UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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:
/x/ Preliminary proxy statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CALIFORNIA INVESTMENT TRUST II
---------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
--------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
--------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
(5) Total fee paid:
/ / Fee paid previously with preliminary 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 the registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CALIFORNIA INVESTMENT TRUST FUND GROUP
44 MONTGOMERY STREET, SUITE 2100
SAN FRANCISCO, CA 94104
[______], 2006
Dear Shareholder:
Enclosed are proxy materials related to your shares in a fund of the
California Investment Trust Fund Group (the "Group"). Please take a few minutes
to read the proxy statement and cast your vote. Your vote must be received by no
later than [_____], 2006, in order to be cast at the Special Shareholders
Meeting on May 12, 2006. The meeting will begin at 10:00 a.m., Mountain Standard
Time, at the offices of ALPS Mutual Fund Services, Inc., the Funds' transfer
agent and fund accountant, at 1625 Broadway, Suite 2200, Denver, Colorado,
80202.
The proxy statement attached requests your vote to elect six
trustees for the Group to serve for an indefinite term. Three of the Group's
current four trustees were previously elected by the shareholders and you would
be re-electing them. One current Trustee was previously appointed to fill a
vacancy in 2001 and two independent Trustee nominees are being recommended for
election to serve as additional Board members to fill two new Board seats. You
would be electing that Trustee and those nominees for the first time.
You are also being asked to approve new investment management
agreements between the Group and CCM Partners, the Group's investment adviser.
[There will be no change in the advisory fee. The new investment advisory
agreements between each Fund and CCM would clarify the services that CCM is
responsible for providing under the management agreements currently in effect
and that that non-investment management services that were not clearly covered
under the current management agreements are, in fact, not covered as part of the
advisory arrangements between CCM and the Funds.
Finally, you are being asked to approve an Agreement and Plan of
Reorganization that provides for the reorganization of each Trust from a
Massachusetts business trust into a single Delaware statutory trust. The
proposed reorganization provides an opportunity for the Fund group to achieve
operational efficiencies and savings by eliminating the duplication associated
with operating two separate Trusts. In addition, Funds that are formed as
Delaware statutory trusts are granted a significant amount of operational
flexibility, resulting in additional efficiencies of operation that may
translate into savings for the Funds.
Please review the enclosed material and complete, sign, date and
return the enclosed Proxy Card(s). It is important that you submit your vote to
ensure that your shares are represented at the Special Meeting. If you have any
questions about the proxy, please call us at (800) 225-8778.
The Trustees have carefully reviewed the proposals and unanimously
recommend that you approve them. Your vote is important for the proper
administration of the Group. Thank you in advance for your participation and
prompt response in this matter.
Page 2
Sincerely,
Stephen C. Rogers
Chairman and President
Enclosures
CALIFORNIA INVESTMENT TRUST FUND GROUP
California Tax-Free Income Fund S&P 500 Index Fund U.S. Government Securities Fund
California Insured Intermediate Fund S&P MidCap Index Fund The United States Treasury Trust
California Tax-Free Money Market Fund S&P SmallCap Index Fund Short-Term U.S. Government Bond
Equity Income Fund Fund
European Growth & Income Fund
Nasdaq-100 Index Fund
-----------------------------
44 Montgomery Street, Suite 2100
San Francisco, CA 94104
(800) 225-8778
- --------------------------------------------------------------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held May 12, 2006
- --------------------------------------------------------------------------------
To the Shareholders:
A Special Meeting of Shareholders of each Fund listed above will be
held on May 12, 2006 at 10:00 a.m., mountain standard time, at the offices of
ALPS Mutual Fund Services, Inc., the Funds' transfer agent and fund accountant,
at 1625 Broadway, Suite 2200, Denver, Colorado, 80202, for the following
purposes:
1. To elect six trustees to serve until their successors are elected
and qualified;
2. To approve new Investment Advisory Agreements between each Trust,
on behalf of their respective Funds, and CCM Partners ("CCM"), with no change in
the advisory fee payable to CCM;
3. To approve an Agreement and Plan of Reorganization that provides
for the reorganization of each Trust from a Massachusetts business trust into a
single Delaware statutory trust.
4. To transact such other business as may properly come before the
Meeting of Shareholders or any adjournments thereof.
Shareholders of record at the close of business on February 28, 2006
are entitled to notice of, and to vote at, the Meeting. Your attention is called
to the accompanying Proxy Statement. Regardless of whether you plan to attend
the Meeting, please complete, sign and promptly return the enclosed proxy card
so that a quorum will be present and a maximum number of shares may be voted. If
you are present at the Meeting, you may change your vote, if desired, at that
time.
By Order of the Board of Trustees
Stephen C. Rogers, Secretary
[______], 2006
CALIFORNIA INVESTMENT TRUST FUND GROUP
California Tax-Free Income Fund S&P 500 Index Fund U.S. Government Securities Fund
California Insured Intermediate Fund S&P MidCap Index Fund The United States Treasury Trust
California Tax-Free Money Market Fund S&P SmallCap Index Fund Short-Term U.S. Government Bond
Equity Income Fund Fund
European Growth & Income Fund
Nasdaq-100 Index Fund
- --------------------------------------------------------------------------------
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
To be held May 12, 2006
- --------------------------------------------------------------------------------
A Special Meeting (the "Meeting") of Shareholders of each Fund
listed above will be held on May 12, 2006 at 10:00 a.m., mountain standard time,
at the offices of ALPS Mutual Fund Services, Inc., the Funds' transfer agent and
fund accountant, at 1625 Broadway, Suite 2200, Denver, Colorado, 80202, for the
following purposes:
1. To elect six trustees to serve until their successors are elected
and qualified;
2. To approve new Investment Advisory Agreements between each Trust,
on behalf of their respective Funds, and CCM Partners ("CCM"), with no change in
the advisory fee payable to CCM;
3. To approve an Agreement and Plan of Reorganization that provides
for the reorganization of each Trust from a Massachusetts business trust into a
single Delaware statutory trust.
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
This proxy statement was first mailed to shareholders on or about
[April 1], 2006.
This is a combined proxy statement for all of the Funds. Each Fund
is a series of California Investment Trust or of California Investment Trust II,
each of which is a registered investment company (each investment company is
referred to in this proxy as a "Trust" and, collectively, as the "Trusts"). The
following table identifies the Trusts to which this proxy relates and the Funds
that are series thereof:
California Investment Trust California Investment Trust II
California Tax-Free Income Fund S&P 500 Index Fund
California Insured Intermediate Fund S&P MidCap Index Fund
California Tax-Free Money Market Fund S&P SmallCap Index Fund
Equity Income Fund
European Growth & Income Fund
Nasdaq-100 Index Fund
U.S. Government Securities Fund
The United States Treasury Trust
Short-Term U.S. Government Bond Fund
-1-
As illustrated in the following table, all shareholders of all Funds
who were shareholders of record on the Record Date will be asked to vote at the
Meeting on all Proposals described in this proxy statement:
Fund Proposal 1 Proposal 2 Proposal 3
- ---- ---------- ---------- ----------
California Tax-Free Income Fund ("Income Fund") |X| |X| |X|
California Insured Intermediate Fund ("Insured Fund") |X| |X| |X|
California Tax-Free Money Market Fund ("Money Fund") |X| |X| |X|
U.S. Government Securities Fund ("Government Fund") |X| |X| |X|
The United States Treasury Trust ("Treasury Trust") |X| |X| |X|
Short-Term U.S. Government Bond Fund ("Short-Term Government Fund") |X| |X| |X|
S&P 500 Index Fund ("500 Fund") |X| |X| |X|
S&P MidCap Index Fund ("MidCap Fund") |X| |X| |X|
S&P SmallCap Index Fund ("SmallCap Fund") |X| |X| |X|
Equity Income Fund ("Equity Income Fund") |X| |X| |X|
European Growth & Income Fund ("Euro Fund") |X| |X| |X|
Nasdaq-100 Index Fund ("Nasdaq-100 Fund") |X| |X| |X|
-2-
SUMMARY OF PROPOSALS
While you should read the full text of the Proxy Statement, here's a brief
summary of each of the proposals and how they will affect the Trusts and the
Funds.
Proposal 1 (All shareholders)
Under this proposal, the Board recommends that you elect six individuals
to Board of Trustees of the Trusts (the "Boards"). The nominees are
Stephen C. Rogers, Harry Holmes, John B. Sias, James W. Miller, Jr., Kevin
T. Kogler and Stephen H. Sutro. If the slate of nominees is elected, the
Board of each Trust will consist of six Trustees, one of whom will be an
"interested person" of the Trusts, because of his positions with CCM.
Proposal 2 (All shareholders)
Under this proposal, the Boards recommend that you approve new investment
advisory agreements between each Trust, on behalf of their respective
Funds, and CCM, that would clarify the services that CCM is responsible
for providing under the management agreements currently in effect. As more
fully described in this proxy statement, the proposed amendment will
clarify which non-investment management services are, in fact, covered as
part of the advisory arrangements between CCM and the Funds.
Proposal 3 (All shareholders)
Under this proposal, the Boards recommend that you approve an Agreement
and Plan of Reorganization that provides for the reorganization of each
Trust from a Massachusetts business trust into a single Delaware statutory
trust. As more fully described in this proxy statement, the Boards believe
that the proposed reorganization provides an opportunity for the Fund
group to achieve operational efficiencies and savings by eliminating the
duplication and regulatory and administrative burdens associated with
operating two separate Trusts. In addition, Funds that are formed as
Delaware statutory trusts under the Delaware Statutory Trust Act are
granted a significant amount of operational flexibility, resulting in
additional efficiencies of operation that may translate into savings for
the Funds.
