilliard Lyons Research Advisors, a division of J. J. B. Hilliard, W. L. Lyons (Hilliard) dated April 29, 2008 and incorporated herein by reference as exhibit (d)(12) provides for the indemnification of Hilliard against certain losses.
Section 12 of each of the Investment Advisory Agreements between the Registrant and Schneider Capital Management (Schneider) incorporated herein by reference as exhibits (d)(5) and (d)(11) provides for the indemnification of Schneider against certain losses.
Section 12 of the Investment Advisory Agreement between the Registrant and Bear Stearns Asset Management Inc., (Bear Stearns), on behalf of the Bear Stearns CUFS MLP Mortgage Portfolio , dated August 12, 2008 and incorporated herein by reference as exhibit (d)(14) provides for the indemnification of Bear Stearns against certain losses.
Section 12 of the Investment Advisory Agreement between the Registrant and Marvin & Palmer Associates, Inc., (Marvin & Palmer Associates) dated March 5, 2007 and incorporated herein by reference as exhibit (d)(16) provides for the indemnification of Marvin & Palmer Associates against certain losses.
Section 12 of the Investment Advisory Agreement between the Registrant and Matson Money, Inc. (f/k/a Abundance Technologies, Inc.), (Matson Money) dated December 31, 2007 and incorporated herein by reference as exhibit (d)(17) provides for the indemnification of Abundance against certain losses.
Section 13 of each of the Investment Advisory Agreements between the Registrant and Sustainable Asset Management USA., (SAM) incorporated herein by reference as exhibits (d)(18), (d)(19), (d)(28) and (d)(29) provides for the indemnification of SAM against certain losses.
Section 12 of the Investment Advisory Agreement between the Registrant and Perimeter Capital Management dated August 17, 2009 and incorporated herein by reference as exhibit (d)(31) provides for the indemnification of Perimeter against certain losses.
Item 31. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS.
1. |
BlackRock Institutional Management Corporation: |
BlackRock Institutional Management Corporations (BIMC) principal business address is 100 Bellevue Parkway, Wilmington, DE 19809. BIMC is registered under the Investment Advisers Act of 1940, as amended and serves as an investment adviser for registered investment companies. Information as to the directors and officers of BIMC is as follows:
Name and Position with BlackRock |
Other Company |
Position with Other Company |
||
Ann Marie Petach, Chief Financial Officer and Managing Director |
BAA Holdings, LLC, Wilmington, DE |
Chief Financial Officer and Managing Director |
||
BlackRock, Inc., New York, NY |
Chief Financial Officer and Managing Director |
|||
BlackRock Advisors, LLC, Wilmington, DE |
Chief Financial Officer and Managing Director |
|||
BlackRock Advisors Holdings, Inc., New York, NY |
Chief Financial Officer and Managing Director |
|||
BlackRock Capital Management, Inc., Wilmington, DE |
Chief Financial Officer and Managing Director |
|||
BlackRock Financial Management, Inc., New York, NY |
Chief Financial Officer and Managing Director |
|||
BlackRock Funding International, Ltd., Cayman Islands |
Chief Financial Officer and Managing Director |
|||
BlackRock Holdco 2, Inc. Wilmington, DE |
Chief Financial Officer and Managing Director |
|||
BlackRock International Holdings, Inc., New York, NY |
Chief Financial Officer and Managing Director |
|||
BlackRock Investment Management, LLC, Plainsboro, NJ |
Chief Financial Officer and Managing Director |
|||
BlackRock Lux Finco S.a r.l., Luxembourg, Luxembourg |
Chief Financial Officer and Managing Director |
|||
BlackRock Operations (Luxembourg) S.a r.l., Luxembourg, Luxembourg |
Chief Financial Officer and Managing Director |
|||
BlackRock Portfolio Holdings, Inc., Wilmington, DE |
Chief Financial Officer and Managing Director |
|||
BlackRock Portfolio Investments, LLC, Wilmington, DE |
Chief Financial Officer and Managing Director |
|||
BlackRock UK 1 LP, London, England |
Chief Financial Officer and Managing Director |
|||
BlackRock US Newco, Inc., Wilmington, DE |
Chief Financial Officer and Managing Director |
|||
State Street Research & Management Company, Boston, MA |
Chief Financial Officer and Managing Director |
|||
SSRM Holdings, Inc., Boston, MA |
Chief Financial Officer and Managing Director |
Robert P. Connolly, General Counsel, Managing Director and Secretary | BAA Holdings, LLC, Wilmington, DE | General Counsel, Managing Director and Secretary | ||
BlackRock, Inc., New York, NY | General Counsel, Managing Director and Secretary | |||
BlackRock Advisors, LLC, Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock Advisors Holdings, Inc., New York, NY | General Counsel, Managing Director and Secretary | |||
BlackRock Capital Management, Inc., Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock Financial Management, Inc., New York, NY | General Counsel, Managing Director and Secretary | |||
BlackRock Funding, Inc., Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock Funding International, Ltd., Cayman Islands | General Counsel, Managing Director and Secretary | |||
BlackRock Holdco 2, Inc. Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock International Holdings, Inc., New York, NY | General Counsel, Managing Director and Secretary | |||
BlackRock Investments, LLC, Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock Investment Management, LLC, Plainsboro, NJ | General Counsel, Managing Director and Secretary | |||
BlackRock Lux Finco S.a r.l., Luxembourg, Luxembourg | General Counsel, Managing Director and Secretary | |||
BlackRock Operations (Luxembourg) S.a r.l., Luxembourg, Luxembourg | General Counsel, Managing Director and Secretary | |||
BlackRock Portfolio Holdings, Inc., Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock Portfolio Investments, LLC, Wilmington, DE | General Counsel, Managing Director and Secretary | |||
BlackRock UK 1 LP, London, England | General Counsel, Managing Director and Secretary | |||
BlackRock US Newco, Inc., Wilmington, DE | General Counsel, Managing Director and Secretary | |||
State Street Research & Management Company, Boston, MA | General Counsel, Managing Director and Secretary | |||
SSRM Holdings, Inc., Boston, MA | General Counsel, Managing Director and Secretary | |||
Laurence D. Fink, Chief Executive Officer | BAA Holdings, LLC, Wilmington, DE | Chief Executive Officer and Director | ||
BlackRock, Inc., New York, NY | Chief Executive Officer and Director | |||
BlackRock Advisors, LLC, Wilmington, DE | Chief Executive Officer | |||
BlackRock Advisors Holdings, Inc., New York, NY | Chief Executive Officer and Director |
BlackRock Advisors Singapore Pte. Ltd., Singapore | Chief Executive Officer | |||
BlackRock Capital Management, Inc., Wilmington, DE | Chief Executive Officer | |||
BlackRock Capital Markets, LLC, Wilmington, DE | Chairman and Director | |||
BlackRock Financial Management, Inc., New York, NY | Chief Executive Officer and Director | |||
BlackRock Funding, Inc., Wilmington, DE | Chief Executive Officer | |||
BlackRock Funding International, Ltd., Cayman Islands | Chief Executive Officer and Director | |||
BlackRock Holdco 2, Inc. Wilmington, DE | Chief Executive Officer and Director | |||
BlackRock HPB Management, LLC, New York, NY | Director | |||
BlackRock International Holdings, Inc., New York, NY | Chief Executive Officer and Director | |||
BlackRock Investments, LLC, Wilmington, DE | Chairman and Director - Board of Managers | |||
BlackRock Investment Management, LLC, Plainsboro, NJ | Chief Executive Officer | |||
