SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
AZZAD FUNDS
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exch. Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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October 4, 2001
Dear Shareholder:
Your Board of Trustees is recommending a number of proposals designed to
improve the management and operations of Azzad Income Fund (the "Fund"). The
Fund, formerly known as Islamia Income Fund, was established last year to
provide investors with an investment vehicle that operates consistent with
Islamic law. First, we are seeking shareholder approval of a new investment
advisory contract reflecting a new adviser for the Fund, Azzad Asset Management,
Inc. ("Azzad") to replace the current manager, Income Achievers, Inc. Azzad is a
well-established investment adviser that has been in business since 1997 and has
greater financial resources and experience managing investment portfolios
pursuant to Islamic principles. Azzad's management incorporates oversight of
Fund investments by a highly qualified Shari`ah Supervisory Board.
Second, we recommend approval of a modified investment objective of the
Fund in order to reflect the oversight of the Shari`ah Supervisory Board to
insure that investment decisions are made in accordance with Islamic principles.
We also recommend revisions to and elimination of certain of the Fund's
fundamental investment limitations in order to clarify certain policies and
eliminate others that are no longer required to be fundamental policies.
Third, we recommend changes to the distribution arrangements for the Fund,
and, in particular, the adoption of a Rule 12b-1 Plan.
And, finally, we seek shareholder approval of the nomination of one new
trustee and continued service by four current trustees of the Fund.
A special meeting of Fund shareholders is being held on October 20, 2001 to
consider the proposals. If you owned Fund shares at the close of business on
September 28, 2001, you are entitled to vote at the meeting. THE FUND'S BOARD OF
TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU APPROVE THESE PROPOSALS.
Your vote is important. Please take a moment now to sign and return your
proxy card in the enclosed postage-paid envelope or fax it to us at
281-444-5929. If you have additional questions regarding the proposal, please
contact Champion Fund Services at 14340 Torrey Chase Blvd., Suite 170, Houston,
Texas 77014 or by calling (877) 881-2750
Very truly yours,
AZZAD INCOME FUND
/s/ Qamaruddin Ali Yar Khan
---------------------------
Qamaruddin Ali Yar Khan
President
2
AZZAD INCOME FUND
(A SERIES OF AZZAD FUNDS)
----------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OCTOBER 20, 2001
----------------------
TO THE SHAREHOLDERS:
A special meeting of shareholders of Azzad Income Fund ("Fund"), a series
of Azzad Funds ("Trust"), will be held on October 20, 2001 at 12:00 p.m.,
Central Time, at Drury Lane, 100 Oak Brook Terrace, Oak Brook, IL 60181, for the
following purposes:
(1) To approve a new advisory agreement with Azzad Asset Management, Inc.
for the Fund;
(2) To approve revision to the Fund's fundamental investment objective;
(3) To approve revisions to and elimination of certain of the Fund's
fundamental investment restrictions;
(4) To adopt a distribution plan pursuant to Rule 12b-1 of the Investment
Company Act of 1940;
(5) To elect a Board of Trustees; and
(6) To transact such other business as may properly come before the
meeting or any adjournment thereof.
You are entitled to vote at the meeting and any adjournments thereof if you
owned Fund shares at the close of business on September 28, 2001. If you attend
the meeting, you may vote your shares in person. WHETHER OR NOT YOU EXPECT TO
ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY
CARD IN THE ENCLOSED POSTAGE PAID ENVELOPE.
By order of the Board of Trustees,
Sabina Qadir
SECRETARY
3
October 4, 2001
19 West Fullerton Avenue
Glendale Heights, IL 60139
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YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED PROXY CARD, DATE
AND SIGN IT, AND RETURN IT IN THE POSTAGE PAID ENVELOPE PROVIDED. IF YOU SIGN,
DATE AND RETURN THE PROXY CARD BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL
BE VOTED "FOR" THE PROPOSALS AND "FOR" OR "AGAINST" ANY OTHER BUSINESS WHICH MAY
PROPERLY ARISE AT THE MEETING, IN THE PROXIES' DISCRETION. IN ORDER TO AVOID THE
ADDITIONAL EXPENSE OF FURTHER SOLICITATION, WE ASK YOUR COOPERATION IN MAILING
IN YOUR PROXY CARD PROMPTLY.
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AZZAD INCOME FUND
A SERIES OF AZZAD FUNDS
----------------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON OCTOBER 20, 2001
----------------------
This statement is furnished to the shareholders of Azzad Income Fund
("Fund"), a series of Azzad Funds ("Trust"), in connection with the Board of
Trustees' solicitation of proxies to be used at the special meeting of the
shareholders of the Fund to be held on October 20, 2001 at 12:00 p.m., Central
Time, at Drury Lane, 100 Oak Brook Terrace, Oak Brook, IL 60181, or any
adjournment or adjournments thereof ("Meeting"). This proxy statement and the
related proxy card will first be mailed to shareholders on or about October 4,
2001.
4
The close of business on September 28, 2001 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the Meeting ("Record Date"). On that date, the Fund had 45,339.912 shares of
common stock outstanding and entitled to vote. Each share of common stock is
entitled to one vote at the Meeting, and fractional shares are entitled to
proportionate fractions of one vote. Proposals 1, 2, 3, and 4 each require the
affirmative vote of a "majority of the outstanding voting securities" of the
Fund. Under the 1940 Act, the vote of a "majority of the outstanding voting
securities" means the affirmative vote of the lesser of (a) 67% or more of the
voting securities of the Fund present at the meeting or represented by proxy if
the holders of more than 50% of the outstanding voting securities are present or
represented by proxy or (b) more than 50% of the outstanding voting securities
of the Fund. Proposal 5 must be approved by a plurality of the shares present at
the Meeting. If a proposal is not approved by the requisite vote of shareholders
of the Fund, the Board of Trustees will determine what action to take.
As of the Record Date, the Trustees and executive officers of the Fund,
individually, and as a group, owned the following shares of the Fund
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TRUSTEE and EXECUTIVE OFFICER'S OFFICE NUMBER OF PERCENT
NAME/ADDRESS HELD SHARES BENEFICIAL
OWNED: OWNERSHIP
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(1) Qamaruddin Ali Yar Khan Chairman, 2,500 Shares 5.51%
19 West Fullerton Ave President
Glendale Hights, IL 60139 and Trustee
(2) Syed Shamshad Hussain Trustee 3,344.482 Shares 7.38%
1046 Longford Road
Bartlett, IL 60103
(3) Syed K. Raheemullah Trustee 673.353 Shares 1.49%
25 W. 181 Salem
Naperville, IL 60540
(4) Bashar Qasem Trustee 0 Shares 0%
3130 Fairview Park Dr., Suite 130
Falls Church, VA 22402
(5) Sabina Abdul Qadir Secretary 0 Shares 0%
2037 Bloomingdale Road
Suite #211
Glendale Heights, IL
(6) Farooq Sultan Controller 2,711.995 Shares 5.98%
2037 Bloomingdale Road
Suite #211
Glendale Heights, IL
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5
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Total shares held by trustees and
executive officers 9,229.830 Shares 20.36%
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Except as set forth below, as of the Record Date, the Fund does not know of
any person who owns beneficially more than 5% of the Fund's outstanding shares:
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SHAREHOLDER'S NAME/ADDRESS: NUMBER OF PERCENT
SHARES BENEFICIAL
OWNED OWNERSHIP
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Qamaruddin Ali Yar Khan & Sabera 2,500 Shares 5.51%
Khan Jt. Acct.
19 West Fullerton Ave
Glendale Heights, IL 60139
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Nafees Ahmed-IRA Acct. 8,018.377 Shares 17.69%
05640 Meyers Road
Lombard, IL 60148
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Mahmood Mohiuddin -IRA Acct. 5,147.523 Shares 11.35%
41 Square Road
Hawthron Wood, IL 60047
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Syed Shamshad Husain -IRA Acct. 3,344. 482 Shares 7.38%
1046 Longford Road
Bartlett, IL 60103
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Farooq Sultan
637 Dana Court
Naperville, IL 60563 2,711.995 shares 5.98%
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The holders of thirty percent of the voting power of the shares of
beneficial interest of the Trust entitled to vote at a meeting constitute a
quorum for the transaction of business at the Meeting. In the event that a
quorum is not present at the Meeting, or if a quorum is present at the Meeting
but sufficient votes to approve a Proposal are not received, the persons named
as proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. Any such adjournment will require the affirmative vote
of a majority of those shares represented at the Meeting in person or by proxy
even though less than a quorum is present at the Meeting. The persons named as
proxies will vote those proxies which they are entitled to vote "FOR" any such
proposal in favor of such an adjournment, and will vote those proxies required
to be voted "AGAINST" any such proposal against such adjournment.