The Board of Trustees recommends that you vote FOR each proposal.
-3-
PROPOSAL NO. 1
ELECTION OF TRUSTEES
Why is the Fund seeking to elect Trustees?
The Board of Trustees of each Trust is currently comprised of four
individuals, three of whom were elected by the shareholders and one of whom was
appointed by each Board to fill an interim vacancy. A majority of the
individuals serving on each Board of Trustees are required by the Investment
Company Act of 1940 (the "1940 Act") to have been elected by Shareholders. That
is currently the case with the Board of Trustees of each Trust. In the event of
a future vacancy on the Board of Trustees, however, the Board would not be able
to fill that vacancy or add another independent Trustee by appointment. Its
authority to do so under the Declaration of Trust and Bylaws of each Trust would
be limited by the 1940 Act, which permits such an appointment, with certain
exceptions, only when, after giving effect to the appointment, two thirds of the
Trustees would have been elected by the shareholders. In addition, the Board of
Trustees proposes to expand to six total members and add two additional Trustees
who are not "interested persons" as that term is defined in the 1940 Act
("Independent Trustees") of each Trust. The Board has nominated for election by
shareholders two individuals to serve as the two new Independent Trustees.
Consequently, one purpose of the Meeting is to elect or re-elect, as
the case may be, all four current Trustees of each Trust's Board of Trustees and
to elect the two nominees as additional Independent Trustees of each Trust's
Board. If elected, each will serve on the respective Boards for an indefinite
term, so that any future additions that need to be made to the Board can be
handled by the Trustees by appointment.
How were the nominees selected?
The Trusts do not have formal standing nominating committees, and
accordingly do not have charters for such committees. Instead, in the view of
the Board of Trustees of each Trust, it is appropriate for the Independent
Trustees of each Board to be collectively responsible for the selection,
evaluation and nomination of independent trustee candidates. During a search
process, the Independent Trustees may consult with the interested Trustee on
suggestions of potential candidates. In evaluating the nominees submitted for
election in this Proxy Statement, the Independent Trustees of each Board
considered a variety of factors, including, as appropriate:
o the candidate's ability to qualify as an independent director
for purposes of the 1940 Act, the candidate's independence
from each Trust's service providers and the existence of any
other relationships that might give rise to conflict of
interest or the appearance of a conflict of interest;
o the candidate's knowledge in matters relating to the
investment company industry;
o any experience possessed by the candidate as a director or
senior officer of public or private companies;
o the candidate's educational background;
o the candidate's reputation for high ethical standards and
personal and professional integrity;
-4-
o any specific financial, technical or other expertise possessed
by the candidate, and the extent to which such expertise would
complement each Board's existing mix of skills and
qualifications;
o the candidate's perceived ability to contribute to the ongoing
functions of each Board, including the candidate's ability and
commitment to attend meetings regularly and work
collaboratively with other members of each Board; and
o such other factors as each Board determined to be relevant in
light of the existing composition of each Board of Trustees.
Prior to making a final recommendation to each Board, the
Independent Trustees reviewed the qualifications of other possible candidates
and determined that the two nominated individuals possessed outstanding
qualifications and offered the best fit with the current Board. One or more of
the Independent Trustees of each Board met with each of Messrs. Kogler and Sutro
before recommending to each Board of Trustees that they each be nominated to
stand for election as an Independent Trustee of each Board.
As nominees for election to the Board of Trustees of each Trust,
each of Messrs. Kogler and Sutro has consented to be named in this Proxy
Statement and to serve as a Trustee if elected. None of the members of the Board
of Trustees of either Trust has any reason to believe that either nominee will
become unavailable for election as a Trustee.
Who are the new nominees for Trustees and who are the current Trustees and
officers of each Trust?
Listed below are the names, ages, business experience during the
past five years and other directorships of the current trustees and nominees for
new trustees (as furnished to the Trusts). The address of all Trustees, nominees
and officers is California Investment Trust Fund Group, P.O. Box 387, San
Francisco, CA 94104. The Trustees of each Trust are identical.
Trustee who is an interested person:
Number of Portfolios
Position and Term of Office Principal Occupation(s) (including in Fund Complex
Offices with and Length of any other directorships) Overseen by Trustee
Name and Date of Birth the Trusts Time Served within the Past 5 Years or Nominee
- ---------------------- ---------- ----------- ----------------------- ----------
*Stephen C. Rogers Chairman, Indefinite/ Chief Executive Officer, CCM 12
(06/27/66) President, Served as Partners, 1999 to present; Chief
Secretary and trustee since Operating Officer, CCM Partners 1997
Trustee 1998 to 1999, Administrative Officer, CCM
Partners 1994-1997; Marketing
Representative, CCM Partners, 1993 to
1994.
*Mr. Rogers is considered to be an interested person of each Trust, as defined
under Section 2(a)(19) of the 1940 Act, because of his relationship and position
with CCM.
-5-
Trustees and nominees who are not interested persons:
Number of Portfolios
Position and Term of Office Principal Occupation(s) (including in Fund Complex
Offices with and Length of any other directorships) Overseen by Trustee
Name and Date of Birth the Trusts Time Served within the Past 5 Years or Nominee
- ---------------------- ---------- ----------- ----------------------- ----------
Harry Holmes Trustee Indefinite/ Principal, Harry Holmes & Associates 12
(12/5/25) Served as (consulting); President and Chief
trustee since Executive Officer, Aspen Skiing
1985 Company, 1982-1984; President and
Chief Executive Officer, Pebble Beach
Company (property management),
1973-1984.
John B. Sias Trustee Indefinite/ Director Enzo Biochem, Inc., 1982 to 12
(01/22/27) Served as present: Chairman, President and CEO,
trustee since Chronicle Publishing Company, 1993 to
1990 2000; Executive Vice President,
Capital Cities/ABC Inc. and
President, ABC Network T.V. Group,
1986 to 1992.
James W. Miller, Jr. Trustee Indefinite/ Vice President, Jones Lange LaSalle 12
(05/28/66) Served as Americas, Inc. 1999 to present;
trustee since Associate, Orrick Herrington &
2001 Sutcliffe LLP (law firm), 1996-1999;
Associate, Gordon & Rees LLP (law
firm), 1992-1993
Kevin T. Kogler Nominee for Indefinite** Senior Vice President, Technology 12**
(2/21/66) Trustee Investment Banking, Friedman Billings
Ramsey, 2003 to present; Director,
Technology Investment Banking,
Salomon Smith Barney, 2001-2002;Vice
President, Technology Investment
Banking, CS First Boston/Donaldson
Lufkin & Jenrette, 1997-2001;
Associate, PaineWebber, Inc.,
1995-1997
Stephen H. Sutro Nominee for Indefinite** Partner, Duane Morris LLP (law firm), 12**
(04/09/69) Trustee 2003 to present; Associate, Duane
Morris LLP, 2000-2002; Associate,
Hancock Rothert & Bunshoft LLP (law
firm), 1994-1999
**The Information furnished indicates the responses that would be disclosed in
the event the nominees are elected by shareholders.
-6-
Officers of the Trust:
The affiliations of the officers and their principal occupations for
the past five years are listed below. Information as to Mr. Rogers, President
and Secretary of the Trusts, is provided above. The officers of each Trust are
identical.
Position and Term of Office
Offices with the and Length of Principal Occupation(s)
Name and Date of Birth Trusts Time Served within the Past 5 Years
- ---------------------- ------ ----------- -----------------------
Michael O'Callaghan Chief Compliance Elected Chief Compliance Officer, CIT Funds, 2004 to present;
(07/14/67) Officer annually/ Fund Operations, CCM Partners, 2003 -2004; Senior Tax
Since 2004 and Financial Reporting Analyst, Dresdner RCM Global
Investors, 2000-2003;
Christopher P. Browne Treasurer Elected Portfolio Manager, CIT Funds, 2004 to present; Manager,
(02/07/67) annually/ Autodesk, 2000-2004; Principal, Baystar Capital,
Since 2004 1998-2004
Listed below is a dollar range of equity holdings in the respective
Funds beneficially owned by each Trustee and nominee as of the Record Date:
Name of Trustee or Nominee Income Fund Insured Fund Money Fund Govt. Fund Nasdaq-100 Fund Treasury Trust
- -------------------------- ----------- ------------ ---------- ---------- --------------- --------------
Stephen C. Rogers ........ None None $50,001-$100,000 None $50,001-$100,000 $10,001-$50,000
Harry Holmes ............. None None None None None None
John B. Sias ............. None None None None None Above $100,000
James W. Miller, Jr. .... None None $10,001-$50,000 None $10,001-$50,000 $1-$10,000
Kevin T. Kogler .......... None $1-$10,000 None None $50,001-$100,000 None
Stephen H. Sutro ......... None None None None None None
Equity Income Short-Term
Name of Trustee or Nominee 500 Fund MidCap Fund SmallCap Fund Fund Govt. Fund Euro Fund
- -------------------------- -------- ----------- ------------- ---- ---------- ---------
Stephen C. Rogers ........ $10,001-$50,000 Above $100,000 Above $100,000 $50,001-$100,000 $50,001-$100,000 $50,001-$100,000
Harry Holmes ............. None None None Above $100,000 None None
John B. Sias ............. None Above $100,000 None None None None
James W. Miller, Jr. .... $10,001-$50,000 $50,001-$100,000 $50,001-$100,000 None $10,001-$50,000 $10,001-$50,000
Kevin T. Kogler .......... Above $100,000 None None None None None
Stephen H. Sutro ......... None None None None None None
Listed below is an aggregate dollar range of equity securities in
the Trusts and Fund Complex beneficially owned by each Trustee and nominee as of
the Record Date:
-7-
Name of Trustee or Nominee CIT CIT II CIT Fund Group
- -------------------------- --- ------ --------------
Stephen C. Rogers ........... $50,001-$100,000 Above $100,000 Above $100,000
Harry Holmes ................ None Above $100,000 Above $100,000
John B. Sias ................ None Above $100,000 Above $100,000
James W. Miller, Jr. ....... $10,001-$50,000 Above $100,000 Above $100,000
Kevin T. Kogler ............. $1-$10,000 Above $100,000 Above $100,000
Stephen H. Sutro ............ None None None
Additional Information Regarding each Board of Trustees
Each Board met five times during the fiscal year ended August 31,
2005. All of the Trustees then serving attended at least 75% of the meetings of
the Board of Trustees and applicable committees held during the fiscal year.