BlackRock Portfolio Holdings, Inc., Wilmington, DE | Chief Executive Officer | |||
BlackRock Portfolio Investments, LLC, Wilmington, DE | Chief Executive Officer | |||
BlackRock US Newco, Inc., Wilmington, DE | Chief Executive Officer | |||
State Street Research & Management Company, Boston, MA | Chief Executive Officer and Director | |||
State Street Research Investment Services, Inc., Boston, MA | Director | |||
SSRM Holdings, Inc., Boston, MA | Chief Executive Officer and Director | |||
Robert S. Kapito, President and Director | BAA Holdings, LLC, Wilmington, DE | President and Director | ||
BlackRock, Inc., New York, NY | President and Director | |||
BlackRock Advisors, LLC, Wilmington, DE | President and Director | |||
BlackRock Advisors Holdings, Inc., New York, NY | President and Director | |||
BlackRock Advisors Singapore Pte. Ltd., Singapore | President | |||
BlackRock Capital Management, Inc., Wilmington, DE | President and Director | |||
BlackRock Capital Markets, LLC, Wilmington, DE | Director | |||
BlackRock Financial Management, Inc., New York, NY | President and Director |
BlackRock Funding, Inc., Wilmington, DE |
President and Director |
|||
BlackRock Funding International, Ltd., Cayman Islands |
President and Director |
|||
BlackRock Holdco 2, Inc. Wilmington, DE |
President and Director |
|||
BlackRock (Institutional) Canada Ltd., Toronto, Ontario |
President and Director |
|||
BlackRock International Holdings, Inc., New York, NY |
President and Director |
|||
BlackRock Investments, LLC, Wilmington, DE |
Director - Board of Managers |
|||
BlackRock Investment Management, LLC, Plainsboro, NJ |
President |
|||
BlackRock Portfolio Holdings, Inc., Wilmington, DE |
President and Director |
|||
BlackRock Portfolio Investments, LLC, Wilmington, DE |
President and Director |
|||
BlackRock US Newco, Inc., Wilmington, DE |
President and Director |
|||
Carbon Capital III, Inc. New York, NY |
Director |
|||
State Street Research & Management Company, Boston, MA |
President and Director |
|||
State Street Research Investment Services, Inc., Boston, MA |
Director |
|||
SSRM Holdings, Inc., Boston, MA |
President and Director |
|||
Paul Audet, Vice Chairman and Director |
BAA Holdings, LLC, Wilmington, DE |
Vice Chairman and Director |
||
BlackRock, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Advisors, LLC, Wilmington, DE |
Vice Chairman and Director |
|||
BlackRock Advisors Holdings, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Capital Management, Inc., Wilmington, DE |
Vice Chairman and Director |
|||
BlackRock Cayco Limited, Cayman Islands |
Director |
|||
BlackRock Cayman Company, Cayman Islands |
Director |
|||
BlackRock Cayman Newco Limited, Cayman Islands |
Director |
|||
BlackRock Financial Management, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Finco, LLC, Wilmington, DE |
Director |
|||
BlackRock Funding, Inc., Wilmington, DE |
Vice Chairman and Director |
BlackRock Funding International, Ltd. Cayman Islands |
Vice Chairman and Director |
|||
BlackRock Holdco Limited, Cayman Islands |
Director |
|||
BlackRock Holdco 2, Inc. Wilmington, DE |
Vice Chairman |
|||
BlackRock International Holdings, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Investment Management, LLC, Plainsboro, NJ |
Vice Chairman |
|||
BlackRock Lux Finco S.a r.l., Luxembourg, Luxembourg |
Vice Chairman |
|||
BlackRock Operations (Luxembourg) S.a r.l., Luxembourg, Luxembourg |
Vice Chairman |
|||
BlackRock Portfolio Holdings, Inc., Wilmington, DE |
Vice Chairman and Director |
|||
BlackRock Portfolio Investments, LLC, Wilmington, DE |
Vice Chairman and Director |
|||
BlackRock Realty Advisors, Inc., Florham Park, NJ |
Director |
|||
BlackRock UK 1 LP, London, England |
Vice Chairman |
|||
BlackRock US Newco, Inc., Wilmington, DE |
Vice Chairman and Director |
|||
State Street Research & Management Company, Boston, MA |
Vice Chairman |
|||
SSRM Holdings, Inc., Boston, MA |
Vice Chairman |
|||
Charles Hallac, Vice Chairman and Co-Chief Operating Officer |
BlackRock, Inc., New York, NY |
Vice Chairman and Co-Chief Operating Officer |
||
BlackRock Advisors, LLC, Wilmington, DE |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock Advisors Holdings, Inc., New York, NY |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock Capital Management, Inc., Wilmington, DE |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock Financial Management, Inc., New York, NY |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock Funding, Inc., Wilmington, DE |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock Funding International, Ltd. Cayman Islands |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock Holdco 2, Inc. Wilmington, DE |
Vice Chairman and Co-Chief Operating Officer |
|||
BlackRock India Private Ltd., Mumbai, India |
Director |
|||
BlackRock International Holdings, Inc., New York, NY |
Vice Chairman and Co-Chief Operating Officer |
BlackRock Investment Management, LLC, Plainsboro, NJ | Vice Chairman and Co-Chief Operating Officer | |||
BlackRock Portfolio Holdings, Inc., Wilmington, DE | Vice Chairman and Co-Chief Operating Officer | |||
BlackRock Portfolio Investments, LLC, Wilmington, DE | Vice Chairman and Co-Chief Operating Officer | |||
BlackRock US Newco, Inc., Wilmington, DE | Vice Chairman and Co-Chief Operating Officer | |||
State Street Research & Management Company, Boston, MA | Vice Chairman and Co-Chief Operating Officer | |||
SSRM Holdings, Inc., Boston, MA | Vice Chairman and Co-Chief Operating Officer | |||
Barbara Novick, Vice Chairman | BlackRock, Inc., New York, NY | Vice Chairman | ||
BlackRock Advisors, LLC, Wilmington, DE | Vice Chairman | |||
BlackRock Advisors Holdings, Inc., New York, NY | Vice Chairman | |||
BlackRock Capital Management, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Financial Management, Inc., New York, NY | Vice Chairman | |||
BlackRock Funding, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Funding International, Ltd. Cayman Islands | Vice Chairman | |||
BlackRock Holdco 2, Inc. Wilmington, DE | Vice Chairman | |||
BlackRock International Holdings, Inc., New York, NY | Vice Chairman | |||
BlackRock Investment Management, LLC, Plainsboro, NJ | Vice Chairman | |||
BlackRock Portfolio Holdings, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Portfolio Investments, LLC, Wilmington, DE | Vice Chairman | |||
BlackRock US Newco, Inc., Wilmington, DE | Vice Chairman | |||
State Street Research & Management Company, Boston, MA | Vice Chairman | |||
SSRM Holdings, Inc., Boston, MA | Vice Chairman | |||
Scott Amero, Vice Chairman | BlackRock, Inc., New York, NY | Vice Chairman | ||
BlackRock Advisors, LLC, Wilmington, DE | Vice Chairman | |||
BlackRock Advisors Holdings, Inc., New York, NY | Vice Chairman |
BlackRock Capital Management, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Financial Management, Inc., New York, NY | Vice Chairman | |||
BlackRock Funding, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Funding International, Ltd. Cayman Islands | Vice Chairman | |||
BlackRock Holdco 2, Inc. Wilmington, DE | Vice Chairman | |||
BlackRock International Holdings, Inc., New York, NY | Vice Chairman | |||
BlackRock Investment Management, LLC, Plainsboro, NJ | Vice Chairman | |||
BlackRock Portfolio Holdings, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Portfolio Investments, LLC, Wilmington, DE | Vice Chairman | |||
BlackRock US Newco, Inc., Wilmington, DE | Vice Chairman | |||
Anthracite Capital Inc. New York, NY | Director | |||
State Street Research & Management Company, Boston, MA | Vice Chairman | |||