6
Abstentions will be counted as shares present for purposes of determining
whether a quorum is present but will not be voted for or against any proposal.
Accordingly, abstentions effectively will have no effect on the proposal to
adjourn the Meeting because an adjournment must be approved only by a majority
of the votes cast at the Meeting, but effectively will be a vote against the
proposals, other than the election of trustees, because they must be approved by
a simple majority of the Fund's outstanding shares.
The individuals named as proxies on the enclosed proxy card will vote in
accordance with your direction as indicated thereon if your proxy card is
received properly executed by you or by your duly appointed agent or
attorney-in-fact. If you give no voting instructions (and your shares are not
held in street name), your shares will be voted "FOR" the proposals and "FOR" or
"AGAINST" any other business which may properly arise at the meeting, in the
proxies' discretion. You may revoke any proxy by giving another proxy or by
letter or telegram revoking the initial proxy. To be effective, your revocation
must be received by the Fund prior to the Meeting and must indicate your name
and account number. In addition, if you attend the Meeting in person you may, if
you wish, vote by ballot at the Meeting, thereby canceling any proxy previously
given.
The solicitation of proxies, the cost of which will be borne by the Fund
and Azzad, which has entered into an agreement with the Fund to bear some of the
Fund's expenses, will be made primarily by mail but also may include telephone
or oral communications by regular employees of the Trust.
Copies of the Fund's most recent annual and semi-annual reports, including
financial statements, have previously been delivered to shareholders.
SHAREHOLDERS MAY REQUEST FREE COPIES OF THESE REPORTS BY WRITING AZZAD AT AZZAD
INCOME FUND, C/O CHAMPION FUND SERVICES, 14340 TORREY CHASE BLVD, SUITE 170,
HOUSTON, TEXAS 77014 OR BY CALLING TOLL-FREE 1-877-881-2750.
The Trust's Board of Trustees, including the Trustees who are not
"interested persons" of the Trust, as defined by the 1940 Act, has approved, and
recommends that the shareholders of the Fund approve the following Proposals.
PROPOSAL 1:
APPROVAL OF A NEW INVESTMENT ADVISORY AGREEMENT BETWEEN
AZZAD ASSET MANAGEMENT, INC. AND THE FUND
Due to the relatively low asset size of the Fund and the limited financial
resources of Income Achievers, Inc. ("Income Achievers"), Income Achievers has
indicated that it no longer intends to serve as adviser to the Fund pursuant to
the current investment management agreement between Income Achievers and the
Fund (the "Current Agreement"). Income Achievers, a small company with one
investment advisory client, the Fund, has indicated that it cannot continue to
bear the Fund's
7
expenses. Income Achievers has agreed to waive its fees under the Current
Agreement until the Fund's assets reach one million dollars. Income Achievers
and the Board of Trustees have identified Azzad Asset Management ("Azzad") as
uniquely qualified to serve as investment adviser to the Fund. Azzad is an
investment advisory company, established in 1997, with greater financial
resources. In fact, since June 1, 2001, Azzad has absorbed some of the Fund's
expenses pursuant to a letter of intent entered into between the Fund and Azzad,
pursuant to which Azzad agreed to pay monthly expenses, of up to $6,000 each
month, related to the operation of the Fund. In addition to greater financial
resources, Azzad also has experience managing a mutual fund and other investment
accounts pursuant to Islamic Shari`ah principles due to its experience as
investment adviser to the Azzad/Dow Jones Ethical Market Fund, and to other
private funds. An amendment to the Trust's registration statement was filed in
August 2001, which, upon effectiveness, would result in the Azzad/Dow Jones
Ethical Market Fund being established as a second series of the Trust. In
addition, pursuant to the above-referenced letter of intent, the Fund agreed
with Azzad to propose a new Board of Trustees of the Fund, as set forth in
proposal 5 herein. As President of Income Achievers and as President of Azzad,
Qamaruddin Ali Yar Khan and Bashar Qasem, respectively, each a Trustee of the
Fund, have an interest in proposal 1 due to the letter of intent pursuant to
which Azzad currently bears certain monthly expenses of the Fund.
Accordingly, as a result of the anticipated termination of the Current
Agreement, shareholders of the Fund are being asked to consider a new investment
advisory agreement between the Fund and Azzad (the "Proposed Agreement"). If
shareholders approve the Proposed Agreement, purchases of Fund shares would be
subject to a sales charge, a rule 12b-1 fee if proposal 4 is approved, and a
higher expense fee given that Income Achievers has agreed to waive its fees
under the Current Agreement until the Fund's assets reach one million dollars.
In the long-term, however, shareholders likely would be subject to lower annual
fund operating expenses due to a contractual fee waiver that will be in effect
and will limit annual fund operating expenses to 2.25% for a one year period
beginning on the date the agreement is executed in October 2001. The Proposed
Agreement would become effective upon the termination of the Current Agreement,
which is expected to occur shortly after shareholder approval of the Proposed
Agreement. If shareholders approve this proposal, Income Achievers would no
longer operate as an investment adviser.
THE CURRENT AGREEMENT
Income Achievers currently furnishes advice with respect to the Fund's
portfolio transactions pursuant to the Current Agreement dated June 1, 2000
between Income Achievers and the Trust, on behalf of the Fund. The Current
Agreement was last approved by the shareholders of the Fund on June 30, 2000.
Pursuant to the Current Agreement, Income Achievers manages the investment
operations of the Fund and the making and execution of all portfolio decisions
in a manner consistent with and subject to (i) the Trust's Declaration of Trust
and By-laws; (ii) the Fund's investment objectives, policies and restrictions,
(iii) all regulations applicable to the Fund and the Trust; and (iv) any other
written limits or directions furnished by the Trustees to Income Achievers,
8
subject to the supervision and control of the Fund's Board of Trustees. Pursuant
to the Current Agreement, Income Achievers determines if the securities
purchased for the Fund are consistent with Islamic principles as applicable
pursuant to the Fund's investment objectives, policies and restrictions. Income
Achievers also furnishes, at its own expense, office facilities, equipment and
personnel for servicing the investments of the Fund.
As compensation for its services, Income Achievers receives a fee payable
monthly at the annual rate of 0.80% of the Fund's average daily net assets. The
fee accrues each calendar day and is payable monthly. Income Achievers has
agreed to waive its fee for the Fund until the Fund's assets reach one million
dollars.
Under the Current Agreement all costs and expenses (other than those
specifically referred to as being borne by Income Achievers) incidental to the
organization, business or operation of the Fund are borne by the Fund. These
expenses include, but are not limited to, (a) all charges of depositories,
custodians and other agencies for the safekeeping and servicing of its cash,
securities, and other property; (b) all charges for equipment or services used
for obtaining price quotations or for communication between Income Achievers or
the Trust and the custodian, transfer agent, any administrator or any other
agent selected by the Trust; (c) all charges for and accounting services
provided to the Trust by Income Achievers, or any other provider of such
services; (d) all charges for services of the Trust's independent auditors and
for services to the Trust by legal counsel; (e) all compensation of the
Trustees, other than those affiliated with Income Achievers, all expenses
incurred in connection with their services to the Trust, and all expenses of
meetings of the Trustees or committees thereof; (f) all expenses incidental to
holding meetings of holders of shares of interest in the Trust, including
printing and of supplying each record-date shareholder with notice and proxy
solicitation material, and all other proxy solicitation expenses; (g) all
expenses of printing of annual or more frequent revisions of the Trust
prospectus and of supplying each then-existing Shareholder with a copy of a
revised prospectus; (h) all expenses related to preparing and transmitting
certificates (if any) representing the Trust shares; (i) all expenses of bond
and insurance coverage required by law or deemed advisable by the Board of
Trustees; (j) all brokers' commissions and other normal charges incident to the
purchase, sale, or lending of portfolio securities; (k) all taxes and
governmental fees payable to Federal, state or other governmental agencies,
domestic or foreign, including all stamp or other transfer taxes; (l) all
expenses of registering and maintaining the registration of the Trust under the
1940 Act and, to the extent no exemption is available, expenses of registering
the Trust's shares under the Securities Act of 1933, of qualifying and
maintaining qualification of the Trust and of the Trust's shares for sale under
securities laws of various states or other jurisdictions and of registration and
qualification of the Trust under all other laws applicable to the Trust or its
business activities; (m) all interest on indebtedness, if any, incurred by the
Trust or the Fund; and (n) all fees, dues and other expenses incurred by the
Trust in connection with membership of the Trust in any trade association or
other investment company organization.