Currently, each Board has an Audit Committee and a Pricing Committee. The
responsibilities of each committee and its members are described below.
Audit Committee. Each Board has an Audit Committee comprised only of
the Independent Trustees (currently, Messrs. Holmes, Sias, and Miller). Each
Audit Committee has the responsibility, among other things, to (1) recommend the
selection of the Funds' independent auditors; (2) review and approve the scope
of the independent auditors' audit activity; (3) review the financial statements
which are the subject of the independent auditor's certifications; and (4)
review with such independent auditors the adequacy of the Funds' basic
accounting system and the effectiveness of the Funds' internal accounting
controls. During the fiscal year ended August 31, 2005, there were two meetings
of each Audit Committee. Each Audit Committee operates under a written charter
(the "Audit Committee Charter"). Each Audit Committee Charter is attached hereto
as Appendix A.
Each Audit Committee normally meets at least once during each full
fiscal year with representatives of the independent auditors in a separate
executive session to discuss and review various matters. The members of each
Audit Committee are not professionally engaged in the practice of auditing or
accounting. In the performance of its oversight function, the Audit Committee
has considered and discussed the Funds' audited financial statements with
management and the independent auditors of the Fund. The Audit Committee also
has discussed with the independent auditors the matters required to be discussed
by Statement on Auditing Standards No. 61, "Communication with Audit
Committees," as currently in effect. Finally, the Audit Committee has received
the written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and has discussed with the independent auditors the
independence of the independent auditors.
Based upon the reports and discussions described in this report, and
subject to the limitations on the role and responsibilities of the Audit
Committee referred to above and in the Audit Committee Charter, the Audit
Committee recommended to the Board of each Trust that the audited financial
statements of the Funds be included in each Trust's annual report to
shareholders for the fiscal year ended August 31, 2005.
Pricing Committee. The Board has a Pricing Committee, comprised of
one Trustee of the Trust, certain officers of the Trust and of the CCM, which
reviews and monitors the pricing policies adopted by the Board. The Pricing
Committee is responsible for determining the fair value of each Fund's
securities as needed in accordance with the pricing policies and performs such
other tasks as the Board deems necessary. The Pricing Committee meets on an ad
hoc basis to discuss issues relating to the valuation of securities held by the
Funds. Committee members are required to report actions taken at their meetings
at the next scheduled Board meeting following the Pricing Committee's meeting.
During the fiscal year ended August 31, 2005, there were eleven meetings of the
Pricing Committee.
-8-
As shown on the following table, the Funds pay the fees of the
Trustees who are not affiliated with the CCM, which are currently $2,500 per
quarter and $500 for each meeting attended. Mr. Miller is compensated $3,000
annually for his services as Audit Committee Chair. The following table provides
information regarding compensation of the Trustees as of August 31, 2005.
Neither of Messrs. Kogler and Sutro received any compensation from the Funds as
of such date.
Pension or Estimated Total Compensation
retirement benefits accrued respecting Registrant and
Name/Position Aggregate as Annual Benefits Fund complex
with Trust compensation Fund Expenses upon Retirement paid to Trustees
- ---------- ------------ --------------------------- --------------- -------------------------
Stephen C. Rogers None None None None
Chairman, President,
Secretary and Trustee
Harry Holmes $12,000 None None $12,000
Trustee
John B. Sias $12,000 None None $12,000
Trustee
James W. Miller, Jr. $15,000 None None $15,000
Trustee
The Board of Trustees of each Trust has procedures whereby
shareholders may bring matters to the attention of the Board of Trustees. To
communicate with the Board of Trustees, please send your correspondence to:
Board of Trustees, California Investment Trust Group, 44 Montgomery Street,
Suite 2100, San Francisco, CA 94104.
Vote Required
Shareholders of each Trust must separately approve the election of
Nominees for that Trust. When a quorum is present, the affirmative vote of a
plurality of the shares of each Trust voted at the meeting is required to
approve the election of each Nominee for that Trust.
The Board of Trustees of each Trust, including the independent
Trustees, unanimously recommends that shareholders vote "For" each of the
Trustees and Nominees under Proposal No. 1.
-9-
PROPOSAL NO. 2
APPROVAL OF NEW INVESTMENT ADVISORY AGREEMENTS
Why are shareholders being asked to approve New Investment Advisory Agreements?
The shareholders of each Fund are being asked to approve new
Investment Advisory Agreements (the "New Agreements") between each Trust, on
behalf of their respective Funds, and CCM. The description of the New Agreements
provided below is qualified in its entirety by reference to the forms of the New
Agreements set forth in Appendix B to this Proxy Statement. CCM currently acts
as investment adviser to the Funds under Investment Management Agreements dated
January 18, 2000 and January 28, 2000 (the "Current Agreements"). The New
Agreements are intended to clarify the services to be provided by CCM under the
Current Agreements and remove antiquated provisions relating to no longer
existent state laws. As discussed further below, among other changes, the New
Agreements would:
o specify in greater detail CCM's responsibilities as investment
adviser of the Funds;
o clarify which non-investment management services are, in fact,
covered as part of the advisory arrangement between CCM and
the Funds; and
o clarify matters related to expenses and responsibilities for
which the Fund and CCM, respectively, are responsible under
the New Agreements
Generally, the New Agreements will update the Funds' advisory
relationship with CCM from the Current Agreements to reflect the current
investment management operations and environment relevant to the Funds and will
specify more clearly which investment management services CCM is responsible for
providing under the New Agreements to the Funds. CCM currently receives separate
compensation from the Funds under the Restated Fund Administration Servicing
Agreements ("Administration Agreements") that took effect in February 2005 for
specific administrative services.
What effect will these changes have on management fees?
None. CCM's fee rates for its services to the Funds under the New
Agreements are the same as its fee rates under the Current Agreements.
What are the terms of the Current and New Agreements?
Although the language of many provisions in the New Agreements will
vary from their corresponding provisions in the Current Agreements, the terms of
the New Agreements and the Current Agreements are substantively similar in all
material respects. For example, pursuant to the New Agreements, CCM will
continue to provide investment research and portfolio management, including the
selection of securities for the Funds to purchase, hold, or sell and the
selection of brokers or dealers through whom the portfolio transactions of each
fund are executed. Like the Current Agreements, the New Agreements provide that
CCM's activities are subject to review and supervision by the Trustees to whom
CCM renders periodic or special reports of the Funds' investment activities.
-10-
The New Agreements, however, are modernized and contain clearer
language with respect to CCM's responsibilities as investment adviser of the
Funds. For example, the New Agreements make explicit that CCM will provide a
continuous program for the evaluation, investment, sales and reinvestment of the
assets of the Fund and determine the purchase, retention, closing, exchange or
sale of the securities, cash and other investments for the Funds, and when and
in what portions such actions should take place. The Current Agreements contain
a more generalized and frequently redundant formulation that CCM will furnish
the Funds with advice and recommendations with respect to the investment of the
Fund's assets and the purchase and sale of portfolio securities. Since some
Funds may utilize certain investment instruments like futures for hedging
purposes that would not normally be characterized as portfolio securities, the
more detailed description in the New Agreements will allow the Fund's advisory
contracts to more precisely reflect current investment management operations
relevant to the Funds. In addition, the New Agreements specify certain
procedures that are to be followed in connection with the retention or change of
individual portfolio managers of the Funds, identify certain material events for
mandatory notice to the parties and expressly require that records and other
information related to the Funds be treated as confidential and proprietary
information of the Funds.
It is the intention of the Board in proposing the New Agreements to
make clear that non-investment management services that were not clearly covered
under the Current Agreements are, in fact, not covered as part of the advisory
arrangement between CCM and the Funds. As initially disclosed to shareholders in
the Funds' prospectus and in other filings with the SEC in January 2005, CCM is
separately compensated by the Funds under the Administration Agreements between
CCM and each Trust for such services and benefits, as well as for certain other
additional administrative and regulatory support functions. Under such
Administration Agreements, as compensation for the performance of its duties,
CCM receives fees of 0.10% on the first $100 million in combined assets of the
Trusts, 0.08% on the next $400 million in combined assets of the Trusts, and
0.06% on the Trusts combined assets over $500 million. As with the management
fees and other non-extraordinary expenses, fees payable under the Fund
Administration Agreement are subject to applicable contractual expense
limitations agreed to by CCM under the New Agreements (which are identical to
the expense limitations under the Current Agreements).