SSRM Holdings, Inc., Boston, MA | Vice Chairman | |||
Susan Wagner, Vice Chairman and Chief Operating Officer | BAA Holdings, LLC, Wilmington, DE | Vice Chairman, Chief Operating Officer and Director | ||
BlackRock, Inc., New York, NY | Vice Chairman and Chief Operating Officer | |||
BlackRock Advisors, LLC, Wilmington, DE | Vice Chairman and Chief Operating Officer | |||
BlackRock Advisors Holdings, Inc., New York, NY | Vice Chairman and Chief Operating Officer | |||
BlackRock Capital Management, Inc., Wilmington, DE | Vice Chairman and Chief Operating Officer | |||
BlackRock Financial Management, Inc., New York, NY | Vice Chairman and Chief Operating Officer | |||
BlackRock Funding, Inc., Wilmington, DE | Vice Chairman and Chief Operating Officer | |||
BlackRock Funding International, Ltd. Cayman Islands | Vice Chairman and Chief Operating Officer | |||
BlackRock Holdco 2, Inc. Wilmington, DE | Vice Chairman and Chief Operating Officer | |||
BlackRock International Holdings, Inc., New York, NY | Vice Chairman and Chief Operating Officer | |||
BlackRock Investment Management, LLC, Plainsboro, NJ |
Vice Chairman and Chief Operating Officer |
BlackRock Mortgage Ventures, LLC Wilmington, DE |
Director |
|||
BlackRock Portfolio Holdings, Inc., Wilmington, DE |
Vice Chairman and Chief Operating Officer |
|||
BlackRock Portfolio Investments, LLC, Wilmington, DE |
Vice Chairman and Chief Operating Officer |
|||
BlackRock US Newco, Inc., Wilmington, DE |
Vice Chairman and Chief Operating Officer |
|||
State Street Research & Management Company, Boston, MA |
Vice Chairman and Chief Operating Officer |
|||
SSRM Holdings, Inc., Boston, MA |
Vice Chairman and Chief Operating Officer |
|||
Robert Doll, Vice Chairman |
BlackRock, Inc., New York, NY |
Vice Chairman |
||
BlackRock Advisors, LLC, Wilmington, DE |
Vice Chairman |
|||
BlackRock Advisors Holdings, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Capital Management, Inc., Wilmington, DE |
Vice Chairman |
|||
BlackRock Financial Management, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Funding, Inc., Wilmington, DE |
Vice Chairman |
|||
BlackRock Funding International, Ltd. Cayman Islands |
Vice Chairman |
|||
BlackRock Holdco 2, Inc. Wilmington, DE |
Vice Chairman |
|||
BlackRock International Holdings, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Investment Management, LLC, Plainsboro, NJ |
Vice Chairman |
|||
BlackRock Portfolio Holdings, Inc., Wilmington, DE |
Vice Chairman |
|||
BlackRock Portfolio Investments, LLC, Wilmington, DE |
Vice Chairman |
|||
BlackRock US Newco, Inc., Wilmington, DE |
Vice Chairman |
|||
Portfolio Administration & Management Ltd., Cayman Islands |
Director |
|||
State Street Research & Management Company, Boston, MA |
Vice Chairman |
|||
SSRM Holdings, Inc., Boston, MA |
Vice Chairman |
|||
Robert Fairbairn, Vice Chairman |
BlackRock, Inc., New York, NY |
Vice Chairman |
||
BlackRock Advisors, LLC, Wilmington, DE |
Vice Chairman |
|||
BlackRock Advisors Holdings, Inc., New York, NY |
Vice Chairman |
BlackRock Capital Management, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Financial Management, Inc., New York, NY | Vice Chairman | |||
BlackRock Funding, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Funding International, Ltd. Cayman Islands | Vice Chairman | |||
BlackRock International Holdings, Inc., New York, NY | Vice Chairman | |||
BlackRock Investment Management, LLC, Plainsboro, NJ | Vice Chairman | |||
BlackRock Lux Finco S.a r.l., Luxembourg, Luxembourg | Vice Chairman | |||
BlackRock Operations (Luxembourg) S.a r.l., Luxembourg, Luxembourg | Vice Chairman | |||
BlackRock Portfolio Holdings, Inc., Wilmington, DE | Vice Chairman | |||
BlackRock Portfolio Investments, LLC, Wilmington, DE | Vice Chairman | |||
BlackRock UK 1 LP, London, England | Vice Chairman | |||
BlackRock US Newco, Inc., Wilmington, DE | Vice Chairman | |||
State Street Research & Management Company, Boston, MA | Vice Chairman | |||
SSRM Holdings, Inc., Boston, MA | Vice Chairman | |||
Bennett Golub, Vice Chairman and Chief Risk Officer | BlackRock, Inc., New York, NY | Vice Chairman and Chief Risk Officer | ||
BlackRock Advisors, LLC, Wilmington, DE | Vice Chairman and Chief Risk Officer | |||
BlackRock Advisors Holdings, Inc., New York, NY | Vice Chairman and Chief Risk Officer | |||
BlackRock Capital Management, Inc. Wilmington, DE | Vice Chairman and Chief Risk Officer | |||
BlackRock Financial Management, Inc., New York, NY | Vice Chairman and Chief Risk Officer | |||
BlackRock Funding, Inc., Wilmington, DE | Vice Chairman and Chief Risk Officer | |||
BlackRock Funding International, Ltd. Cayman Islands | Vice Chairman and Chief Risk Officer | |||
BlackRock International Holdings, Inc., New York, NY | Vice Chairman and Chief Risk Officer | |||
BlackRock Investment Management, LLC, Plainsboro, NJ | Vice Chairman and Chief Risk Officer | |||
BlackRock Portfolio Holdings, Inc. Wilmington, DE | Vice Chairman and Chief Risk Officer | |||
BlackRock Portfolio Investments, LLC Wilmington, DE | Vice Chairman and Chief Risk Officer |
BlackRock US Newco, Inc. Wilmington, DE |
Vice Chairman and Chief Risk Officer |
|||
SSRM Holdings, Inc. Boston, MA |
Vice Chairman and Chief Risk Officer |
|||
State Street Research & Management Company, Boston, MA |
Vice Chairman and Chief Risk Officer |
|||
Richard Kushel, Vice Chairman |
BlackRock, Inc., New York, NY |
Vice Chairman |
||
BlackRock Advisors, LLC, Wilmington, DE |
Vice Chairman |
|||
BlackRock Advisors Holdings, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Capital Management, Inc. Wilmington, DE |
Vice Chairman |
|||
BlackRock Financial Management, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Funding, Inc., Wilmington, DE |
Vice Chairman |
|||
BlackRock International Holdings, Inc., New York, NY |
Vice Chairman |
|||
BlackRock Investment Management, LLC, Plainsboro, NJ |
Vice Chairman |
|||
BlackRock Japan Co., Ltd Tokyo, Japan |
Director |
|||
BlackRock Portfolio Holdings, Inc. Wilmington, DE |
Vice Chairman |
|||
BlackRock Portfolio Investments, LLC Wilmington, DE |
Vice Chairman |
|||
BlackRock Securities Co., Ltd Tokyo, Japan |
Director |
|||
BlackRock US Newco, Inc. Wilmington, DE |
Vice Chairman |
|||
SSRM Holdings, Inc. Boston, MA |
Vice Chairman |
|||
State Street Research & Management Company, Boston, MA |
Vice Chairman |
|||
BlackRock Advisors Singapore Pte. Ltd., Singapore |
Director |
|||
BlackRock Asset Management UK Limited, London, England |
Chairman and Director |
|||
BlackRock Group Limited, London, England |
Chairman and Director |
|||
BlackRock (Hong Kong) Limited, Hong Kong, SAR, China |
Director |
|||
BlackRock International Limited, Edinburgh, Scotland |
Chairman and Director |
|||
BlackRock Investment Management (Australia) Limited, Melbourne, Australia |
Director |
BlackRock Investment Management International Limited, London, England |
Chairman and Director |
|||
BlackRock Investment Management (Korea) Limited, Seoul, Korea |
Director |
|||
BlackRock Investment Management (Singapore) Limited, Singapore |
Director |
|||
BlackRock Investment Management (UK) Limited, London, England |
Chairman and Director |
|||
BlackRock (Taiwan) Limited, Taipei, Taiwan |
Director |
|||
Impact Investing Pty Ltd., Melbourne, Australia |
Director |
|||
PSN Pty Ltd., Melbourne, Australia |
Director |
2. |
Bogle Investment Management, LP: |
The sole business activity of Bogle Investment Management, LP (Bogle), 2310 Washington Street, Suite 310, Newton Lower Falls, MA 02462, is to serve as an investment adviser. Bogle is registered under the Investment Advisers Act of 1940.