9
Income Achievers' principal business address is 19 West Fullerton Avenue,
Glendale Heights, IL 60139. Qamaruddin Ali Yar Khan, the Chairman, President and
a Trustee of the Fund and President, Director and Treasurer of Income Achievers
is a controlling person of the Adviser through his ownership of a majority of
the common stock of the Adviser. For additional information about Mr. Khan, see
proposal 5 herein. The other principal executive officer of Income Achievers is
Sabera Khan, Secretary, who is lab manager of Priming Lab, Syngenta Seeds, Inc.
Her address is 19 West Fullerton Avenue, Glendale Heights, IL 60139.
THE PROPOSED AGREEMENT
Under the Proposed Agreement, Azzad would act as investment adviser to the
Fund ("New Adviser"), and would supervise investments of the Fund in accordance
with the investment objective, policies and restrictions of the Fund, as set
forth in the Fund's governing documents, any limitations or restrictions imposed
by Islamic Shari`ah law as interpreted by the Islamic Shari`ah Supervisory
Board, and any other limitations, policies and procedures that the Trustees may
impose from time to time in writing to the New Adviser. The New Adviser would
manage the investment and reinvestment of the Fund's assets, subject to the
control and oversight of the Board of Trustees and the Shari`ah Supervisory
Board. The form of the Proposed Agreement is attached as Exhibit A.
For its services, the Fund would pay the New Adviser a fee of 1.00% of the
Fund's assets, accrued daily and paid monthly. A separate Expenses Agreement
entered into between Azzad and the Trust provides that for a one-year period
beginning on the date the agreement is executed, Azzad agrees to waive all or a
portion of its management fees and/or reimburse the Fund for the operating
expenses it incurs during that period, but only to the extent necessary to
maintain total annual operating expenses at 2.25% of the Fund's average daily
net assets for that period. For purposes of the Expenses Agreement, operating
expenses excludes brokerage costs, interest, taxes, litigation and other
extraordinary expenses.
Under the Proposed Agreement, the New Adviser would be responsible for (i)
providing the personnel, office space and equipment reasonably necessary for the
investment management of the Fund, and (ii) the costs of any special Board of
Trustees meetings or shareholder meetings deemed by the Board of Trustees at the
time any meeting is called to be convened for the primary benefit of the
Adviser. The Fund would assume and pay all other expenses including, but not
limited to investment advisory and administrative fees and expenses payable to
the Adviser or Administrator under the appropriate agreements entered into with
the Adviser or the Administrator, as the case may be; fees and expenses incurred
in connection with the issuance, registration and transfer of its shares;
brokerage and commission expenses; all expenses of transfer, receipt,
safekeeping, servicing and accounting for the cash, securities and other
property of the Fund including all fees and expenses of its custodian,
shareholder services agent and accounting services agent; interest charges on
any borrowings; costs and expenses of pricing and calculating its daily net
asset value and of maintaining its books of account
10
required under the Investment Company Act; taxes, if any; a pro rata portion of
expenditures in connection with meetings of the Trust's shareholders and Board
of Trustees that are properly payable by the Fund; salaries and expenses of
officers and fees and expenses of members of the Board of Trustees or members of
any advisory board or committee who are not members of, affiliated with or
interested persons of the Adviser or the Administrator; insurance premiums on
property or personnel of the Fund which inure to its benefit, including
liability and fidelity bond insurance; the cost of preparing and printing
reports, proxy statements, prospectuses and statements of additional information
of the Fund or other communications for distribution to existing shareholders;
legal, auditing and accounting fees; trade association dues; fees and expenses
(including legal fees) of registering and maintaining registration of its shares
for sale under federal and applicable state and foreign securities laws; all
expenses of maintaining and servicing shareholder accounts, including all
charges for transfer, shareholder recordkeeping, dividend disbursing,
redemption, and other agents for the benefit of the Fund; and all other charges
and costs of its operation plus any extraordinary and non-recurring expenses,
except as herein otherwise prescribed.
The Proposed Agreement further provides that the New Adviser shall not be
liable to the Fund or any shareholder of the Fund for any act or omission in the
course of, or connected with, rendering services under the Agreement or for any
losses that may be sustained in the purchase, holding or sale of any security by
the Fund. Nothing contained in the Proposed Agreement, however, shall be
construed to protect the Adviser against any liability to the Fund or the Fund's
shareholders by reason of the Adviser's willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under the
Proposed Agreement.
If approved by shareholders of the Fund, the Proposed Agreement will become
effective on the effective date of the Fund's prospectus filed with the SEC
reflecting the terms of the Proposed Agreement and shall continue in effect,
unless sooner terminated as described below, for two years thereafter. If not
terminated, the Proposed Agreement will continue automatically for successive
annual periods, provided such continuance is specifically approved at least
annually by (a) the Board of Trustees of the Trust or by a vote of a majority of
the outstanding voting securities of the Trust and (b) a vote of a majority of
the Trustees of the Trust who are not parties to the Proposed Agreement, nor
"interested persons" thereof, cast in person at a meeting called for the purpose
of voting on such approval as defined in the 1940 Act. The Proposed Agreement
may be terminated without penalty at any time either by a vote of the Board of
Trustees of the Fund or by a vote of a majority of the outstanding voting
securities of the Trust, as defined in the 1940 Act, on 60 days' written notice
to the Adviser, or by the Adviser on 60 days' written notice to the Fund, and
shall immediately terminate in the event of its assignment.
Azzad's principal business address is 3130 Fairview Park Drive, Suite 130,
Falls Church, Virginia 22402. As of September 1, 2001, Messrs. Ziad Al-Bassam
(18.8 %), Bashar Qasem ( 24.69 %), F. Scott Valpey ( 24.15 %), Khalid Al-Subaihi
(11.80%), Khalid Zainy (11.80%) exercise voting control over the Adviser.
11
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Owners of ten percent or more of Address
Azzad's outstanding voting
securities
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Ziad Al-Bassam P.O.Box: 1829
Jeddah 21441
Saudi Arabia
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F. Scott Valpey 3130 Fairview Park Drive
Suite 130
Falls Church, VA 22042
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Khalid Al-Subaihi Al-Irshad Printing Press
P.O. Box 24087
Safat 13101
Kuwait
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Khalid Zainy P.O. Box 5910
Jeddah Saudi Arabia
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Bashar Qasem 3130 Fairview Park Drive
Suite 130
Falls Church, VA 22042
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The following nominee for Trustee of the Trust is also an officer of Azzad:
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NAME POSITION WITH FUND AND ADDRESS
POSITION WITH AZZAD
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Bashar Qasem Fund: Trustee 3130 Fairview Park Drive
Azzad: President & CEO Suite 130
Falls Church, VA 22042
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The name, address and principal occupation of each principal executive
officer and each director of Azzad is:
--------------------------------------------------------------------------------
Bashar Qasem President & CEO 3130 Fairview Park Drive
Suite 130
Falls Church, VA 22042
--------------------------------------------------------------------------------
Jamal ElBarmil Vice President of Technology 3130 Fairview Park Drive
Suite 130
Falls Church, VA 22042
--------------------------------------------------------------------------------
F. Scott Valpey Chief Investment officer 3130 Fairview Park Drive
Suite 130
Falls Church, VA 22042
--------------------------------------------------------------------------------
Ziad Al-Bassam Director P.O.Box: 1829
Jeddah 21441
Saudi Arabia
--------------------------------------------------------------------------------
Khalid Al-Subaihi Director Al-Irshad Printing Press
P.O. Box 24087
Safat 13101
Kuwait
--------------------------------------------------------------------------------
Khalid Zainy Director P.O. Box 5910
Jeddah Saudi Arabia
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12
FEE AND EXPENSE COMPARISON
The following tables set forth for the Fund the total fees and expenses as
of the fiscal period ended June 30, 2001 under the Current Agreement and the
total fees and expenses had the Proposed Agreement been in effect during that
period.
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Aggregate Fees and Expenses Change from Current
Agreement
--------------------------------------------------------------------------------
Fund Current Proposed Difference between the
Agreement Agreement current and proposed
agreements as a percentage of
the current aggregate fees and
expenses
--------------------------------------------------------------------------------
Azzad $80,957 $58,939 (27.20)%
Income Fund
--------------------------------------------------------------------------------
The following table shows a comparison between the expenses under the
Current Agreement and the Proposed Agreement.