As provided in the Current Agreements, each Fund under the New
Agreements will to continue to pay for its own operating expenses and for its
share of its respective Trust's expenses not assumed by CCM, including, but not
limited to, costs of custodian services, brokerage fees, taxes, interest, costs
of reports and notices to shareholders, costs of dividend disbursing and
shareholder record-keeping services (including telephone costs), auditing and
legal fees, the fees of the independent Trustees, its pro-rata portion of
premiums on the fidelity bond covering the Funds, and the salaries of any
officers or employees who are not affiliated with CCM, provided that the New
Agreements clarify that the Funds will be responsible for the compensation and
related costs of the Funds' Chief Compliance Officer ("CCO") (a new position on
which the Current Agreements are silent). To the extent the CCO has
responsibilities that he/she performs for CCM and is paid by CCM, the Funds will
reimburse CCM for that portion of the salary of the CCO of each Trust (who is
affiliated with CCM) that is allocated to his duties as the CCO of the Trusts.
-11-
As stated above, there will be no increase in management fees for
any of the Funds from the fee rates payable under the Current Agreements or
diminution of the investment management services provided by CCM. The annual
advisory fees under the New Agreements for each Fund are as follows:
Fund Name Advisory Fees
- --------- -------------
California Tax-Free Income Fund A monthly fee computed at the annual
California Insured Intermediate Fund rate of 0.50% of average daily net
California Tax-Free Money Market Fund assets up to and including $100
U.S. Government Securities Fund million; plus 0.45% of average daily
The United States Treasury Trust net assets over $100 million up to
and including $500 million; plus
0.40% of average daily net assets
above $500 million.
S&P MidCap Index Fund A monthly fee computed at the annual
rate of 0.40% of average daily net
assets.
S&P 500 Index Fund A monthly fee computed at the annual
rate of 0.25% of average daily net
assets.
European Growth and Income Fund A monthly fee computed at the annual
rate of 0.85% of average daily net
assets.
S&P SmallCap Index Fund A monthly fee computed at the annual
Equity Income Fund rate of 0.50% of average daily net
Short-Term U.S. Government Bond Fund assets up to and including $500
Nasdaq-100 Index Fund million; plus 0.45% of average daily
net assets up to and including $1
billion; plus 0.40% of average daily
net assets above $1 billion.
Like the Current Agreements, the New Agreements provide that CCM is
obligated to reimburse each of the Funds of each Trust (through a reduction of
its management fees and otherwise) for all expenses (except for extraordinary
expenses such as litigation) in excess of 1.00% of each Fund's average daily net
assets. On a voluntary basis, CCM may also, and has to date for all Funds except
Equity Income Fund and Income Fund, reduced its fees even more than it is
required to do under the Current Agreements.
The New Agreements, like the Current Agreements, provide that CCM
shall not be liable thereunder for any for any losses suffered by the Funds in
connection with the services provided by CCM under the agreements except that
nothing in the agreements will protect CCM against liability for willful
misfeasance, bad faith or gross negligence in the performance of its duties by
reason of CCM's reckless disregard of its obligations and duties under the
agreements, except that the New Agreements also apply such provisions to
affiliated and control persons of CCM (the corresponding provisions of the
Current Agreements are silent as to such matters). The New Agreements, like the
Current Agreements, provide that CCM shall reimburse the Trusts for certain
costs and expenses incurred by the Trusts as a result of the actions (or
failures to act) of CCM or its partners that relate to transactions or matters
in which CCM has an interest or which are in CCM's control. Notwithstanding any
indemnification provision in the New Agreements, the 1940 Act and the Investment
CCMs Act of 1940 limit the circumstances under which an investment adviser may
be indemnified.
-12-
The terms of the New Agreements like the Current Agreements permit
CCM to serve as investment manager to other persons, firms or corporations,
including other investment companies so long as CCM's ability to render the
services provided for in the Agreements are not impaired.
As with the Current Agreements, the New Agreements may be terminated
without penalty at any time by the applicable Trust with respect to one or more
of the Funds to which the relevant Agreement applies (either by the applicable
Board of Trustees or by a majority vote of the terminating Fund's outstanding
shares); or by the CCM on 60-days' written notice, and will automatically
terminate in the event of its assignment as defined in the 1940 Act.
What factors did the Board of Trustees consider in recommending shareholder
approval of the New Agreements?
At a meeting held in person on February 14, 2006, the Board of
Trustees, including the Trustees who are not "interested persons" as that term
is defined in the 1940 Act (the "Independent Trustees"), discussed whether to
renew the Current Agreements and, subject to obtaining requisite approval by
Fund shareholders, approve the New Agreements. Prior to the February 14, 2006
meeting, the renewals of the Current Agreements were last approved by the Board
at an in-person meeting called for such purpose on March 1, 2005.
In determining whether to approve the New Agreements and to
recommend their approval to the shareholders, the Board considered information
provided by CCM regarding the new requirements and increased levels of
administrative responsibilities required to operate the Funds and the fact that
CCM had been voluntarily assuming responsibility for performing these new and
additional services even though CCM believed they were not clearly within the
scope of the Current Agreement. The Board and its independent members were
advised by independent legal counsel that the Current Agreements were outdated
and contain many antiquated provisions. In addition to the factors discussed
below, the Board took into account the following: (1) that the principal purpose
of the Current Agreements is to secure investment management services for the
assets of the Fund; (2) CCM's representation that the same persons responsible
for management of the Funds under the Current Agreements are currently expected
to continue to manage the Funds under the New Agreements; (3) that the
management fees to be received by CCM under the New Agreements is the same as
the management fees paid under the Current Agreements; (4) that the senior
management personnel responsible for the management of CCM are expected to
continue to be responsible for the management of CCM; (5) the substantive
similarity of many terms and provisions of the New Agreements and Current
Agreements; (6) that CCM does not expect any diminution in the level of required
management services it provides under the Current Agreement; (7) that CCM, prior
to the adoption of the Administration Agreements was performing many
administrative services that CCM believed were not clearly covered by the
Current Agreements at CCM's own expense; (8) that although the office of CCO was
not anticipated at the time the Current Agreements were first approved or last
ratified, and that SEC rules currently require each Trust to fill the office of
CCO, and that the performance of his duties under the supervision of the Board
is viewed as benefiting each Fund and the allocation of the cost of the Funds'
CCO to the Funds is viewed as enhancing the independence of the CCO; (9) that
currently CCM bears certain expenses and is separately compensated by the Funds
for certain administrative and regulatory support functions under the
Administration Agreements that are not covered by the Current Agreements; and
(10) that when the Current Agreements were initially entered into, neither CCM
nor the Funds contemplated the scope of obligations that are currently involved
with respect to the non-investment management operation of the Funds, and that
these increased obligations largely fall outside of the core investment
management function for which CCM was appointed under the Current Agreements.
-13-
Prior to the meeting, the Independent Trustees requested information
from CCM. This information together with other information provided by CCM and
the information provided to the Independent Trustees throughout the course of
year formed the primary (but not exclusive) basis for the Board's determinations
as summarized below. In addition to the factors identified above, the
information, other material factors and conclusions that formed the basis for
the Board's subsequent approval are described below.
Information Received
Materials reviewed. During the course of each year, the independent
Trustees receive a wide variety of materials relating to the services provided
by CCM, including reports on each Fund's investment results; portfolio
composition; portfolio trading practices; shareholder services; and other
information relating to the nature, extent and quality of services provided by
CCM to the Funds. In addition, the Board requests and reviews supplementary
information that includes materials regarding each Fund's investment results,
advisory fee and expense comparisons, the costs of operating the Funds and the
financial and profitability information regarding CCM (the principal business
activity of which is managing the Funds), descriptions of various functions such
as compliance monitoring and portfolio trading practices, and information about
the personnel providing investment management services to each Fund.
Review Process. The Board received assistance and advice regarding
legal and industry standards from independent counsel to the independent
Trustees. The Board discussed the renewal of the Current Agreements and the
approval of the New Agreements with CCM representatives and in a private session
with independent legal counsel at which no representatives of CCM were present.
In deciding to approve the renewal of the Current Agreements and recommend the
approval of the New Agreements to the shareholders, the independent Trustees
considered the total mix of information requested by and made available to them
and did not identify any single issue or particular information that, in
isolation, was the controlling factor. This summary describes the most
important, but not all, of the factors considered by the Board.
Nature, Extent and Quality of Services
CCM, its personnel and its resources. The Board considered the depth
and quality of CCM's investment management process; the experience, capability
and integrity of its senior management and other personnel; the turnover rates
of its personnel; and the overall financial strength and stability of its
organization. The Board also considered that CCM made available to its
investment professionals a variety of resources relating to investment
management, compliance, trading, performance and portfolio accounting, and that
CCM is currently exploring the acquisition of a higher quality analytics package
and performance attribution tools. The Board further considered CCM's continuing
need to attract and retain qualified personnel and, noting CCM's recent
retention of a new chief operating officer with extensive industry experience
and proposed additions to CCM's administrative support staff, determined that
CCM was adequately managing matters related to the Funds.
-14-
Other Services. The Board considered, in connection with the
performance of its investment management services to the Funds, the following:
CCM's policies, procedures and systems to ensure compliance with applicable laws
and regulations and its commitment to these programs; its efforts to keep the
Trustees informed; and its attention to matters that may involve conflicts of
interest with the Funds. As a point of comparison, the Board also considered the
nature, extent, quality and cost of certain non-investment related
administrative services provided by CCM to the Funds under the Administration
Agreements.