The directors and officers have not held any positions with other companies during the last two fiscal years.
3. |
Schneider Capital Management Company: |
The sole business activity of Schneider Capital Management Company (Schneider), 460 E. Swedesford Road, Suite 2000, Wayne, PA 19087, is to serve as an investment adviser. Schneider is registered under the Investment Advisers Act of 1940.
Information as to the directors and officers of Schneider is as follows:
Name and Position with Schneider |
Other Company |
Position With Other Company |
||
Arnold C. Schneider, III President and Chief Investment Officer |
Turnbridge Management Partners Corp. | President | ||
Steven J. Fellin Sr. Vice President, Chief Operating & Financial Officer Chief Compliance Officer |
Turnbridge Management Partners Corp. | Vice President |
4. |
Robeco Investment Management , Inc. |
The sole business activity of Robeco Investment Management, Inc. (RIM), 909 Third Avenue, 32 nd floor, New York 10022, is to serve as an investment adviser. RIM provides investment advisory services to the Robeco Boston Partners Funds and the Robeco Weiss, Peck, & Greer Funds.
RIM is registered under the Investment Advisers Act of 1940 and serves as an investment adviser to domestic and foreign institutional investors, investment companies, commingled trust funds, private investment partnerships and collective investment vehicles. Information as to the directors and officers of Robeco Investment Management, Inc. is as follows:
Name and Position with RIM |
Other Company |
Position With Other Company |
||
Mark E. Donovan Senior Managing Director, Co-Chief Executive Officer |
Robeco Institutional Asset Management US Inc. |
Director |
||
Robeco Trust Company |
Co-CEO, Director & Chairman of the Board |
|||
Saint Sebastian High School |
Trustee |
|||
Joseph F. Feeney, Jr. Senior Managing Director, Co-Chief Executive Officer |
Robeco Trust Company |
President, Co-CEO, Chief Investment Officer, Director & Vice Chairman of the Board |
||
William George Butterly, III Senior Managing Director, Chief Operating Officer, General Counsel, Chief Compliance Officer & Secretary |
Robeco Institutional Assets Management US Inc. |
Chief Legal Officer, Chief Compliance Officer & Secretary |
||
Robeco Securities, L.L.C. |
Chief Legal Officer |
|||
Robeco Trust Company |
Chief Operating Officer, Secretary & Director |
|||
Sustainable Asset Management USA, Inc. |
Chief Legal Officer & Chief Compliance Officer & Secretary |
|||
Matthew J. Davis Senior Managing Director, Treasurer & Chief Financial Officer |
Robeco Institutional Asset Management US Inc. |
President, Treasurer& Director |
||
Robeco Securities, L.L.C. |
Chief Legal Officer |
|||
Robeco Trust Company |
Chief Financial Officer, Treasurer & Director |
Paul F. Healey Senior Managing Director & Director of Sales, Marketing & Client Service |
Robeco Securities, L.L.C. |
Chief Executive Officer |
||
Mellon Capital Management | Executive Vice President | |||
Franklin Portfolio Associates | President and Chief Operating Officer | |||
Investment Committee of the New England Province of Jesuits | Member, Former Chairman | |||
Massachusetts Chapter of the Cystic Fibrosis Foundation | Chairman of the Board | |||
Roderick Munsters Director |
None | None | ||
Cornelis Korthout Director |
None | None | ||
Leni M. Boeren Director |
None | None | ||
Hester Borrie Director |
None | None |
5. |
Hilliard Lyons Research Advisors: |
Hilliard Lyons Research Advisors is located at 500 West Jefferson Street, Louisville, Kentucky 40202. Hilliard Lyons Research Advisors is a division of J.J.B. Hilliard, W.L. Lyons, LLC. (Hilliard). Hilliard is registered under the Investment Advisers Act of 1940 and is also a registered broker-dealer. Hilliard is owned by HL Financial Services, LLC which is owned by Houchens Industries, Inc. and by employees of Hilliard and its affiliates as well as a limited number of outside investors.
Information as to the directors and executive officers of Hilliard is as follows:
Name and Position with Hilliard |
Other Company |
Position With Other Company |
||
James M. Rogers Executive Vice President, Chief Operating Officer and Director |
Hilliard Lyons Trust Company, LLC |
Director |
James R. Allen President, Chief Executive Officer and Director |
Hilliard Lyons Trust Company, LLC |
Director | ||
Hilliard Lyons Capital Management, LLC |
Director | |||
HL Financial Services, LLC | Director | |||
Paul J. Moretti Executive Vice President and Chief Financial Officer |
None | None | ||
John R. Bugh Executive Vice President |
Hilliard Lyons Capital Management, LLC |
Director | ||
Carmella Miller Executive Vice President, Chief Administrative Officer and Director |
Hilliard Lyons Trust Company, LLC |
Director |
6. |
Bear Stearns Asset Management Inc. |
Bear Stearns Asset Management Inc. (BSAM) serves as the investment adviser to the Bear Stearns CUFS MLP Mortgage Portfolio. BSAM is located at 245 Park Avenue, New York, New York 10167. BSAM is a registered investment adviser under the Investment Advisers Act of 1940, as amended. BSAMs Form ADV is available on the SECs website.
Information as to the directors and officers of BSAM is as follows:
Name and Position with BSAM |
Other Company |
Position With Other Company |
||
Lawrence Unrein Director, Chairman of the Board, Chief Executive Officer, President |
||||
Roger Baumann Director |
Artisan Advisors LLC |
CEO/Founder |
||
Gregory Quental Director |
Domus |
Director |
||
Richard T. Madsen Chief Financial Officer |
7. |
Matson Money, Inc. (formerly known as Abundance Technologies, Inc.): |
The sole business activity of Matson Money, Inc. (Matson Money), 5955 Deerfield Blvd., Mason, OH 45040, is to serve as an investment adviser. Matson Money is registered under the Investment Advisers Act of 1940.
Below is a list of each executive officer and director of Matson Money indicating each business, profession, vocation or employment of a substantial nature in which each such person has been engaged within the last two years, for his or her own account or in the capacity of director, officer, partner or trustee.