Comparative Expense Table
Shareholder Fees (fees paid directly from your investment) (1)
--------------------------------------------------------------------------------
Pro
Current Forma
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Purchases (as a 3% 3%
percentage of offering price)
--------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) NONE NONE
--------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested Dividends NONE NONE
--------------------------------------------------------------------------------
Redemption Fees(2) NONE NONE
--------------------------------------------------------------------------------
Exchange Fee NONE NONE
--------------------------------------------------------------------------------
13
Annual Fund Operating Expenses (as a percentage of average daily net assets):
--------------------------------------------------------------------------------
Pro
Current Forma
--------------------------------------------------------------------------------
Management Fees 0.80% 1.00%
--------------------------------------------------------------------------------
Distribution and Service (12b-1) Fees NONE 0.25%
--------------------------------------------------------------------------------
Other Operating Expenses(3) 32.59% 22.33%
--------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 33.39% 23.58%
--------------------------------------------------------------------------------
Fee Waiver and Expense Reimbursement NONE 21.33%
--------------------------------------------------------------------------------
Net Annual Fund Operating Expenses 33.39% 2.25%
--------------------------------------------------------------------------------
1 Authorized Dealers and other firms may charge additional fees for
shareholder transactions or for advisory services. Please see their
materials for details.
2 Redemptions from IRA accounts will be charged a $15 fee.
3 Azzad has contractually agreed to waive all or a portion of its fees or
reimburse the Fund for operating expenses, to the extent necessary to limit
the Fund's total annual operating expenses to 2.25% of average daily net
assets. This agreement is in effect for a one-year period beginning on the
date the agreement will be executed in October 2001, and can be continued
for one-year periods thereafter. "Operating expenses," for purposes of the
expense cap agreement, excludes brokerage costs, interest, taxes,
litigation and other extraordinary expenses.
Income Achievers has agreed to waive all of its investment advisory
(management) fees allocable to the Fund until the Fund's assets reach one
million dollars. The Board considered the waiver and the fact that it would only
operate for the limited period of time that the Fund's assets were below one
million dollars and determined that the contractual Fund fees under the Current
Agreement represented the relevant basis for comparison to the fees under the
Proposed Agreement.
14
The following example is intended to help compare the cost of investing in the
Fund under both the Current Agreement and the Proposed Agreement. The example
assumes an investment of $10,000 in the Fund for the time periods indicated and
then redemption of all shares at the end of those periods. The Example also
assumes the investment has a 5% return each year and that the Fund's operating
expenses remain the same. Although actual costs may be higher or lower, based on
these assumptions, costs would be:
----------------------------------
Current Pro Forma
----------------------------------
1 year $ 3,079 $ 521
----------------------------------
3 years $ 6,494 $ 4,222
----------------------------------
5 years $ 8,246 $ 6,757
----------------------------------
10 years $ 9,742 $10,130
----------------------------------
EVALUATION BY THE BOARD
In considering adoption of the Proposed Agreement, the Board of Trustees of
the Fund considered, among other things, the following factors: (1) the nature,
quality and scope of services to be provided by the New Adviser to the Fund; (2)
the New Adviser's and Income Achiever's capacity to provide the advisory
services to be performed including the financial condition of each company; (3)
the fairness of all the contract terms; (4) the extent to which economies of
scale, if available, have been taken into account in setting the fee schedule;
(5) the existence of any "fall-out" benefits to the New Adviser; and (6) the
comparison of the advisory fees to those of similar funds.
In reviewing the Proposed Agreement described above, the Board considered
that the Proposed Agreement with the New Adviser would have a higher advisory
fee and considered that Income Achievers has agreed to waive its fees until the
Fund's assets reach one million dollars. The Board considered that the fee
waiver could only effectively occur over a limited period of time because if the
Fund's assets never exceed one million dollars, that agreement would not be
financially viable for Income Achievers to continue over the long term. The
Board also noted that if the Fund's assets exceed one million dollars, the
Proposed Agreement would have potentially lower overall expenses, at least as
long as the contractual fee waiver is in effect because under the Current
Agreement, expenses when the Fund's assets are greater than one million dollars
are not contractually limited.
The Board further considered the inability of Income Achievers to continue
to provide advisory services to the Fund pursuant to the Current Agreement. The
Board also considered that Income Achievers recommended Azzad to be investment
adviser to the Fund, subject to shareholder approval, and noted Azzad's
financial resources and experience managing a mutual fund pursuant to Islamic
Shari`ah principles and considered that the Fund would have access to a highly
qualified Shari`ah Supervisory Board that had been established by Azzad. The
Board also considered the letter of intent entered into between Azzad and the
Fund, pursuant to which Azzad currently bears certain expenses of the Fund. The
Board also was informed of, and considered, the differences between the Current
and Proposed Agreements including the differences
15
discussed above regarding the oversight responsibilities of the Shari`ah
Supervisory Board. The Board was also informed that the Proposed Agreement would
be substantially similar to the form of contract used with respect to the Fund
currently advised by Azzad, Azzad/Dow Jones Ethical Market Fund, and that, upon
effectiveness of an amendment to the Trust's registration statement filed in
August 2001, the Fund would be part of a group of funds offering an index and
managed fund option, each consistent with Islamic Shari`ah law. The Board
obtained assurances from the representatives of the Adviser that the Adviser
would provide satisfactory advisory and other services to the Fund of a scope
and quality at least equivalent, in the Board's judgment, to the scope and
quality of services previously provided to the Fund. On the basis of the
foregoing, the Board approved, and recommended that shareholders approve, the
Proposed Agreement.
REQUIRED VOTE. Approval of Proposal 1 requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. Under the 1940 Act,
the vote of a "majority of the outstanding voting securities" means the
affirmative vote of the lesser of (a) 67% or more of the voting securities of
the Fund present at the meeting or represented by proxy if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy or (b) more than 50% of the outstanding voting securities of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
APPROVAL OF PROPOSAL 1 TO APPROVE A NEW INVESTMENT ADVISORY
AGREEMENT FOR THE FUND.
PROPOSAL 2:
APPROVAL OF A REVISED FUNDAMENTAL INVESTMENT
OBJECTIVE OF THE FUND
The Board of Trustees has approved, and recommends that shareholders
approve, modifications to the Fund's investment objective to reflect that
investment decisions will be made with the oversight of the Shari`ah Supervisory
Board, which is composed of three renowned Shari`ah scholars versed in modern
investment disciplines. Adoption of the proposed objective is not expected to
materially affect the common stocks in which the Fund invests, but it will alter
the manner of how determinations are made that investments are in compliance
with Islamic principles. Specifically, if this proposal is approved, the
Shari`ah Supervisory Board will supervise and review Fund policies and
procedures for compliance with Islamic Shari`ah principles. Currently, Income
Achievers makes those determinations subject to review of the Trust's Board of
Trustees. The Fund will rely solely on the Shari`ah Supervisory Board to set the
criteria used to determine whether stocks are compliant with Shari`ah based
principles. Any changes in the selection criteria are made in the sole
discretion of the Shari`ah Supervisory Board and neither the Fund nor the
Adviser will alter or deviate from such criteria based on its own analysis of
Islamic Shari`ah law.
16
CURRENT OBJECTIVE AND POLICIES. The Fund's current investment objective provides
that the Fund seeks:
To provide primarily current income and as a secondary objective,
appreciation of capital consistent with Islamic principles as determined by
the Fund.
In addition, the Fund observes the following non-fundamental investment
strategies: "The Fund invests primarily in equity securities, including foreign
securities. Investment decisions are made in accordance with Islamic principles
as determined by the Fund. The Fund ordinarily will invest at least 80% of its
assets in dividend paying companies. In selecting securities, the adviser looks
for companies with a history of consistent dividends and earnings. The Fund will
primarily invest in the common stocks of established, large capitalization
companies, but may invest up to 25% of its assets in the common stocks of middle
or small capitalization companies (companies with a market capitalization of
less than $1 billion)."
DISCUSSION OF PROPOSED CHANGES. The Trustees recommend that the Fund's objective
be modified to reflect that investment decisions will be made with the oversight
of the Shari`ah Supervisory Board. If the proposal is approved, the Fund's
objective will be replaced with the following fundamental objective:
As a primary investment objective, the Fund seeks to provide current income
and as a secondary objective, the Fund seeks appreciation of capital
consistent with Shari`ah -based principles as determined by the Fund's
Shari`ah Supervisory Board.
While investments will continue to be made in compliance with Islamic law,
the revised investment objective reflects the role that the Shari`ah Supervisory
Board will have in supervising and reviewing Fund policies and procedures to
insure compliance with Islamic principles.
The Fund's Trustees also intend to replace the Fund's investment strategies
with the following non-fundamental policies, which could be changed in the
future without further approval of shareholders: "Investment decisions are made
in accordance with Shari`ah-based principles as determined by the Fund's
Shari`ah Supervisory Board.1 The Fund will ordinarily invest at least 80% of its
assets in dividend paying companies. In selecting securities, the Adviser looks
for companies that, in the Adviser's opinion, have a history of consistent
dividends and earnings. The Fund will invest primarily in the common stocks of
large-capitalization companies, but may invest up to 25% of its assets in the
common stocks of middle or small capitalization companies (companies with a
market capitalization of less than $1 billion). The Adviser will sell securities
if
-----------------------------
1 All dividend payments to the Fund will be subject to a purification process
according to the methodology formulated by the Adviser and approved by the
Shari`ah Supervisory Board. A portion of each dividend may be deemed prohibited
as in relates to interest income or any other incidental prohibited income
earned by a particular company held by the Fund. The portion of the dividend
deemed prohibited will be treated as interest income and will be segregated to
the charitable account.