The Board concluded that the CCM had the quality and depth of
personnel and investment methods essential to performing its duties under the
Current Agreements and which would be essential to performing its duties under
the New Agreements, and that the nature, extent and overall quality of such
services are satisfactory and reliable.
Investment Performance
The Board considered each Fund's unique, balanced pursuit of its
investment objectives and the investment results of each Fund in light of its
objectives. The Trustees reviewed the short-term and long-term performance of
each of the Funds on both an absolute basis and in comparison to benchmark
indices. The Trustees also reviewed the Morningstar or iMoneyNet rankings for
each of the Funds, as applicable. In assessing performance of certain Funds, the
Trustees took into consideration the fact that Fund performance is expected to
mirror the appropriate benchmarks as closely as possible given certain practical
constraints imposed by the 1940 Act, the Fund's investment restrictions, the
Fund's size and similar factors.
o For the California Insured Intermediate Fund, it was noted that the
performance of the Fund was in the third quartile for the 3-year
(annualized) period and in the second quartile for the 5-year
(annualized) and 10-year (annualized) periods. Although performance
in recent periods was in the bottom quartile, the Board took into
consideration the fact that the Fund's investment restrictions
require it to maintain a higher credit quality portfolio than the
Morningstar comparison group for the Fund, and accordingly that the
Fund's ranking may reflect a comparison to certain other funds with
lower credit quality portfolios.
o For the California Tax-Free Money Market Fund, it was noted that the
performance of the Fund was in the third quartile for the 1-month
(annualized) and second quartile for 12-month-to-date periods.
o For the California Tax-Free Income Fund, although the Board noted
that under the Morningstar California Municipal Long comparison
group the performance of the Fund was in the bottom quartile for all
periods considered, the Trustees also took into account CCM's
representation that that the Morningstar California Municipal
Intermediate/Short comparison group provided a more suitable
category for peer analysis for the Fund. Under such comparison
group, the performance of the Fund ranked in the second quartile for
all periods considered. The Trustees also took into consideration
the composition of the portfolio inherited from the Fund's prior
portfolio manager and the continued efforts to reposition the
portfolio with minimal realization of capital gain pending an
eventual inversion of the yield curve.
-15-
o For the Equity Income Fund, it was noted that although performance
of the most recent quarter was unfavorable due to a slight
overweight in certain sectors that dragged in November and December
of 2005, the performance of the Fund was in the second quartile for
the 3-year and 5-year periods. The Board also noted that the Fund
outperformed the benchmark index in the 5-year (annualized) period.
o For the European Growth & Income Fund, it was noted that the
performance of the Fund was in the bottom quartile for the 1-year,
3-year and 5-year periods. The Fund underperformed the benchmark
index in the quarterly, 1-year and 3-year (annualized) periods, but
outperformed the benchmark index in the 5-year (annualized) period.
The Board also noted the Fund's total return for the 1-year and
3-year (annualized) periods was 6.99% and 18.24%, respectively. The
Board considered that although the Fund is not technically
considered an index fund because it primarily invests in American
Depositary Receipts instead of the underlying securities of the
foreign issuers, the Fund's seeks to act as an index fund that
tracks the Dow Jones European Stoxx 50 Index as a target portfolio.
Although the Board expressed concern about the Fund's performance,
the Board considered that a review of Statistical R Squared Data
against the Dow Jones European Stoxx 50 Index may assist in future
evaluations of performance.
o For the Nasdaq-100 Index Fund, it was noted that the performance of
the Fund was in third and fourth quartile for the quarter and 1-year
periods, respectively, Fund performance was in the second quartile
for the 3-year and 5-year periods. The Board also noted with
approval that the Fund was tracking its asset class tightly.
o For the S&P 500 Index Fund, it was noted that the performance of the
Fund was in the second quartile over the 3-year and 5-year periods
and in the top quartile for the 10-year period. The Trustees noted
with approval that the Fund was tracking its asset class tightly.
o For the S&P MidCap Index Fund, it was noted that the performance of
the Fund was in the top quartile over the quarterly, 1-year and
10-year periods and in the second quartile over the 3-year and
5-year periods. The Board also noted the Fund's positive absolute
performance over every period measured. The Trustees noted with
approval that the Fund was tracking its asset class tightly.
o For the S&P SmallCap Index Fund, it was noted that the performance
of the Fund was in the second quartile for the 1-year and 3-year
periods. The Board also noted the Fund's positive absolute
performance over every period measured. The Trustees noted that in
general the Fund was tracking its asset class tightly.
-16-
o For the Short-Term U.S. Govt. Bond Fund, the Trustees noted that the
performance of the Fund was in the second quartile for the quarterly
and 1-year periods.
o For the U.S. Government Securities Fund, it was noted that the
performance of the Fund was in the second quartile for the quarterly
period, and the third quartile for other periods considered.
o For The United States Treasury Trust, it was noted that the
performance of the Fund was in the top quartile for the 1-month
(annualized) period and in the second quartile for the
12-month-to-date period.
The Board ultimately concluded that CCM's performance record in
managing each Fund was satisfactory and in some cases excellent, supporting the
determination that CCM's continued management under the Current Agreements and,
subject to shareholder approval, the New Agreements would be consistent with the
best interests of each Fund and its shareholders.
Management Fees and Total Operating Expenses
The Board reviewed the management fees and total operating expenses
of each Fund and compared such amounts with the industry average fees and
expense levels of other Funds in applicable Morningstar categories. The Board
noted that the total management fees charged to each Fund were below the
industry average and that with respect to two-thirds of the Funds the management
fees charged by CCM were significantly lower than the industry averages for such
Funds. The Board observed that with certain exceptions each Fund's total
operating expenses were well below the industry average of the other Funds. With
respect to the exceptions, the Board noted that the operating expenses of one
Fund equaled the industry average for its category and the Class K shares of two
Funds exceeded the industry average for its category, but not by a significant
amount. The Board also noted the voluntary advisory fee limitation that CCM had
put into effect during 2005 with respect to all but two of the Funds. The
Trustees noted that although additional new administrative services are now paid
for by the Funds under Fund Administration Agreements that took effect during
February of 2005, these services were previously provided to the Funds by CCM at
its own expense. The Board concluded that the relatively low level of the fees
charged by CCM should benefit the Fund and its shareholders, and considering
that no increase in management fees was contemplated under the New Agreements,
such benefit should continue under the New Agreements.
Adviser, Costs, Level of Profits, Economies of Scale and Ancillary Benefits
The Board reviewed information regarding CCM's costs of providing
services to the Funds, as well as the resulting level of profits to CCM. The
independent Trustees received a representation from CCM that its profits were
not excessive and that CCM's profitability was low by industry standards. The
Board considered CCM's need to invest in technology, infrastructure and staff to
reinforce and offer new services and obtain the tools necessary to improve the
provision of investment advisory services to the Funds. They further considered
that breakpoints in the advisory fee structure of certain Funds provide for
reductions in the level of fees charged by CCM to such Fund as Fund assets
increase, reflecting the fact that economies of scale in the cost of operations
will be shared with such Fund's shareholders. The Trustees also noted that CCM
has contractually agreed to limit its advisory fees of the Funds so that those
Funds do not exceed their respective specified operating expense limitations,
and that in the case of certain Funds CCM imposed a voluntary fee limitation,
although such voluntary limitations may be decreased or eliminated at the option
of CCM. The Board also considered that CCM does not receive substantial indirect
benefits from managing the Funds (one example of an indirect benefit is research
paid for by Fund brokerage commissions -- CCM currently does not seek to
supplement its fees with such "soft-dollar" benefits). On the basis of the
foregoing, the Board concluded that each Fund's cost structure was reasonable
and that CCM was committed to sharing economies of scale with each Fund and its
shareholders, to their benefit.
-17-
Conclusions
Based on their review, including their consideration of each of the
factors referred to above, the Board concluded that the Current Agreements and
the New Agreements, taking into account the separate administration fees, are
and would be fair and reasonable to each Fund and its shareholders, that each
Fund's shareholders received or should receive reasonable value in return for
the advisory fees and other amounts paid to CCM by the Fund, and that the
renewal of the Current Agreements and the approval of the New Agreements were in
the best interests of each Fund and its shareholders.
Additional Information about the New Agreements
If approved by shareholders of the Funds, the New Agreements will
take effect immediately upon their approval by the respective Funds'
shareholders, and the New Agreements, like the Current Agreements, would
continue in effect for an initial two-year period, and from year to year
thereafter, subject to termination, if such continuance is specifically approved
at least annually (i) by a vote of the holders of a majority of the outstanding
voting securities of the Fund (as defined in the 1940 Act) or by a vote of the
Trustees, and (ii) by a vote of a majority of the Trustees who are not parties
to the New Agreements or interested persons of any such party, cast in person at
a meeting called for the purpose of voting on such approval. The New Agreements
like the Current Agreements will terminate automatically upon their assignment
and are terminable at any time without penalty on 60 days' written notice by the
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund, or by CCM upon 90 days' written notice. If the shareholders of any Fund
should fail to approve the New Agreement pertaining to that Fund, CCM will
continue to provide the Fund with investment advisory services under the Current
Agreement pertaining to that Fund.
Shareholders of the Fund last approved the Current Agreements on
January 28, 2000, in connection with a change of control of CCM.
Additional Information about CCM Partners
CCM, a California limited partnership, is the investment adviser for
the Funds under the Current Agreements. CCM is registered as an investment
advisor with the Securities and Exchange Commission. As of February 28, 2006 CCM
managed approximately $672 million in assets. Other than the Trusts, CCM does
not act as investment adviser to any other registered investment companies.