Name and Position with Abundance Technologies | Name of Other Company | Position With Other Company | ||
Mark E Matson President/CEO |
Abundance Horizons LLC | 50% owner | ||
Michelle Matson Vice President/ Secretary |
None | None | ||
Dan List Chief Compliance Officer |
None | None |
8. |
Marvin & Palmer Associates, Inc.: |
The sole business activity of Marvin & Palmer Associates, Inc., 1201 N. Market Street, Suite 2300, Wilmington, Delaware 19801-1165, is to serve as an investment adviser. Marvin & Palmer Associates is registered under the Investment Advisers Act of 1940.
Below is a list of each executive officer and director of Marvin & Palmer Associates indicating each business, profession, vocation or employment of a substantial nature in which each such person has been engaged within the last two years, for his or her own account or in the capacity of director, officer, partner or trustee.
Name and Position with Marvin & Palmer
|
Name of Other Company |
Position With Other Company |
||
David F. Marvin Chairman & Chief Executive Officer Director |
Cash Management Policy Board Office of the State Treasurer 820 Silver Lake Boulevard Suite 100 Dover, Delaware 19901 |
Board Member |
||
Wilmington University Board of Trustees 320 DuPont Highway New Castle, Delaware 19720 |
Trustee |
|||
Stanley Palmer Vice Chairman Director |
None |
None |
||
Todd D. Marvin President Director |
Serviam Girls Academy P. O. Box 7907 Wilmington, Delaware 19803 |
Board Member |
||
David L. Schaen President Director |
None |
None |
||
Karen T. Buckley Chief Operating Officer Chief Financial Officer Director |
None |
None |
||
The Rt. Hon. Lord Moore, P.C. Director |
Rolls-Royce Fund Trustees Moor Lane Derby, DE 24 8BJ United Kingdom |
Chairman (Retired 12-31-07) |
Madelyn B. Smith Director |
Badgley Funds Inc. Badgley, Phelps and Bell 1420 Fifth Avenue Suite 3200 Seattle, Washington 98101-2349 |
Director (Retired 12-31-07) |
||
University of Puget Sound Endowment Committee 1500 North Warner Street Tacoma, Washington 98416 |
Committee Member |
|||
Bellarmine Preparatory School Retirement Board 2300 S. Washington Tacoma, Washington 98405-1399 |
Board Member |
9. |
Sustainable Asset Management USA, Inc. |
The sole business activity of Sustainable Asset Management USA, Inc. (SAM US), 909 Third Avenue, New York 10022, is to serve as an investment adviser.
SAM US is registered under the Investment Advisers Act of 1940 and serves as an investment adviser to domestic and foreign institutional investors, investment companies, commingled trust funds, private investment partnerships and collective investment vehicles. Information as to the directors and officers of SAM US is as follows:
Name and Position with SAM |
Name of Other Company |
Position With Other Company |
||
Hugo Steensma Managing Director & Director |
SAM Group Holding AG | Representative USA | ||
Michael Baldinger Head of Clients & Distribution ; Director |
SAM Group Holding AG | Head of Clients & Distribution | ||
Roman Martin Binder CEO, Treasurer & Director |
SAM Group Holding AG | Chief Operation Officer, Chief Financial Officer, Chief Risk Officer | ||
Sander van Eijkern Director |
SAM Group Holding AG | Chief Executive Officer, Director | ||
Robeco Groep NV | Head of Alternative & Sustainable Investments; Member of Management Board | |||
Robeco Institutional Asset Management B.V. | Managing Director | |||
Robecco Nederland B.V. | Managing Director |
William George Butterly, III Chief Legal Officer & Chief Compliance Officer & Secretary |
Robeco Investment Management, Inc. |
Senior Managing Director, Chief
Operating Officer, General Counsel, Chief Compliance Officer & Secretary |
||
Robeco Institutional Asset Management US Inc. | Chief Legal Officer & Chief Compliance Officer & Secretary | |||
Robeco Securities, L.L.C. | Chief Legal Officer | |||
Robeco Trust Company | Chief Operating Officer, Secretary & Director | |||
Stefanie Feigt Chief Investment Officer |
SAM Group Holding AG | Chief Investment Officer |
10. |
Perimeter Capital Management, LLC (Perimeter) |
The principal business address of Perimeter is Five Concourse Parkway, Suite 2725, Atlanta, Georgia 30328.
Perimeter serves as the investment adviser for the Perimeter Small Cap Growth Fund. Perimeter is an investment adviser registered under the Investment Advisers Act of 1940. The information as to the directors and officers of Perimeter is as follows:
Name and Position with Perimeter |
Name of Other Company |
Position With Other Company |
||||
G. Bradley Ball Managing Partner and CEO Perimeter Capital Management |
Perimeter Concourse Capital LLC | Member, Board of Directors | ||||
Mark D. Garfinkel, CFA Managing Partner and CIO Perimeter Capital Management |
Perimeter Concourse Capital LLC | Member, Board of Directors | ||||
Christopher J. Paolella Managing Partner, Director of Marketing & Consultant Relations Perimeter Capital Management |
Perimeter Concourse Capital LLC | Director of Marketing & Consultant Relations | ||||
Adam C. Steward, CFA, Partner, Director of Trading and Chief Compliance Officer Perimeter Capital Management |
Perimeter Concourse Capital LLC. | Director of Trading & CCO |
Theresa N. Benson
Partner, Director of Third-Party Distribution
|
Perimeter Concourse Capital LLC. |
Director of Third-Party Distribution
|
Item 32 . | Principal Underwriter |
(a) |
BNY Mellon Distributors Inc. (the Distributor) is registered with the Securities and Exchange Commission as a broker-dealer and is a member of the FINRA. As of July 1, 2010, the Distributor acted as principal underwriter for the following investment companies: |
Aston Funds
E.I.I. Realty Securities Trust
Fairholme Funds, Inc.
FundVantage Trust
GuideStone Funds
Highland Floating Rate Fund
Highland Floating Rate Advantage Fund
Highland Funds I
Industry Leaders Fund
Kalmar Pooled Investment Trust
Matthews International Funds, dba Matthews Asia Funds
The Metropolitan West Funds
The Motley Fool Funds Trust
New Alternatives Funds
Old Westbury Funds
The RBB Fund, Inc.