17
companies are no longer compliant with Shari`ah-based principles. The Adviser
also may decide to sell securities given a variety of circumstances, such as
when a security no longer appears to the Adviser to be consistent with the
Fund's investment objectives or when an investment opportunity arises that the
Adviser believes is more compelling."
With the exception of the elimination of the fundamental investment
restriction limiting investment in securities of unseasoned issuers (see
proposal 3B, herein) the proposed principal investment strategies are similar to
the current strategies of the Fund. All investments, however, will be subject to
the oversight of the Shari`ah Supervisory Board.
DUTIES OF THE SHARI'AH SUPERVISORY BOARD
SELECTION OF SECURITIES. The Fund relies solely on the Shari`ah Supervisory
Board to set the criteria used to determine whether common stocks are compliant
with Shari`ah based principles. Any changes to the selection criteria are made
in the sole discretion of the Shari`ah Supervisory Board and the Fund will not
alter or deviate from such criteria based on its own analysis of Islamic
Shari`ah law.
FUND POLICIES AND BUSINESS PRACTICES. To ensure that the investment policies and
general business practices of the Fund also comply with the precepts of Shari`ah
law, the Adviser has convened the Shari`ah Supervisory Board to supervise and
review Fund policies and procedures. On a quarterly basis, the Shari`ah
Supervisory Board monitors the Fund's investment activities and reviews the
Fund's management and compliance procedures with Islamic Shari`ah principles
adopted by the Shari`ah Supervisory Board. The Shari`ah Supervisory Board also
meets annually for a more comprehensive review and reports on the results of
their findings annually in a report to the Board of Trustees of the Fund. The
Shari`ah Supervisory Board also has primary responsibility for implementing the
Fund's policies in connection with the purification of a portion of the
dividends related to interest income and any incidental prohibited income.
The Shari`ah Supervisory Board is comprised of three renowned Shari`ah scholars
versed in modern investment disciplines. The Board is chaired by Shaykh Yusuf
Talal DeLorenzo of the United States of America and also includes Shaykh Dr.
Mohamed Ali EL-Gari of the Kingdom of Saudi Arabia and Shaykh Nizam Yaquby of
Bahrain. Additional biographical information on each Shari`ah Supervisory Board
member is provided below:
Shaykh Yusuf Talal DeLorenzo
Shaykh Yusuf Talal DeLorenzo is currently a Shari`ah consultant/advisor and
translator/researcher for the institution of Islamic Banking, London, and
PCS Inc., Reston, Virginia. He holds an M.A. in Islamic Studies from
Jami'ah al Ulum al Islamiyah (Karachi) and is a doctoral candidate at the
Hartford Seminary. Shaykh DeLorenzo produced the first systematic academic
translation
18
in English of legal rulings issued by Shari`ah advisory boards on the
operations of Islamic Bank Rulings on the Operations of Islamic Banks. He
has also authored original research in Islamic studies, including Islamic
banking and law, in English, Arabic and Urdu.
Shaykh Dr. Mohamed Ali EL-Gari
Dr. Mohamed Ali EL-Gari is the director of Saudi Arabia the Center for
Research in Islamic Economics at King Abdulaziz University in Jeddah. He is
also a member of the OIC Fiqh Council. Dr. EL-Gari serves as a consultant
to Islamic banks and has served on the consulting committee that counseled
the Government of Pakistan on the Islamization of its banking system. Dr.
EL-Gari holds a Ph.D.in Economics from the University of California.
Shaykh Nizam Yaquby
Shaykh Nizam Yaquby is a renowned Shari`ah scholar and advisor to numerous
Islamic banks and companies, including Abu Dhabi Islamic Bank, Islamic
Investment Company of the Gulf, Bahrain and the Arab Islamic Bank, Bahrain.
He pursued traditional Islamic studies in Mecca, India and Morocco under
the guidance of eminent Islamic scholars, including Shaykh Abdullah
Al-Farisi and Shaykh Muhammad Salah Al-Abbasi. He holds a B.A. in Economics
and Comparative Religion from McGill University, Toronto. He is a Ph.D.
candidate in Islamic Law at the University of Wales. Shaykh Yaquby has
published several books on Islamic law and is a frequent speaker at Islamic
conferences.
REQUIRED VOTE. Approval of Proposal 2 requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. Under the 1940 Act,
the vote of a "majority of the outstanding voting securities" means the
affirmative vote of the lesser of (a) 67% or more of the voting securities of
the Fund present at the meeting or represented by proxy if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy or (b) more than 50% of the outstanding voting securities of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS
APPROVAL OF PROPOSAL 2 TO AMEND THE FUND'S
FUNDAMENTAL INVESTMENT OBJECTIVE.
PROPOSAL 3:
TO APPROVE AMENDMENTS TO CERTAIN OF THE FUND'S
FUNDAMENTAL INVESTMENT RESTRICTIONS
The Fund is subject to certain investment restrictions which govern its
investment activities. Under the 1940 Act, certain investment restrictions are
required to be "fundamental," which means that they can only be changed by a
shareholder vote. An investment company may designate additional restrictions
that are fundamental, and it may also adopt "non-fundamental" restrictions,
which may be changed by the Trustees without shareholder approval.
19
Aside from the fundamental investment restrictions that conform to Islamic
principles and therefore are more restrictive than required under the 1940 Act,
the Fund also is currently subject to other fundamental investment restrictions
that are not required under Islamic Shari`ah principles and that are either more
restrictive that required under current law, or that are no longer required at
all. Some of the Fund's fundamental restrictions reflect past regulatory,
business or industry conditions, practices or requirements that are no longer in
effect. With the development of new practices and changes in regulatory
standards, several of these fundamental policies are considered by Fund
management to be unnecessary or unwarranted. Accordingly, the Trustees recommend
that the Fund's shareholders approve: (1) the elimination or clarification of
certain of the Fund's current fundamental investment restrictions, and (2) the
replacement of one of the Fund's fundamental investment restrictions with a
non-fundamental policy which may be changed by the Board without shareholder
approval. The proposed restrictions satisfy current regulatory requirements and
are written to provide flexibility to respond to future legal, regulatory,
market or technical changes.
By reducing the total number of investment restrictions that can be changed
only by a shareholder vote, the Trustees believe that the Fund will be able to
minimize the costs and delays associated with holding future shareholder
meetings to revise fundamental investment restrictions that have become outdated
or inappropriate. The Trustees also believe that the Adviser's ability to manage
the Fund's assets in a changing investment environment will be enhanced, and
that investment management opportunities will be increased by these changes.
A. Elimination Of Fundamental Investment Restriction Limiting Investments In
Oil, Gas, Or Other Mineral Exploration Leases And Programs
The Fund currently is subject to a fundamental investment restriction
prohibiting it from investing in oil, gas, or other mineral exploration leases
and programs. It is proposed that the current fundamental restriction be
eliminated. The current fundamental restriction states:
The Fund may not invest in oil, gas, or other mineral exploration leases
and programs.
This restriction was originally adopted to address state or "Blue Sky"
requirements in connection with the registration of shares of the Fund for sale
in a particular state or states. The Board recommends that shareholders
eliminate this fundamental investment restriction, which no longer applies to
the Fund. In addition, the Board believes that its elimination could increase
the Fund's flexibility when choosing investments in the future.
20
B. Elimination Of Fundamental Restriction Limiting Investments In Unseasoned
Issuers
The Fund currently is subject to a fundamental investment restriction
concerning its investments in securities of issuers with a record of less than
three years of continuous operation ("unseasonsed issuers"). It is proposed that
this current fundamental restriction be eliminated. The current fundamental
restriction states:
The Fund may not purchase the securities of any issuer if, as a result,
more than 10% of its total assets would be invested in the securities of
issuers that, including predecessors or unconditional guarantors, have a
record of less than three years of continuous operation. This policy does
not apply to securities of pooled investment vehicles.
This restriction was originally adopted to address state or "Blue Sky"
requirements in connection with the registration of shares of the Fund for sale
in a particular state or states. The Board recommends that shareholders
eliminate this fundamental investment restriction, which no longer applies to
the Fund. In addition, the Board believes that its elimination could increase
the Fund's flexibility when choosing investments in the future.
C. Modification Of Fundamental Restriction On Real Estate Investments
The Fund's current fundamental restriction regarding real estate
investments states:
The Fund may not purchase or sell real estate, real estate limited
partnerships (except master limited partnerships that are publicly traded
on a national securities exchange or Nasdaq Stock Market).