-18-
The general partner of CCM is RFS Partners, a California limited
partnership ("RFS Partners"), the Funds' Distributor. The general partner of RFS
Partners is Richard F. Shelton, Inc., a corporation, 100% of the voting shares
of which are held by Richard F. Shelton Irrevocable Trust. Richard F. Shelton
Irrevocable Trust is a family trust, the trustees of which are Stephen C.
Rogers, Celia Rogers and Curtis B. Cutter.
Stephen C. Rogers is the portfolio manager for the S&P 500 Index
Fund, S&P MidCap Index Fund, S&P SmallCap Index Fund, European Growth & Income
Fund, Nasdaq-100 Index Fund and the Equity Income Fund. Mr. Rogers is a member
of the portfolio management team for the fixed income funds. He joined CCM
Partners in 1993 and serves as Chief Executive Officer of CCM Partners. Mr.
Rogers graduated from the University of Iowa in 1988 and earned his MBA from the
University of California at Berkeley in 2000.
The officers of CCM and its general partner, RFS Partners, are shown
below:
Principal Occupation
Name and Address Within the Past 5 years
- --------------------------------------------------------------------------------
Stephen C. Rogers Chief Executive Officer, CCM
44 Montgomery Street Partners, 1999 to present; Chief
Suite 2100 Operating Officer, CCM Partners
San Francisco, CA 94104 1997 to 1999, Administrative
Officer, CCM Partners 1994-1997;
Marketing Representative, CCM
Partners, 1993 to 1994.
President, RFS Partners, 1999 to
present.
Rodney D. Yee Chief Operating Officer - CCM
44 Montgomery Street Partners 2005 - Present; CFO -
Suite 2100 Matthews International Capital
San Francisco, CA 94104 Management LLC 2004-2005; CFO & CCO
- Sand Hill Advisors, Inc.
2002-2004; Controller - Firsthand
Capital Management, Inc. 1998-2002;
Interim Controller / Accounting
Manager - Fremont Investment
Advisors, Inc. 1994-1998;
Supervisor Fund Accounting -
Franklin Resources, Inc. 1987-1994;
Sales Representative - Metropolitan
Life 1984-1987
-19-
As stated above, Mr. Rogers is also an officer and interested
trustee of the Trusts. Because of Mr. Rogers' position and ownership interest in
CCM, Mr. Rogers may be deemed to have a substantial interest in the approval of
the New Agreements.
The following management fees were paid to CCM under the Current
Agreements for the fiscal year ended August 31, 2005:
Fund Fee Reimbursement Net to CCM
- ---- --- ------------- ----------
Money Fund $375,619 $148,649 $226,970
Income Fund $710,619 $0 $710,619
Government Fund $146,870 $23,631 $123,239
Treasury Trust $211,178 $111,758 $99,420
Insured Fund $123,272 $32,208 $91,064
S&P 500 $276,585 $149,088 $127,497
S&P MidCap $607,173 $56,893 $550,280
S&P SmallCap $139,183 $42,321 $96,862
Equity Income $87,331 $2,762 $84,569
European Growth & Income $56,851 $38,812 $18,039
Nasdaq-100 $89,140 $43,017 $46,123
Short-Term Gov't Fund $84,377 $48,289 $36,088
The following administrative fees were paid to CCM under the
Administration Agreements for the fiscal year ended August 31, 2005:
Fund Fee
- ---- ---
Money Fund $26,972
Income Fund $56,720
Government Fund $11,500
Treasury Trust $17,076
Insured Fund $9,290
S&P 500 $43,406
S&P MidCap $62,972
S&P SmallCap $11,433
Equity Income $7,375
European Growth & Income $2,941
Nasdaq-100 $7,121
Short-Term Gov't Fund $6,839
The following fees were paid by the respective Funds to RFS
Partners, the general partner of CCM, pursuant to distribution plans adopted
under Rule 12b-1 of the 1940 Act by the Funds of California Investment Trust II,
for the fiscal year ended August 31, 2005:
Fund Rule 12b-1Fee
- ---- -------------
Government Fund $7,999
Treasury Trust $4,192
Short-Term Gov't Fund $3,444
S&P 500 $9,118
S&P MidCap $9,448
S&P SmallCap $11,083
Equity Income $5,747
European Growth & Income $5,405
Nasdaq-100 $6,375
-20-
During the year ended August 31, 2005, the Funds paid no commissions
to its affiliated broker-dealer RFS Partners.
Vote Required
Shareholders of each Fund must separately approve the applicable New
Agreement with respect to that Fund. Approval of this Proposal No. 2 by a Fund
requires an affirmative vote of the lesser of (i) 67% or more of the shares of
the Fund present at the Meeting if more than 50% of the outstanding shares of
the Fund are present or represented by proxy, or (ii) more than 50% of the
outstanding shares of the Fund.
The Board of Trustees of the Funds, including a majority of the
independent Trustees, unanimously recommends that you vote "FOR" this Proposal
No. 2.
-21-
PROPOSAL NO. 3
APPROVAL OF AN AGREEMENT AND PLAN OF REORGANIZATION THAT PROVIDES FOR THE
REORGANIZATION OF EACH TRUST FROM A MASSACHUSETTS BUSINESS TRUST INTO A
SINGLE DELAWARE STATUTORY TRUST
The Trustees unanimously recommend that you approve an Agreement and
Plan of Reorganization (the "Plan"), substantially in the form attached to this
Proxy Statement as Appendix C, which would change the state of organization of
each Trust. The description of the Plan provided below is qualified in its
entirety by reference to the form of the Plan set forth in Appendix C. This
proposed change calls for the reorganization of each Trust from a Massachusetts
business trust into a combined, single newly formed Delaware statutory trust.
This proposed reorganization is referred to throughout this Proxy Statement as
the "Reorganization." To implement the Reorganization, the Trustees have
approved the Plan, which contemplates the continuation of the current business
of each Trust in the form of a combined, single newly formed Delaware statutory
trust, named "California Investment Trust" (the "DE Trust"). As of the effective
date of the Reorganization, the DE Trust will have series that correspond to
each of the then current Funds of each Trust and that will have the same names
as their corresponding Fund (each a "DE Fund" and, together, the "DE Funds").
What will the Reorganization mean for the Funds and for you?
If the Plan is approved by shareholders and the Reorganization is
implemented, the DE Funds would have the same investment goals, policies, and
restrictions as their corresponding Funds. The Board, including any new Trustees
elected under Proposal 1, and officers of the DE Trust would be the same as
those of each Trust, and would operate the DE Trust and the DE Funds in the same
manner as these persons previously operated each Trust and their Funds, except
as otherwise described below. Thus, on the effective date of the Reorganization,
you would hold an interest in the applicable DE Fund that is equivalent to your
then interest in the corresponding Fund. For all practical purposes, a
shareholder's investment in each Trust and their Funds would not change.
Why are the Trustees recommending approval of the Plan and the Reorganization?
The Trustees have determined that the Reorganization offers the
opportunity to achieve operational efficiencies and savings by eliminating the
duplication and regulatory and administrative burdens associated with operating
two separate Trusts through the reorganization of each Trust into a single DE
Trust. CIT and CIT II were originally organized as two separate Massachusetts
business trusts because former income tax laws of the state of California that
were in effect at the time the Trusts were organized in the 1980's (but which
have since been superceded) permitted pass-through tax treatment of interest
income derived from fund investments in municipal bonds issued by California
municipalities only at the trust level rather than at the fund level.
Consequently, under such prior laws, if California municipal bond funds were
issued as series of the same trust as funds with other investment policies,
shareholders of the California municipal bond funds would not be able to obtain
the same state income tax benefits than if such municipal bond funds were
organized as series of a separate trust. Because such laws are no longer in
effect, there are no longer the same potential adverse state income tax
consequences associated with the organization of the Funds of CIT as series of
the same trust as the Funds of CIT II. Currently, although the Trusts are
distinct legal entities, CIT and CIT II have substantially identical charter
documents, make substantially similar regulatory filings and generally conduct
joint operations as if they were a single trust. The Reorganization is expected
to have the benefit of eliminating certain administrative burdens and expenses
associated with operating two Trusts.
-22-
In addition, the Trustees have determined that investment companies
formed as Delaware statutory trusts have certain advantages over investment
companies organized a Massachusetts business trusts. Under Delaware law,
investment companies are able to simplify their operations by reducing
administrative burdens. For example, Delaware law does not require that the
Declaration of Trust and any amendments to the Declaration of Trust be filed
with the State of Delaware while Massachusetts law requires that the Declaration
of Trust and any amendments to the Declaration of Trust be filed with the
Commonwealth of Massachusetts and the clerk of the city in Massachusetts in
which the fund has a usual place of business. In addition, the simpler Delaware
procedures allow the DE Trust to file a one-page Certificate of Trust with the
State of Delaware, which rarely needs to be amended. Massachusetts business
trusts, like each Trust, are required to file an Officer's Certificate with the
Commonwealth of Massachusetts with resolutions adopted by the Board of Trustees
of each Trust each time the Board determines to designate and create additional
classes of shares of each Trust or to change or eliminate classes of shares of
each Trust. Such filings are not required in Delaware. Delaware law also allows
greater flexibility in drafting and amending an investment company's governing
documents, which can result in greater efficiencies of operation and savings for
an investment company and its shareholders. Another advantage of Delaware
statutory trusts is greater certainty regarding limiting the liability of
shareholders for obligations of the trust or its trustees and regarding limiting
the liability of one series for obligations of other series within the trust.