Stratton Mutual Funds
The Torray Fund |
(b) |
The Distributor is a Massachusetts corporation located at 760 Moore Road, King of Prussia, PA 19406. The Distributor is a wholly-owned subsidiary of BNY Mellon Distributors Holdings Inc. Inc. a wholly-owned subsidiary of The Bank of New York Mellon Corporation, a publicly traded company. |
The following is a list of the directors and executive officers of the Distributor:
Board of Directors
Name |
Position |
Effective Date |
||
Nicholas M. Marsini, Jr. |
Director |
April 26, 2007 |
||
Michael DeNofrio |
Director |
April 26, 2007 |
||
Steven Turowski |
Director |
August 30, 2007 |
||
T. Thomas Deck |
Director |
January 3, 2008 |
||
Dennis J. Westley |
Director |
March 4, 2008 |
Officers
Name |
Position |
Effective Date |
||
T. Thomas Deck |
President and Chief Executive Officer |
January 3, 2008 |
||
Bruno DiStefano |
Vice President |
April 11, 2007 |
||
Susan K. Moscaritolo |
Vice President, Secretary and Clerk |
VP - April 11, 2007 Secretary and Clerk May 29, 2007 |
||
Matthew O. Tierney |
Treasurer and Financial Operations Principal, Chief Financial Officer |
August 19, 2008 |
||
Mark D. Pinocci |
Chief Compliance Officer |
July 1, 2010 |
||
Jodi Jamison |
Chief Legal Officer |
April 11, 2007 |
||
Ellen C. Krause |
Chief Risk Officer |
March 26, 2009 |
||
Maria C. Schaffer |
Controller and Assistant Treasurer |
April 11, 2007 |
||
John J. Munera |
Anti-Money Laundering Officer |
April 11, 2007 |
||
Ronald Berge |
Assistant Vice President |
April 11, 2007 |
||
Dianna A. Stone |
Assistant Secretary and Assistant Clerk |
November 27, 2007 |
||
Kevin D. Peterson |
Assistant Treasurer Tax |
July 1, 2010 |
||
Gary E. Abbs |
Assistant Treasurer Tax |
July 1, 2010 |
||
Joanne S. Huber |
Assistant Treasurer Tax |
July 1, 2010 |
||
Barbara J. Parrish |
Assistant Secretary |
July 1, 2010 |
||
Mary Lou Olinski |
Assistant Secretary |
July 1, 2010 |
||
Cristina Rice |
Assistant Secretary |
July 1, 2010 |
(c) |
Not Applicable. |
Item 33. LOCATION OF ACCOUNTS AND RECORDS
(1) |
PFPC Trust Company (assignee under custodian agreement), 8800 Tinicum Boulevard, Suite 200, Philadelphia, Pennsylvania 19153 (records relating to its functions as sub-adviser and custodian). |
(2) |
BNY Mellon Distributors, Inc., 760 Moore Road, Valley Forge, Pennsylvania 19406. (records relating to its functions as principal underwriter). |
(3) |
BlackRock Institutional Management Corporation, Bellevue Corporate Center, 100 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as investment adviser, sub-adviser and administrator). |
(4) |
BNY Mellon Investment Servicing (U.S.) Inc., Bellevue Corporate Center, 103 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its functions as transfer agent and dividend disbursing agent). |
(5) |
BNY Mellon Investment Servicing (U.S.) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its function as administrator and accounting agent and Registrants Articles of Incorporation, By-Laws and Minute books). |
(6) |
Robeco Investment Management, Inc. (formerly Boston Partners Asset Management, L.L.C.), 909 Third Avenue, 32 nd floor, New York, New York 10022 (records relating to its function as investment adviser). |
(7) |
Schneider Capital Management Co., 460 East Swedesford Road, Suite 1080, Wayne, Pennsylvania 19087 (records relating to its function as investment adviser). |
(8) |
Bogle Investment Management, L.P., 57 River Street, Suite 206, Wellesley, Massachusetts 02481 (records relating to its function as investment adviser). |
(9) |
Robeco Investment Management, Inc. (formerly Weiss, Peck & Greer Investments), 909 Third Avenue, 32nd floor, New York, New York 10022 (records relating to its function as investment adviser). |
(10) |
Hilliard Lyons Research Advisors, a division of J. J. B. Hilliard, W. L. Lyons, Inc., 500 West Jefferson Street, Louisville, Kentucky 40202 (records relating to its function as investment adviser). |
(11) |
Bear Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167 (records relating to its function as investment adviser). |
(12) |
Marvin & Palmer Associates, Inc., 1201 N. Market Street, Suite 2300, Wilmington, Delaware 19801-1165 (records relating to its function as investment adviser). |
(13) |
Matson Money, Inc. (formerly Abundance Technologies, Inc.), 5955 Deerfield Blvd., Mason, OH 45040 (records relating to its function as investment adviser). |
(14) |
Sustainable Asset Management USA, Inc., 909 Third Avenue, New York, New York 10022 (records relating to its function as investment adviser). |
(15) |
Perimeter Capital Management, LLC, Five Concourse Parkway Suite 2725 Atlanta, GA 30328 (records relating to its function as investment adviser). |
(16) |
Simple Alternatives, LLC, 25 Burtis Avenue, New Canaan, CT 06840 (records relating to its function as investment adviser). |
Item 34. MANAGEMENT SERVICES
None.
Item 35. UNDERTAKINGS
(a) |
Registrant hereby undertakes to hold a meeting of shareholders for the purpose of considering the removal of directors in the event the requisite number of shareholders so request. |
(b) |
Registrant hereby undertakes to furnish each person to whom a prospectus is delivered a copy of Registrants latest annual report to shareholders upon request and without charge. |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended (the 1933 Act), and the Investment Company Act of 1940, as amended, the Registrant has duly caused this Post-Effective Amendment No. 135 to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the City of Wilmington, and State of Delaware on the 19 th day of July, 2010.
THE RBB FUND, INC. | ||
By: |
/s/ Salvatore Faia |
|
Salvatore Faia |
||
President |
Pursuant to the requirements of the 1933 Act, this Post-Effective Amendment to Registrants Registration Statement has been signed below by the following persons in the capacities and on the date indicated.
SIGNATURE |
TITLE |
DATE |
||
/s/ Salvatore Faia Salvatore Faia |
President (Principal Executive Officer) and Chief Compliance Officer | July 19, 2010 | ||
*Joel L. Weiss Joel L. Weiss |
Treasurer (Chief Financial Officer) | July 19, 2010 | ||
*J. Richard Carnall J. Richard Carnall |
Director | July 19, 2010 | ||
*Francis J. McKay Francis J. McKay |
Director | July 19, 2010 | ||
*Marvin E. Sternberg Marvin E. Sternberg |
Director | July 19, 2010 | ||
*Julian A. Brodsky Julian A. Brodsky |
Director | July 19, 2010 | ||
*Arnold M. Reichman Arnold M. Reichman |
Director | July 19, 2010 | ||
*Robert Sablowsky Robert Sablowsky |
Director | July 19, 2010 | ||
*Robert Straniere Robert Straniere |
Director | July 19, 2010 | ||
*Nicholas A. Giordano Nicholas A. Giordano |
Director | July 19, 2010 | ||
*By: /s/ Salvatore Faia Salvatore Faia Attorney-in-Fact |
July 19, 2010 |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Julian A. Brodsky, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Julian A. Brodsky |
||
Julian A. Brodsky |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, J. Richard Carnall, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ J. Richard Carnall |
||
J. Richard Carnall |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Nicholas A. Giordano, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Nicholas A. Giordano |
||
Nicholas A. Giordano |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Francis J. McKay, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Francis J. McKay |
||
Francis J. McKay |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Arnold M. Reichman, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Arnold M. Reichman |
||
Arnold M. Reichman |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert Sablowsky, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Robert Sablowsky |
||
Robert Sablowsky |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Marvin E. Sternberg, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Marvin E. Sternberg |
||
Marvin E. Sternberg |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert Straniere, hereby constitutes and appoints Salvatore Faia, Michael P. Malloy, James G. Shaw and Joel L. Weiss, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Director or officer, or both, of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
May 7, 2009 |
|
/s/ Robert Straniere |
||
Robert Straniere |
THE RBB FUND, INC.
(the Company)
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Joel L. Weiss, hereby constitutes and appoints Michael P. Malloy, James G. Shaw and Salvatore Faia, his true and lawful attorneys, to execute in his name, place, and stead, in his capacity as Officer of the Company, the Registration Statement and any amendments thereto and all instruments necessary or incidental in connection therewith, and to file the same with the Securities and Exchange Commission; and said attorneys shall have full power and authority to do and perform in his name and on his behalf, in any and all capacities, every act whatsoever requisite or necessary to be done in the premises, as fully and to all intents and purposes as he might or could do in person, said acts of said attorneys being hereby ratified and approved.