The Board recommends that shareholders vote to replace this restriction
with the following fundamental restriction:
The Fund may not purchase or sell real estate unless it is compliant with
the Islamic Shari`ah based principles adopted by the Shari`ah Supervisory
Board and acquired as a result of ownership of securities or other
instruments (but this shall not prevent the Fund from investing in
securities or other instruments backed by real estate or securities of
companies engaged in the real estate business, including real estate
investment trusts).
The proposed restriction would more completely describe the types of
real-estate related securities investments that are permissible for the Fund and
would permit the Fund to purchase or sell real estate acquired as a result of
ownership of securities or other investments (e.g. through foreclosure on a
mortgage investment approved by the Shari`ah Supervisory Board in which the Fund
directly or indirectly holds an interest). The Board believes that this
clarification will make it easier for decisions to be made concerning the Fund's
investments in real estate-related securities without materially
21
altering the general restriction on direct investments in real estate or
interests in real estate. The proposed change would also give the Fund the
ability to invest in assets secured by real estate and would clarify that real
estate investment trusts are permissible investments for the Fund.
D. Elimination Of Fundamental Restriction Limiting Investments In Voting
Securities Of An Issuer And Investing In A Company For The Purpose Of
Exercising Control Or Management And Adoption Of Non-Fundamental Policy
Limiting Investing In A Company For the Purpose Of Exercising Control Or
Management
The Fund currently is subject to a fundamental investment restriction
concerning its investments in the outstanding voting securities of an issuer and
investing in companies for the purpose of exercising control or management. The
current fundamental restriction provides:
The Fund may not purchase more than 10% of the outstanding voting
securities of an issuer, or invest in a company to get control or manage
it.
The fundamental restriction as currently drafted combines a portion of a
fundamental restriction regarding diversification with a restriction regarding
investing in a company for the purpose of exercising control or management. The
Board recommends that shareholders vote to eliminate this restriction as
currently drafted. If the proposal is approved, the Board will adopt a revised
fundamental restriction regarding diversification (see E. below) and a separate
non-fundamental restriction as follows:
The Fund may not invest in a company to get control or manage it.
There is no legal requirement that the Fund have an affirmative policy on
investing for the purpose of exercising control or management if it does not
intend to make investments for that purpose. The Fund has no current intention
of investing in any company for the purpose of exercising control or management.
By eliminating this restriction and adopting a non-fundamental restriction, the
Board, however, may be able to authorize such a strategy in the future if it
concludes that doing so would be in the best interests of the Fund and its
shareholders.
E. Modification To Fundamental Investment Restrictions Regarding
Diversification
The Fund currently is subject to the following fundamental restrictions
regarding diversification:
(1) The Fund may not invest more than 5% of the Fund's total assets in
securities of an issuer; and
(2) The Fund may not purchase more than 10% of the outstanding voting
securities of an issuer.
22
The Board recommends that shareholders vote to replace these restrictions
with the following fundamental restriction:
The Fund may not, with respect to 75% of the Fund's total assets, purchase
the securities of any issuer (other than securities of other investment
companies) if, as a result, (i) more than 5% of the Fund's total assets
would be invested in securities of that issuer, or (ii) the Fund would hold
more than 10% of the outstanding voting securities of that issuer.
The proposed fundamental restriction concerning diversification is the
limitation imposed by the 1940 Act for diversified investment companies, further
limited to conform with Islamic Shari`ah principles. The amended fundamental
restriction would allow the Fund, with respect to 25% of its total assets, to
invest more than 5% of its assets in the securities of one or more issuers and
to hold more than 10% of the voting securities of an issuer. The Fund will
continue to be required to invest 75% of its total assets so that no more than
5% of total assets are invested in any one issuer, and so that the Fund will not
own more than 10% of the voting securities of an issuer.
The amended restriction would give the Fund greater investment flexibility
by permitting it to acquire larger positions in the securities of a particular
issuer, consistent with its investment objective and strategies. This increased
flexibility could provide opportunities to enhance the Fund's performance.
Investing a larger percentage of the Fund's assets in a single issuer's
securities, however, increases the Fund's exposure to credit and other risks
associated with that issuer's financial condition and operations.
The amended fundamental restriction also would permit the Fund to invest
without limit in the securities of other investment companies. The Fund has no
current intention of doing so and the 1940 Act imposes restrictions on the
extent to which a Fund may invest in the securities of other investment
companies. The revision would, however, give the Fund flexibility to invest in
other investment companies in the event legal or other regulatory requirements
change.
In addition to voting "for" or "against" the entire Proposal 3,
shareholders of the Fund also may vote for or against the changes proposed with
respect to specific fundamental restrictions in the manner indicated on the
proxy card. Thus, shareholders may approve one or more of the changes to the
Fund's investment restrictions contemplated by Proposal 3 without approving all
such changes.
If the proposed changes are approved by the shareholders of the Fund at the
Meeting, those changes will be effective on the effective date of the Fund's
registration statement, which is due to go effective at the end of October. If
one or more of the changes contemplated by proposal 3 are not approved by
shareholders, the related existing fundamental restriction(s) of the Fund will
continue in effect.
23
REQUIRED VOTE. Approval of Proposal 3 requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. Under the 1940 Act,
the vote of a "majority of the outstanding voting securities" means the
affirmative vote of the lesser of (a) 67% or more of the voting securities of
the Fund present at the meeting or represented by proxy if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy or (b) more than 50% of the outstanding voting securities of the Fund.
THOSE SHAREHOLDERS WHO WISH TO VOTE AGAINST ANY OF THE SPECIFIC PROPOSED CHANGES
DESCRIBED ABOVE MAY DO SO ON THE PROXY PROVIDED.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL NO. 3 TO APPROVE AMENDMENTS
TO CERTAIN OF THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS
PROPOSAL 4:
APPROVAL OF ADOPTION OF A DISTRIBUTION PLAN PURSUANT TO RULE
12B-1 OF THE INVESTMENT COMPANY ACT OF 1940
The Board of Trustees has approved, and recommends that shareholders
approve a Distribution and Service Plan (the "Plan") for the Fund. A copy of the
proposed Plan is attached to this Proxy Statement as Exhibit B.
THE PLAN. The Plan was approved by the Board as provided for by Rule 12b-1
(the "Rule") promulgated by the SEC under the 1940 Act. The Rule provides that
an investment company (e.g., a mutual fund) acting as a distributor of its
shares must do so pursuant to a written Plan "describing all material aspects of
the proposed financing of distribution." Under the Rule, an investment company
is deemed to be acting as a distributor of its shares if it engages "directly or
indirectly in financing any activity which is primarily intended to result in
the sale of shares issued by such company, including, but not necessarily
limited to, advertising, compensation of underwriters, dealers, and sales
personnel, the printing and mailing of prospectuses to other than current
shareholders, and the printing and mailing of sales literature."
Under the Plan, the Fund would be authorized to pay CFS Distributors, Inc.
("CFS") as its distributor a 12b-1 fee in an amount equal to the annual rate of
0.25% of the Fund's average daily net assets for certain of CFS's services
connected with the distribution of the Fund's shares. The Board of Trustees,
including the independent Trustees, also approved a proposed distribution
contract between the Trust (on behalf of the Fund) and CFS ("Distribution
Contract") under which CFS would serve as the Fund's distributor for the shares
and would be obligated to use its best efforts to distribute the Shares. The
Distribution Contract does not require shareholder approval.
PROPOSED DISTRIBUTION ARRANGEMENT. Pursuant to the Distribution Contract,
CFS would enter into dealer agreements with third party broker/dealers under
which the shares would be sold. Under the proposed arrangements with respect to
shares of the Fund, a sales charge of 3% of the offering price of the shares
would be imposed on purchases. CFS would reallow to the third party
broker-dealers as a sales concession
24
a portion or all of the sales charge imposed on the amount invested, who in turn
will pay sales commissions to their financial advisers and correspondent firms
who sell the shares and service the accounts of Fund shareholders.
Under the Distribution Plan, the Fund would also pay CFS a 12b-1 fee in an
amount equal to the annual rate of up to 0.25% of the Fund's average daily net
assets of shares in connection with CFS's efforts to sell the Shares. If the
Distribution Plan is implemented, the Fund will reimburse CFS, subject to any
applicable restrictions imposed by rules of the National Association of
Securities Dealers, Inc., for distribution expenditures incurred by CFS in
connection with the sale and promotion of the Fund and the furnishing of
services to shareholders of the Fund. Such expenditures shall consist of: (i)
commissions to sales personnel for selling shares of the Fund; (ii)
compensation, sales incentives and payments to sales, marketing and service
personnel; (iii) payments to broker-dealers and other financial institutions
which have entered into agreements with the Distributor; (iv) payment of
expenses incurred in sales and promotional activities, including advertising
expenditures related to the Fund; (v) the costs of preparing and distributing
promotional materials; (vi) the cost of printing the Fund's Prospectus and
Statement of Additional Information for distribution to potential investors; and
(vii) such other similar services that the Trustees of the Company determine are
reasonably calculated to result in sales of shares of the Fund; provided,
however, that a portion of such amount paid to the Distributor, which portion
shall be equal to or less than 0.25% annually of the average daily net assets of
the Fund shares, may be paid for reimbursing the costs of providing services to
shareholders, including assistance in connection with inquiries related to
shareholder accounts.