Furthermore, as described below, in Delaware there is a
well-established body of legal precedent in the area of corporate law that may
be relevant in deciding issues pertaining to the DE Trust. This could benefit
the DE Trust and its shareholders by, for example, making litigation involving
the interpretation of provisions in the DE Trust's governing documents less
likely or, if litigation should be initiated, less burdensome or expensive.
Accordingly, the Trustees believe that it is in the best interests of the
shareholders to approve the Plan.
How do the Massachusetts business trust law and each Trust's governing documents
compare to the Delaware statutory trust law and the DE Trust's governing
documents?
The following summary compares certain rights and characteristics of
the shares of each Trust to the shares of the DE Trust. The summary is qualified
in its entirety by the more complete comparisons of Massachusetts business trust
law and Delaware statutory trust law, and a comparison of the relevant
provisions of the governing documents of each Trust and the DE Trust, attached
as Appendix D to this proxy statement, which is entitled "A Comparison of
Governing Documents and State Law."
Reorganizing each Trust from a Massachusetts business trust to a
single Delaware statutory trust is expected to provide benefits to each Trust
and its shareholders. Funds formed as Delaware statutory trusts under the
Delaware Statutory Trust Act (the "Delaware Act") are granted a significant
amount of operational flexibility, resulting in efficiencies of operation that
may translate into savings for a Fund, such as the DE Trust, and the Fund's
shareholders. For example, the Delaware Act authorizes trust management to take
various actions without requiring shareholder approval if permitted by the
governing instrument, such as fund mergers or the sale of all or substantially
all of the assets of a trust, or a series thereof (see discussion below).
Additionally, unlike Massachusetts business trust law, the Delaware Act permits
any amendment to the statutory trust's governing instrument without the need for
a state or city filing, which can reduce administrative burdens and costs.
-23-
The operations of a Delaware statutory trust formed under the
Delaware Act are governed by a declaration of trust and by-laws. The DE Trust's
Agreement and Declaration of Trust ("Declaration of Trust") and By-Laws
("By-Laws") streamline some of the provisions in each Trust's Declaration of
Trust and By-Laws, and, thus, should lead to enhanced flexibility in management
and administration as compared to each Trusts current separate operations as
Massachusetts business trusts with separate Agreements and Declarations of Trust
and By-Laws. As a Delaware statutory trust, the DE Trust may be able to adapt
more quickly and cost effectively to new developments in the mutual fund
industry and the financial markets.
Moreover, to the extent provisions in the DE Trust's Declaration of
Trust and By-Laws are addressed by rules and principles established under
Delaware corporate law and the laws governing other Delaware business entities
(such as limited partnerships and limited liability companies), the Delaware
courts may look to such other laws to help interpret provisions of the DE
Trust's Declaration of Trust and By-Laws. Applying this body of law to the
operation of the DE Trust should prove beneficial because these laws are
extensively developed and business-oriented. In addition, Delaware's Chancery
Court is dedicated to business law matters, which means that the judges tend to
be more specialized in the nuances of the law that will be applied to the DE
Trust. These legal advantages tend to make more certain the resolution of legal
controversies and help to reduce legal costs resulting from uncertainty in the
law.
Shares of the DE Trust and each Trust each have one vote per full
share and a proportionate fractional vote for each fractional share. Both the DE
Trust and each Trust provide for noncumulative voting in the election of their
Trustees. Like each Trust, the DE Trust is not required by its governing
instrument to hold annual shareholder meetings. Shareholder meetings may be
called at any time by the DE Trust Board, by the chairperson of the DE Trust
Board or by the president or any vice president of the DE Trust for the purpose
of taking action upon any matter deemed by the DE Trust Board to be necessary or
desirable and, in the sole discretion of the board, taking action upon any
matter requested by shareholders at the request of shareholders holding not less
than 10% of the DE Trust's outstanding shares. A meeting of the shareholders for
the purpose of electing trustees, or removing one or more trustees, also (i) may
be called by the DE Trust Board, the chairperson of the DE Trust Board or such
officers, and (ii) shall be called by the president or any vice-president of the
DE Trust at the request of the shareholders holding not less than 10% of the DE
Trust's outstanding shares. Any shareholders' meeting called at the request of
shareholders shall be called and held, if, in the sole discretion of the DE
Trust Board, the shareholders requesting the meeting make payment to the DE
Trust of certain related expenses. With respect to shareholder rights to inspect
a fund's books and records, the Trusts and the DE Trust each provides certain
inspection rights to its shareholders. The DE Trust provides such rights at
least to the extent required by applicable law. Each Trust provides certain
rights of inspection with respect to financial statements, accounting books and
records and minutes of proceedings of the shareholders and the Board of Trustees
and committees thereof, and By-Laws of each Trust.
-24-
While shareholders of the DE Trust will have similar distribution
and voting rights as they currently have as shareholders of the respective
Trusts, there are certain differences. For example, the organizational
structures differ in record date parameters for determining shareholders
entitled to notice, to vote, and to a distribution. In addition, under the DE
Trust's Declaration of Trust, (i) all or substantially all of the DE Trust's
assets may be sold to another fund or trust in exchange for cash or securities
(including securities of the other fund or trust in a reorganization) and (ii)
the DE Trust or DE Fund may be liquidated or dissolved, in each case by the
Trustees without shareholder approval, but only upon at least 30 days' prior
written notice to shareholders and, in the case of the sale of substantially all
of the assets, unless such shareholder approval is required by the 1940 Act.
These differences can reduce time delays and costs, including the costs of
preparing proxy solicitation materials, soliciting proxies and holding a
shareholders meeting. Under each Trust's Agreement and Declaration of Trust,
shareholder approval is required for each of those actions.
Massachusetts business trust law does not specifically provide that
the shareholders of the Trusts are not subject to any personal liability for any
claims against, or liabilities of, the respective Trusts solely by reason of
being or having been a shareholder of the respective Trusts or that the
liabilities of one series are not enforceable against another series of that
respective Trust. Under the Delaware Act, shareholders of the DE Trust will be
entitled to the same limitation of personal liability as is extended to
shareholders of a private corporation organized for profit under the General
Corporation Law of the State of Delaware. In addition the Delaware Act permits
the DE Trust to limit the enforceability of the liabilities of one DE Fund
solely to the assets of that DE Fund.
What are the procedures and consequences of the Reorganization?
Upon completion of the proposed Reorganization, the DE Trust will
continue the business of each Trust in a single entity, and each DE Fund: (i)
will have the same investment goals, policies, and restrictions as those of its
corresponding Fund existing on the date of the Reorganization; (ii) will hold
the same portfolio of securities previously held by such corresponding Fund; and
(iii) will be operated under substantially identical overall management,
investment management, distribution, and administrative arrangements as those of
its corresponding Fund. As the successor to the Trusts' operations, the DE Trust
will adopt each Trust's registration statement under the federal securities laws
as a single registration statement with amendments to show the new Delaware
statutory trust structure.
The DE Trust was created solely for the purpose of becoming the
successor organization to, and carrying on the business of, the Trusts. To
accomplish the Reorganization, the Plan provides that each Trust, on behalf of
each of their respective Funds, will transfer all of their respective portfolio
securities, any other assets and liabilities of their respective Funds to the DE
Trust, on behalf of each corresponding DE Fund. In exchange for these assets and
liabilities, the DE Trust will issue shares of each DE Fund to the corresponding
Trust, which will then distribute those shares pro rata to shareholders of the
corresponding Fund. Through this procedure, you will receive exactly the same
number, class, and dollar amount of shares of each DE Fund as you held in the
corresponding Fund immediately prior to the Reorganization. You will retain the
right to any declared, but undistributed, dividends or other distributions
payable on the shares of a Fund that you may have had as of the effective date
of the Reorganization. As soon as practicable after the date of the
Reorganization, the Trusts will each be dissolved and will cease their
respective existences.
-25-
The Trustees may terminate the Plan and abandon the Reorganization
at any time prior to the effective date of the Reorganization if the Trustees
determine that proceeding with the Reorganization is inadvisable. If the
Reorganization is not approved by shareholders of each Trust, or if the Trustees
abandon the Reorganization, each Trust will continue to operate as a separate
Massachusetts business trust. If the Reorganization is approved by shareholders,
it is expected to be completed in the first half of 2006.
What effect will the Reorganization have on the current and proposed investment
advisory agreements?
As a result of the Reorganization, the DE Trust will be subject to
new investment advisory agreements between the DE Trust, on behalf of each DE
Fund, and CCM Partners, that will be identical in all material respects to the
current investment advisory agreements between CCM Partners and each Trust, or,
if Proposal 2 is approved by the shareholders of a Fund, the new investment
advisory agreements between CCM Partners and each Trust described in Proposal 2.
Specifically, such new agreements with the DE Trust will provide for the same
fees, and rights and responsibilities of the parties thereunder as the current
agreements (or if Proposal 2 is approved, the same fees, and rights and
responsibilities of the parties thereunder as the new advisory agreements
described in Proposal 2) and have the same parties except as needed to reflect
the change in each Trust's state and form of organization. Rather than call
another shareholder meeting to vote on the new investment advisory agreements
between the DE Trust, on behalf of each DE Fund, and CCM after the
Reorganization, we will treat shareholder approval of the Reorganization as
approval of a new investment advisory agreement between CCM Partners and the DE
Trust on behalf of each DE Fund (and if Proposal 2 is approved by the
shareholders of a Fund, as approval of the new investment advisory agreements
described in Proposal 2 between CCM Partners and the DE Trust on behalf of each
corresponding DE Fund).