DATED: |
July 1, 2009 |
|
/s/ Joel L. Weiss |
||
Joel L. Weiss |
PEA 135
EXHIBIT INDEX
EXHIBIT |
DESCRIPTION |
|
(a)(57) | Articles Supplementary | |
(i)(1) | Opinion and Consent of Counsel | |
(i)(2) | Consent of Counsel |
Exhibit (a)(57)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY
THE RBB FUND, INC., a Maryland corporation having its principal office in Baltimore, Maryland (hereinafter called the Corporation), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: In accordance with the requirements of Section 2-208 of the Maryland General Corporation Law, the Board of Directors of the Corporation has classified: 1) One Hundred Million (100,000,000) authorized but unclassified and unissued shares of Common Stock of the Corporation as Class YYYY shares of Common Stock representing interests in the S1 Fund I Class; 2) One Hundred Million (100,000,000) authorized but unclassified and unissued shares of Common Stock of the Corporation as Class ZZZZ shares of Common Stock representing interests in the S1 Fund R Class; pursuant to the following resolutions adopted by the Board of Directors of the Corporation on June 16, 2010:
RESOLVED, that pursuant to the authority expressly given to the Board of Directors in Article VI, Section (4) of the Corporations Charter, the Board hereby classifies authorized and unissued shares of Common Stock of the Corporation, par value $.001 per share, and hereby fixes and determines the rights, preferences, restrictions and other matters relating to such classes of Common Stock as follows:
1. |
Class Shares . One Hundred Million (100,000,000) of the authorized, unissued and unclassified shares of the Corporation (par value $.001 per share) are hereby classified and designated as Class YYYY shares of Common Stock representing interests in the S1 Fund I Class. |
2. |
Class Shares . One Hundred Million (100,000,000) of the authorized, unissued and unclassified shares of the Corporation (par value $.001 per share) are hereby classified and designated as Class ZZZZ shares of Common Stock representing interests in the S1 Fund R Class. |
FURTHER RESOLVED, that a description of the shares so classified with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption as set or changed by the Board of Directors of the Corporation is as set forth in Article VI, Section (6) of the Corporations Articles of Incorporation and as set forth elsewhere in the Charter of the Corporation with respect to stock of the Corporation generally, and as follows:
1. To the full extent permitted by applicable law, the Corporation may, without the vote of the shares of any class of capital stock of the Corporation then outstanding and if so determined by the Board of Directors:
(A)(1) sell and convey the assets belonging to Class YYYY or Class ZZZZ, Common Stock (each a Class) to another trust or corporation that is a management investment company (as defined in the Investment Company Act of 1940, as amended) and is organized under the laws of any state of the United States for consideration, which may include the assumption of all outstanding obligations, taxes and other liabilities, accrued or contingent, belonging to such Class and which may include securities issued by such trust or corporation. Following such sale and conveyance, and after making provision for the payment of any liabilities belonging to such Class that are not assumed by the purchaser of the assets belonging to such Class, the Corporation may, at its option, redeem all outstanding shares of such Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors. Notwithstanding any other provision of the Charter of the Corporation to the contrary, the redemption price may be paid in any combination of cash or other assets belonging to such Class, including but not limited to the distribution of the securities or other consideration received by the Corporation for the assets belonging to such Class upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter of the Corporation;
(2) sell and convert the assets belonging to a Class into money and, after making provision for the payment of all obligations, taxes and other liabilities, accrued or contingent, belonging to such Class, the Corporation may, at its option, redeem all outstanding shares of such Class at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter of the Corporation; or
(3) combine the assets belonging to a Class with the assets belonging to any one or more other classes of capital stock of the Corporation if the Board of Directors reasonably determines that such combination will not have a material adverse effect on the stockholders of any class of capital stock of the Corporation participating in such combination. In connection with any such combination of assets, the shares of the Class then outstanding may, if so determined by the Board of Directors, be converted into shares of any other class or classes of capital stock of the Corporation with respect to which conversion is permitted by applicable law, or may be redeemed, at the option of the Corporation, at the net asset value thereof as determined by the Board of Directors in accordance with the provisions of applicable law, less such redemption fee or other charge, or conversion cost, if any, as may be fixed by resolution of the Board of Directors upon such conditions as the Board of
-2-
Directors deems, in its sole discretion, to be appropriate and consistent with applicable law and the Charter of the Corporation. Notwithstanding any other provision of these Articles Supplementary or the Articles of Incorporation to the contrary, any redemption price, or part thereof, paid pursuant to this section may be paid in shares of any other existing or future class or classes of capital stock of the Corporation; and
(B) without limiting the foregoing, at its option, (i) redeem the shares of the Classes of any holder thereof if the value of such shares in the account maintained by the Corporation or its transfer agent is less than $5,000 (five thousand dollars) provided, however, that such shareholder shall be notified that the value of the account is less than $5,000 and allowed thirty (30) days to make additional purchases of shares so that the account has a value of at least $5,000 before such redemption is processed by the Corporation, or (ii) redeem shares of the Classes for any other reason if the Board of Directors has determined that it is in the best interest of the Corporation to do so. Any such redemption shall be at the net asset value of such shares of such Class being redeemed less such redemption fee or other charge, if any, as may be fixed by resolution of the Board of Directors and shall be made and effective upon such terms and in accordance with procedures approved by the Board of Directors at such time.
2. The shares of Class YYYY Common Stock and Class ZZZZ Common Stock will be issued without stock certificates.
SECOND: The shares aforesaid have been duly classified by the Board of Directors of the Corporation pursuant to authority and power contained in the Charter of the Corporation.
THIRD: (1) Immediately before the classification of additional authorized, unissued and unclassified shares of Common Stock as Class YYYY Common Stock and Class ZZZZ Common Stock:
(a) the Corporation had the authority to issue one hundred billion (100,000,000,000) shares of its Common Stock and the aggregate par value of all the shares of all classes was one hundred million dollars ($100,000,000); and
(b) the number of authorized shares of each class was as follows:
Class A |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class B |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class C |
- |
one hundred million (100,000,000), par value $.001 per share; |
-3-
Class D |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class E |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class F |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class G |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class H |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class I |
- |
one billion five hundred million (1,500,000,000), par value $.001 per share; |
||
Class J |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class K |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class L |
- |
one billion five hundred million (1,500,000,000), par value $.001 per share; |
||
Class M |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class N |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class O |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class P |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class Q |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class R |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class S |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class T |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class U |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class V |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class W |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class X |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class Y |
- |
fifty million (50,000,000), par value $.001 per share; |
-4-
Class Z |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class AA |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class BB |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class CC |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class DD |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class EE |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class FF |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class GG |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class HH |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class II |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class JJ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class KK |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class LL |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class MM |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class NN |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class OO |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class PP |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class QQ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class RR |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class SS |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class TT |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class UU |
- |
one hundred million (100,000,000), par value $.001 per share; |
-5-
Class VV |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class WW |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class YY |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class ZZ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class AAA |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class BBB |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class CCC |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class DDD |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class EEE |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class FFF |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class GGG |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class HHH |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class III |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class JJJ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class KKK |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class LLL |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class MMM |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class NNN |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class OOO |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class PPP |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class QQQ |
- |
two billion five hundred million (2,500,000,000), par value $.001 per share; |
||
Class RRR |
- |
two billion five hundred million (2,500,000,000), par value $.001 per share; |
-6-
-7-
Class OOOO |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class PPPP |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class QQQQ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class RRRR |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class SSSS |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class TTTT |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class UUUU |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class VVVV |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class WWWW |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class XXXX |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class Select |
- |
seven hundred million (700,000,000), par value $.001 per share; |
||
Class Beta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Beta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Beta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Principal Money |
seven hundred million (700,000,000), par value $.001 per share; |
|||
Class Gamma 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Gamma 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Gamma 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Bear Stearns |
||||
Money |
- |
two billion five hundred million (2,500,000,000), par value $.001 per share; |
||
Class Bear Stearns Municipal Money |
- |
one billion five hundred million (1,500,000,000), par value $.001 per share; |
-8-
Class Bear Stearns |
||||
Government Money |
- |
one billion (1,000,000,000), par value $.001 per share; |
||
Class Delta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 4 |
- |
one million (1,000,000), par value $.001 per share; |
for a total of seventy-eight billion, nine hundred seventy-three million (78,973,000,000) shares classified into separate classes of Common Stock.