The Plan contains a number of provisions relating to reporting obligations
and to its amendment and termination as required by the Rule. If approved by
shareholders, the Plan will not be implemented unless a majority of the Trustees
on the Trust's Board are independent. The Plan will then continue in effect as
long as its continuance is specifically approved at least annually by a vote of
a majority of the Trustees, as well as a majority of the independent Trustees.
The Plan may be amended at any time by the Trustees provided that (a) the Plan
may not be amended to increase materially the amount spent by the Fund for
distribution without the approval of a majority of the outstanding voting
securities of the Fund, and (2) all material amendments to the Plan must be
approved by a vote of the Trustees and the independent Trustees cast in person
at a meeting called for the purpose of such vote. The Plan may be terminated at
any time by a vote of the majority of the independent Trustees or by a vote of
the majority of the outstanding shares of the Fund.
The Plan requires that the Trustees receive, at least quarterly, a written
report as to the amounts expended during the quarter by the Distributor in
connection with financing any activity primarily intended to result in the sale
of shares issued by the Fund, and the purposes for which such expenditures were
made. As required by the Rule, while the Plan is in effect, the selection and
nomination of those Trustees who are not "interested persons" shall be committed
to the discretion of the independent Trustees then in office.
25
TRUSTEE CONSIDERATION. Prior to approving the Distribution Plan and the
Distribution Contract, the Trust's Board of Trustees was provided with detailed
information relating thereto. Among other things, the Trustees considered
information relating to the merits of certain possible alternatives to the
Distribution Plan, the potential costs and benefits of the Distribution Plan to
shareholders and the likelihood that the Distribution Plan would succeed in
producing its intended results.
In approving the Distribution Plan, the Trustees considered all the
features of the distribution system with respect to the Fund, including (1) the
conditions under which initial sales charges would be imposed and the amount of
such charges, (2) CFS's belief that the initial sales charge combined with a
service fee would be attractive to the broker-dealers selling the shares,
resulting in greater growth of the Fund than might otherwise be the case, (3)
the advantages to the shareholders of economies of scale resulting from growth
in the Fund's assets and potential continued growth, (4) the services provided
to the Fund and its shareholders by CFS, and (5) CFS's estimated expenses and
costs in distributing the shares.
With respect to the Distribution Plan, the Trustees considered all
compensation that CFS would receive thereunder and under the Distribution
Contract, including initial sales charges, as applicable, and 12b-1 fees. The
Trustees also considered the benefits that would accrue to CFS under the
Distribution Plan in that CFS would receive 12b-1 fees that are calculated based
upon a percentage of the average net assets of the Fund, which fees would
increase if the Distribution Plan was successful and the Fund attained and
maintained significant asset levels.
Following their consideration, the Trustees, including the independent
Trustees, concluded that the fees payable by the Fund under the Distribution
Plan were reasonable in view of the services that would be provided by CFS and
the anticipated benefits of the Distribution Plan. The Trustees, including a
majority of the independent Trustees, determined that approval of the
Distribution Plan would be in the best interests of the Fund and would have a
reasonable likelihood of benefiting the Fund and its shareholders, once
established. Accordingly, the Board of Trustees approved the Distribution Plan.
For the reasons stated above, the members of the Board of Trustees
concluded in the exercise of their business judgment and in light of their
fiduciary duties under state law and the 1940 Act that there is a reasonable
likelihood that the Plan will benefit the Fund and its shareholders. The
Trustees recommend that shareholders of the Fund vote FOR approval of the Plan.
If the Plan is approved by Fund shareholders it will not be implemented unless a
majority of the Trustees on the Trust's Board are independent Trustees.
REQUIRED VOTE. Approval of Proposal 4 requires the affirmative vote of a
"majority of the outstanding voting securities" of the Fund. Under the 1940 Act,
the vote of a "majority of the outstanding voting securities" means the
affirmative vote of the lesser of
26
(a) 67% or more of the voting securities of the Fund present at the meeting or
represented by proxy if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy or (b) more than 50% of the
outstanding voting securities of the Fund.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR PROPOSAL NO. 4 TO APPROVE ADOPTION OF A
DISTRIBUTION PLAN PURSUANT TO RULE 12B-1 OF THE INVESTMENT
COMPANY ACT OF 1940
PROPOSAL 5:
TO ELECT A BOARD OF TRUSTEES
At the Meeting, five (5) Trustees are to be elected to hold office until
the next meeting of shareholders called for the purpose of electing Trustees and
until their successors are duly elected and shall have qualified. The persons
named as attorneys-in-fact in the enclosed proxy have advised the Fund that
unless a proxy instructs them to withhold authority to vote for all listed
nominees or any individual nominee, all validly executed proxies will be voted
by them for the election of the nominees named below as Trustees of the Fund. As
a Massachusetts business trust, the Fund does not contemplate holding annual
shareholder meetings for the purpose of electing Trustees. Thus, the Trustees
will be elected for indefinite terms until a special shareholder meeting is
called for the purpose of voting for Trustees and until their successors are
properly elected and qualified.
Four of the nominees currently serve as Trustees of the Fund. All of the
nominees have consented to be named as such in this proxy statement and have
consented to serve as Trustees if elected.
Each nominee indicated below by an asterisk is an "interested person" (as
that term is defined in the 1940 Act) of the Fund due to the positions indicated
with the Fund's current investment advisor, Income Achievers, Inc., or would be
an interested person if Proposal 1 is approved, as a result of such person's
position with Azzad Asset Management, Inc. The shares of beneficial interest
listed below include voting and investment control, unless otherwise indicated
below. If a nominee should be unable to accept election, the Board of Trustees
may, in its discretion, select another person to fill the vacant position.
----------------------------------------------------------------------------------------
Fund Shares %
Beneficially Owned
Name, Age, Address And Five-Year Business Experience Owned as of
September 28,
2001
----------------------------------------------------------------------------------------
Qamaruddin Ali Yar Khan* (55) 2500 shares 5.51%
19 West Fullerton Avenue
Glendale Heights, IL 60139
Chairman, President and Trustee of Azzad Funds since 2000.
President, Director and Shareholder of Income Achievers, Inc.
(since its inception in 1995 to present); Vice-President,
Finance, Sonoscan, Inc. (manufacturer of ultrasonic testing
equipment) since February 2001; Controller, Sonoscan, Inc.,
1991 through February 2001.
----------------------------------------------------------------------------------------
27
----------------------------------------------------------------------------------------
Bashar Qasem * (37) 0 shares
3130 Fairview Park Drive
Suite 130
Falls Church, VA 22402
Trustee of Azzad Funds since July 2001.
President of Azzad Asset Management, Inc. (since its inception
in 2000); Operating Manager of Azzad Asset Management
LLC (investment adviser) (1997 to 1999); Chief Executive
Officer of Ideal Network Systems (computers)(1992 to 1997).
----------------------------------------------------------------------------------------
Syed Shamshad Husain (64) 3,344,482 shares 7.38%
1046 Longford Road
Bartlett, IL 60103
Trustee of Azzad Funds since 2000.
Managing Director of IQRA International Education
Foundation (publisher of Islamic religious books) (1995 to
present).
----------------------------------------------------------------------------------------
Syed K. Raheemullah (52) 673.353 shares 1.49%
25 W. 181 Salem
Naperville, IL 60540
Trustee of Azzad Funds since 2000
Member of the technical staff of Lucent Technologies
(manufacturer of telephone equipment) (1986 to present).
----------------------------------------------------------------------------------------
Mohammad Abdul-Aleem (43) 0 0
5845 Doverwood Drive, #107
Culver City, CA 90230
Nominee for Trustee
----------------------------------------------------------------------------------------
28
----------------------------------------------------------------------------------------
CEO, Tjara Networks, Inc. (Architects of IslamiaCity.com)
(2000 to present); President, Human Assistance and
Development International (A non-profit organization working
in the field of long-term development for the disadvantaged)
(1990 to present); Project Management Systems Analyst, TRW
Space and Defense (1987 - present)
----------------------------------------------------------------------------------------
Under the 1940 Act, the Board of Trustees may fill vacancies on the Board
of Trustees or appoint new Trustees only if, immediately thereafter, at least
two-thirds of the Trustees will have been elected by shareholders. Currently,
one of the Fund's four Trustees has not been elected by shareholders. In
addition, the Board of Trustees has nominated Mr. Abdul-Aleem to become a
Trustee of the Fund.
Under the 1940 Act, the Fund is also required to call a meeting of
shareholders promptly to elect Trustees if at any time less than a majority of
the Trustees have been elected by shareholders. By proposing to elect Trustees
at this time, the Fund may be able to delay the time at which another
shareholder meeting is required for the election of Trustees, which will result
in a savings of the costs associated with holding a meeting.
The primary responsibility for the management of the Fund rests with the
Board of Trustees. The Trustees meet regularly to review the activities of the
Fund and of the Adviser, which is responsible for its day-to-day operations.
Four regular meetings of the Trustees were held during the fiscal period ended
June 30, 2001. Each of the incumbent Trustees was present for at least 75% of
the meetings held of the Board and of all committees on which that Trustee
served.
Each of the current Trustees will also serve as a trustee of the other
series of Azzad Funds, Azzad/Dow Jones Ethical Market Fund. The Trustees who are
not affiliated with the current or proposed investment advisor ("Non-affiliated
Trustees") are paid a retainer plus a fixed fee for attending each meeting and
are reimbursed for expenses incurred in connection with attending such meetings,
although each Trustee waived any fees for the past fiscal period and has agreed
to waive their fees until June 30, 2002.
These non-affiliated Trustees of the Fund were entitled to receive the
compensation shown below from the Fund during the fiscal period ended June 30,
2001. Compensation is paid for services in the positions below their names:
--------------------------------------------------------------------------------
AGGREGATE TOTAL COMPENSATION
COMPENSATION FROM FROM THE COMPANY
NAME OF TRUSTEE THE COMPANY AND FUND COMPLEX
--------------------------------------------------------------------------------
Syed Shamshad Husain $400* $400*
--------------------------------------------------------------------------------
Syed K. Raheemullah $400* $400*
--------------------------------------------------------------------------------
29
* Each non-affiliated Trustee agreed to waive its fees from the inception of the
Fund until June 30, 2002.
Each officer of the Fund is elected by the Trustees to serve an annual term.
Information is given below about the executive officers that are not Trustees of
the Fund, including their business experience during the past five years.
The following individuals are officers of the Fund, but not Trustees of the
Fund:
--------------------------------------------------------------------------------
Name, age, address Office and Term of Office Five Year Business Experience
------------------ ------------------------- -----------------------------
--------------------------------------------------------------------------------
Farooq Sultan Controller of the Fund Franchisee of Mobil Oil
Age: 59 years Corporation, 1996 to present
637 Dana Ct.
Naperville, IL 60563
--------------------------------------------------------------------------------
Mrs. Sabina Qadir Secretary Homemaker
Age: 30 year
1507 Cocalico
Naperville, IL 60566
--------------------------------------------------------------------------------
All officers serve at the pleasure of the Board.
REQUIRED VOTE. The approval of election of the Board of Trustees requires
approval by a plurality of the shares present at the Meeting.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR"
PROPOSAL 5 TO ELECT EACH NOMINEE TO THE
BOARD OF TRUSTEES OF THE FUND.
SHAREHOLDER PROPOSALS
The Fund is not required to, and does not, hold annual meetings of
shareholders, except as required by the 1940 Act. When annual or special
meetings are held by the Fund, shareholder proposals which are intended for
inclusion in the proxy materials for the meeting must be received by the Fund
within a reasonable period of time before the solicitation is made. Any
shareholder who wishes to submit proposals to be considered at a future meeting
of shareholders should send such proposals to the Secretary of the Trust at
Champion Fund Services at 14340 Torrey Chase Blvd., Suite 170, Houston, Texas
77014 or by calling (877) 881-2750.
Timely submission of a proposal does not guarantee its inclusion.
30
OTHER BUSINESS
The Fund and Income Achievers know of no business to be presented at the
Meeting other than the matters set forth in this proxy statement, but should any
other matter requiring a vote of shareholders arise, the proxies will vote
thereon acording to their best judgment in the interest of the Fund.
By order of the Board of Trustees,
Sabina Qadir
SECRETARY
October 4, 2001
31
PROXY
AZZAD INCOME FUND
(A SERIES OF AZZAD FUNDS)
SPECIAL MEETING OF SHAREHOLDERS OCTOBER 20, 2001
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF AZZAD INCOME
FUND ("FUND"), A SERIES OF AZZAD FUNDS ("TRUST"). The undersigned hereby
appoints as proxies Qamaruddin Ali Yar Khan and Syed Shamshad Husain and each of
them (with power of substitution) to vote for the undersigned all shares of
common stock of the undersigned in the Fund at the above referenced meeting and
any adjournment thereof, with all the power the undersigned would have if
personally present. The shares represented by this proxy will be voted as
instructed. UNLESS INDICATED TO THE CONTRARY, THIS PROXY SHALL BE DEEMED TO
GRANT AUTHORITY TO VOTE "FOR" THE PROPOSALS RELATING TO THE FUND.
YOUR VOTE IS IMPORTANT. Please date and sign this proxy on the reverse side
and return it promptly in the enclosed envelope to Champion Fund Services,14340
Torrey Chase Blvd., Suite 170, Houston, Texas 77014 or call (877) 881-2750. To
vote by facsimile, please send your signed and dated proxy card by Fax at (281)
444-5929.
If you vote by facsimile, there is no need to return your proxy card by
mail.
PLEASE INDICATE YOUR VOTE BY AN "X" IN THE APPROPRIATE BOX BELOW.
1. Proposal 1: To approve a new advisory agreement with Azzad Asset
Management, Inc. for the Fund
|_| FOR |_| AGAINST |_| ABSTAIN
2. Proposal 2: To approve an amendment to the Fund's fundamental
investment objective
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal 3: To approve amendments to certain of the Fund's fundamental
investment restrictions
|_| FOR |_| AGAINST |_| ABSTAIN
[ ] To vote "against" changes to specific fundamental investment
restrictions, but to vote "for" changes to all others, fill in
box at
32
left AND indicate the letter(s) (as set forth in the proxy
statement) you do not want to change on the line below
--------------------------
4. Proposal 4: To adopt a distribution plan pursuant to Rule 12b-1 of the
Investment Company Act of 1940
|_| FOR |_| AGAINST |_| ABSTAIN
5. Proposal 5: To elect Trustees: (a) Qamaruddin Ali Yar Khan; (b) Bashar
Qasem; (c) Syed Shamshad Husain; (d) Syed K. Raheemullah; (e) Mohammad
Abdul-Aleem
|_| FOR ALL |_| WITHHOLD ALL |_| FOR ALL EXCEPT
To withhold authority to vote for any individual nominee, mark
"For All Except" and write the nominee's letter on the line
below.
--------------------------
YOUR VOTE IS IMPORTANT.
PLEASE DATE AND SIGN THIS PROXY BELOW AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
This proxy will not be valid unless it is dated and signed exactly as instructed
below. If shares are held by an individual, sign your name exactly as it appears
on this card. If shares are held jointly, either party may sign, but the name of
the party signing should conform exactly to the name shown on this proxy card.
If shares are held by a corporation, partnership or similar account, the name
and the capacity of the individual signing the proxy card should be indicated
unless it is reflected in the form of registration. For example: "ABC Corp.,
John Doe, Treasurer."
-------------------------------
Signature
-------------------------------
Signature (if held jointly)
, 2001
-------------------------------
Date
33
PLEASE MARK YOUR VOTE ON THE REVERSE SIDE OF THIS CARD
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general guidelines for signing proxy cards may be of
assistance to you and avoid the time and expense of validating your vote if you
fail to sign your proxy card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears on the proxy
card.
2. JOINT ACCOUNTS: Either party may sign the name of the party signing
should conform exactly to the name shown on the proxy card.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the name of the
account. For example:
ACCOUNT NAME VALID SIGNATURE
Corporate Accounts
(1) ABC Corp. .................................. ABC Corp. John Doe, Treasurer
(2) ABC Corp. .................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer .......... John Doe
(4) ABC Corp. Profit Sharing Plan .............. John Doe, Trustee Partnership
Accounts
(1) The XYZ Partnership ........................ Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership ....... Jane B. Smith, General Partner
Trust Accounts
(1) ABC Trust Account .......................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/18/78 ........ Jane B. Doe Custodial or
Estate Accounts
(1) John B. Smith, Cust. f/b/o John B. Smith,
Jr. UGMA/UTMA .............................. John B. Smith
(2) Estate of John B. Smith .................... John B. Smith, Jr., Executor
34