(2) After the classification of additional authorized, unissued and unclassified shares of Common Stock as Class YYYY and Class ZZZZ Common Stock:
-9-
(a) the Corporation has the authority to issue one hundred billion (100,000,000,000) shares of its Common Stock and the aggregate par value of all the shares of all classes is one hundred million dollars ($100,000,000); and
(b) the number of authorized shares of each class is now as follows:
Class A |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class B |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class C |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class D |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class E |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class F |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class G |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class H |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class I |
- |
one billion five hundred million (1,500,000,000), par value $.001 per share; |
||
Class J |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class K |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class L |
- |
one billion five hundred million (1,500,000,000), par value $.001 per share; |
||
Class M |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class N |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class O |
- |
five hundred million (500,000,000), par value $.001 per share; |
||
Class P |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class Q |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class R |
- |
five hundred million (500,000,000), par value $.001 per share; |
-10-
-11-
Class PP |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class QQ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class RR |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class SS |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class TT |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class UU |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class VV |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class WW |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class YY |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class ZZ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class AAA |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class BBB |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class CCC |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class DDD |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class EEE |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class FFF |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class GGG |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class HHH |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class III |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class JJJ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class KKK |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class LLL |
- |
one hundred million (100,000,000), par value $.001 per share; |
-12-
Class MMM |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class NNN |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class OOO |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class PPP |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class QQQ |
- |
two billion five hundred million (2,500,000,000), par value $.001 per share; |
||
Class RRR |
- |
two billion five hundred million (2,500,000,000), par value $.001 per share; |
||
Class SSS |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class TTT |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class UUU |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class VVV |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class WWW |
- |
fifty million (50,000,000), par value $.001 per share; |
||
Class XXX |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class YYY |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class ZZZ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class AAAA |
- |
fifty billion (50,000,000,000), par value $.001 per share; |
||
Class BBBB |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class CCCC |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class DDDD |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class EEEE |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class FFFF |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class GGGG |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class HHHH |
- |
one hundred million (100,000,000), par value $.001 per share; |
-13-
Class IIII |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class JJJJ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class KKKK |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class LLLL |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class MMMM |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class NNNN |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class OOOO |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class PPPP |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class QQQQ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class RRRR |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class SSSS |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class TTTT |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class UUUU |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class VVVV |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class WWWW |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class XXXX |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class YYYY |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class ZZZZ |
- |
one hundred million (100,000,000), par value $.001 per share; |
||
Class Select |
- |
seven hundred million (700,000,000), par value $.001 per share; |
||
Class Beta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Beta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Beta 4 |
- |
one million (1,000,000), par value $.001 per share; |
-14-
Class Principal Money |
seven hundred million (700,000,000), par value $.001 per share; |
|||
Class Gamma 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Gamma 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Gamma 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Bear Stearns Money |
- |
two billion five hundred million (2,500,000,000), par value $.001 per share; |
||
Class Bear Stearns Municipal Money |
- |
one billion five hundred million (1,500,000,000), par value $.001 per share; |
||
Class Bear Stearns Government Money |
- |
one billion (1,000,000,000), par value $.001 per share; |
||
Class Delta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Epsilon 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Zeta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Eta 3 |
- |
one million (1,000,000), par value $.001 per share; |
-15-
Class Eta 4 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 1 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 2 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 3 |
- |
one million (1,000,000), par value $.001 per share; |
||
Class Theta 4 |
- |
one million (1,000,000), par value $.001 per share; |
for a total of seventy-nine billion, one hundred seventy-three million (79,173,000,000) shares classified into separate classes of Common Stock.
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be signed in its name and on its behalf by its President and witnessed by its Secretary on the 19 th day of July, 2010.
WITNESS: | THE RBB FUND, INC. | |||||||
By: |
/s/ Jennifer Rogers |
By: |
/s/ Salvatore Faia |
|||||
Jennifer Rogers | Salvatore Faia | |||||||
Secretary | President |
-16-
CERTIFICATE
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on behalf of said Corporation the foregoing Articles Supplementary to the Charter, of which this certificate is made a part, hereby acknowledges that the foregoing Articles Supplementary are the act of the said Corporation and further certifies that, to the best of his knowledge, information and belief, the matters and facts set forth therein with respect to the approval thereof are true in all material respects, under the penalties of perjury.
/s/ Salvatore Faia |
Salvatore Faia |
President |
-17-
Exhibit (i)(1)
Drinker Biddle & Reath LLP
One Logan Square
Suite 2000
Philadelphia, PA 19103
(215) 988-2700 (Phone)
(215) 988-2757 (Facsimile)
www.drinkerbiddle.com
July 19, 2010
The RBB Fund, Inc.
Bellevue Park Corporate Center
103 Bellevue Parkway
Wilmington, Delaware 19809
Re: |
Shares Registered by Post-Effective Amendment No. 135 to Registration |
|
Statement on Form N-1A (File No. 33-20827) |
Ladies and Gentlemen:
We have acted as counsel to The RBB Fund, Inc. (the Company) in connection with the preparation and filing with the Securities and Exchange Commission of Post-Effective Amendment No. 135 (the Amendment) to the Companys Registration Statement on Form N-1A under the Securities Act of 1933, as amended. The Board of Directors of the Company has authorized the issuance and sale by the Company of the following classes and numbers of shares of common stock, $0.001 par value per share (collectively, the Shares), with respect to the Companys S1 Fund:
PORTFOLIO |
CLASS | AUTHORIZED SHARES | ||
S1 Fund |
YYYY
ZZZZ |
100 million
100 million |
The Amendment seeks to register an indefinite number of the Shares.
We have reviewed the Companys Articles of Incorporation, ByLaws, resolutions of its Board of Directors, and such other legal and factual matters as we have deemed appropriate. This opinion is based exclusively on the Maryland General Corporation Law and the federal law of the United States of America.
Based upon and subject to the foregoing, it is our opinion that the Shares, when issued for payment as described in the Companys Prospectuses offering the Shares and in accordance with the Companys Articles of Incorporation for not less than $0.001 per share, will be legally issued, fully paid and non-assessable by the Company.
We consent to the filing of this opinion as an exhibit to the Amendment to the Companys Registration Statement.
Very truly yours, |
/s/ Drinker Biddle & Reath LLP |
Drinker Biddle & Reath LLP |
Exhibit (i)(2)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our Firm under the caption Counsel in the Statement of Additional Information that is included in Post-Effective Amendment No. 135 to the Registration Statement (No. 33-20827; 811-5518) on Form N-1A of The RBB Fund, Inc., under the Securities Act of 1933 and the Investment Company Act of 1940, respectively. This consent does not constitute a consent under section 7 of the Securities Act of 1933, and in consenting to the use of our name and the references to our Firm under such caption we have not certified any part of the Registration Statement and do not otherwise come within the categories of persons whose consent is required under said section 7 or the rules and regulations of the Securities and Exchange Commission thereunder.
/s/ Drinker Biddle & Reath LLP |
DRINKER BIDDLE & REATH LLP |
Philadelphia, Pennsylvania
July 19, 2010