What effect will the Reorganization have on the fund accounting and servicing,
administration and underwriting agreements and distribution plans?
The DE Trust, on behalf of the DE Funds, will succeed each Trust as
a party to a fund accounting servicing agreement and a transfer agent servicing
agreement with ALPS Mutual Fund Services, LLC ("ALPS"), such that the fund
accounting, transfer agency, dividend disbursing and shareholder services
provided to the DE Trust will be substantially identical to those provided under
the respective agreements currently in place for each Trust with ALPS.
Similarly, CCM will serve as the administrator to the DE Trust and DE Funds
under the Administration Agreements on terms that are substantially identical to
the Administration Agreements currently in effect for each Trust with CCM. RFS
Partners will serve as the distributor for the shares of the DE Funds under a
underwriting agreement on terms that are substantially identical to the
underwriting agreement currently in effect for each Trust with RFS. US Bank,
N.A. ("US Bank") will serve as the custodian for the of the securities and other
assets of the DE Trust under a custodian agreement on terms that are
substantially identical to the custodian agreement currently in effect for each
Trust with US Bank. In the case of the foregoing agreements, if the Plan is
approved by shareholders and the Reorganization is consummated, each service
provider will provide an acknowledgement of the effect of the Reorganization and
that the DE Trust has succeeded each Trust as a party to their respective
agreements.
-26-
As of the effective date of the Reorganization, each corresponding
DE Fund will have a distribution plan under Rule 12b-1 of the 1940 Act relating
to the distribution of that DE Fund's classes of shares, which is identical in
all material respects to the distribution plan currently in place for the
corresponding classes of shares of each corresponding Fund that currently has a
distribution plan under Rule 12b-1 of the 1940 Act. It is anticipated that there
will be no material change to the distribution plans as a result of the
Reorganization.
What is the effect of shareholder approval of the Plan?
Under the 1940 Act, the shareholders of a mutual fund must elect
trustees and approve the initial investment advisory agreement(s) for the fund.
Theoretically, if the Plan is approved by shareholders and each Trust is
reorganized to a Delaware statutory trust, the shareholders would need to vote
on these two items for the DE Trust.
The DE Trust and the DE Funds must obtain shareholder approval of
these items in order to comply with the 1940 Act and to operate after the
Reorganization. The Trustees, however, have determined that it is in the best
interests of the shareholders to avoid the considerable expense of another
shareholder meeting to obtain these approvals after the Reorganization. The
Trustees, therefore, have determined that, by approving the Plan, you are also
approving, for purposes of the 1940 Act: (1) the election of the Trustees of
each Trust who are in office at the time of the Reorganization as trustees of
the DE Trust (including any new Trustees that are elected under Proposal 1); and
(2) new investment advisory agreements between the DE Trust and CCM Partners,
which are identical in all material respects to the investment advisory
agreements currently in place for the Funds (and if Proposal 2 is also approved
by the shareholders of a Fund, as approval of the new investment advisory
agreements described in Proposal 2 between CCM Partners and the DE Trust on
behalf of each corresponding DE Fund).
Prior to the Reorganization, if the Plan is approved by shareholders
of each Trust, the officers will cause each Trust, as the shareholders of the DE
Trust and each DE Fund, to vote its shares FOR the matters specified above. This
action will enable the DE Trust to satisfy the requirements of the 1940 Act
without involving the time and expense of another shareholder meeting.
What is the capitalization and structure of the DE Trust?
The DE Trust was formed as a Delaware statutory trust on [_____],
2006 pursuant to the Delaware Act. As of the effective date of the
Reorganization, the DE Trust will have separate series, each of which will
correspond to the similarly named series of the respective Trusts, each with an
unlimited number of shares of beneficial interest without par value authorized.
The shares of each DE Fund will be allocated into classes to correspond to the
current classes of shares of the corresponding Fund.
-27-
As of the effective date of the Reorganization, as with the existing
shares you hold, outstanding shares of the DE Trust will be fully paid,
nonassessable (e.g., you will not owe any further money to the respective Trust
to own your shares), and have no preemptive or subscription rights (e.g., no
special rights to purchase shares in advance of other investors). The DE Trust
will also have the same fiscal year as the Trusts.
Who will bear the expenses of the Reorganization?
Since the Reorganization is expected to benefit each Trust and their
respective shareholders, the Board has authorized that the expenses incurred in
the Reorganization, including the estimated costs associated with soliciting
proxies with respect to this proposal, shall be paid by each Trust (and,
therefore, indirectly by shareholders), whether or not the Reorganization is
approved by shareholders.
Are there any tax consequences for shareholders?
The Reorganization is designed to be "tax-free" for federal income
tax purposes so that you will not experience a taxable gain or loss when the
Reorganization is completed. Generally, the basis and holding period of your
shares in a DE Fund will be the same as the basis and holding period of your
shares in the corresponding Fund. The Reorganization is not expected to give
rise to the recognition of income, gain, or loss for federal income tax purposes
to the Trusts, the Funds, the DE Trust, or the DE Funds, or to their respective
shareholders.
The Funds do not hold any securities that are listed on foreign
exchanges or custodied out of the U.S.; nor do the Funds sell their shares out
of the U. S., so foreign tax consequences are not generally relevant.
Nevertheless shareholders subject to foreign taxes should note that, as a result
of the Reorganization, there may be adverse tax consequences in a foreign
country, including possible taxes on capital gains and forfeiture of capital
loss carry forwards. If a foreign country treats the Reorganization as a "sale"
and "purchase" of portfolio securities that are registered in that country, the
applicable Fund may be required to pay taxes on any capital gains arising from
the "sale" of those portfolio securities. Similarly, such treatment by a foreign
country may prevent the Fund from retaining the capital losses it previously
incurred on securities registered in that country to offset future capital
gains, if any, incurred on securities registered in that country. Each Trust,
however, does not believe that any Fund or any Fund shareholders will experience
a materially adverse impact as a result of a foreign country's tax treatment of
the Reorganization.
What if I choose to sell my shares at any time?
A request to sell Fund shares that is received and processed prior
to the effective date of the Reorganization will be treated as a redemption of
shares of that Fund. A request to sell shares that is received and processed
after the effective date of the Reorganization will be treated as a request for
the redemption of the same number of shares of the corresponding DE Fund.
What is the effect of my voting "For" the Plan?
By voting "FOR" the Plan, you will be agreeing to become a
shareholder of a single mutual fund organized as a Delaware statutory trust,
with trustees, investment advisory agreements, administration agreements, a
distribution plan, and other service arrangements that are substantially
identical to those currently in place for your corresponding Fund or Funds. In
addition, you will have the same exchange rights that you have currently,
including counting the time you held shares of a Fund for purposes of
calculating any redemption fee on shares you receive of the corresponding DE
Fund.
-28-
Vote Required
Shareholders of each Trust must separately approve the Agreement and
Plan of Reorganization for that Trust. When a quorum is present, the affirmative
vote of a majority of the shares of each Trust voted at the meeting is required
to approve the Agreement and Plan of Reorganization for that Trust.
The Board of Trustees of the Funds, including a majority of the
independent Trustees, unanimously recommends that you vote "FOR" this Proposal
No. 3.
-29-
GENERAL INFORMATION
General
The Funds' Distributor is RFS Partners, 44 Montgomery Street, Suite
2100, San Francisco, California, 94104. The Funds' Custodian is US Bank, N.A.,
425 Walnut Street, M.L. CN-OH-W6TC, Cincinnati, Ohio, 45202. ALPS Mutual Fund
Services, Inc., 1625 Broadway, Suite 2200, Denver, Colorado, 80202, acts as fund
accountant, the shareholder servicing agent for the Trusts and acts as the
Trusts' transfer and dividend-paying agent.
Voting Rights and Procedures and Shareholder Meeting Costs
Each share of each Fund is entitled to one vote. Shareholders of
each Fund at the close of business on February 28, 2006 (the "Record Date") will
be entitled to be present and give voting instructions for the Funds at the
Meeting with respect to their shares owned as of the Record Date. For each Fund,
as of the Record Date, the total number of shares outstanding and entitled to
vote, the total net assets represented by those shares, the number of shares
held by the Trustees and officers of the Trusts and percentage of total shares
outstanding held by Trustees and officers of the Trusts was as follows:
Number of Shares Percent of Total
Total Number Total Net Held by Trustees Shares Held by
Fund of Shares Assets and Officers Trustees and Officers
---- ------------ --------- ---------------- ----------------
California Tax Free Income 11,312,491.811 $135,259,432 None ***
Fund
California Insured 1,913,211.206 $20,129,317 84.955 ***
Intermediate Fund
California Tax-Free Money 61,392,067.936 $61,325,440 71,478.580 ***
Market Fund
U.S. Government Securities 2,596,885.352 $26,630,165 None ***
Fund
The United States Treasury 34,855,412.217 $34,848,566 840,332.970 2.4%
Trust
Short-Term U.S. Government 1,655,200.218 $16,296,558 8,378.147 ***
Bond Fund
S&P 500 Index Fund 4,305,617.894 $111,288,225 8,983.059 ***
S&P MidCap Index Fund 7,708,247.484 $182,423,404 52,236.255 ***
S&P SmallCap Index Fund 1,650,079.736 $32,645,513 18,209.074 1.1%
Equity Income Fund 1,290,949.699 $20,961,990 18,465.976 1.4%
European Growth & Income 993,140.952 $9,016,740 14,868.839 1.5%
Fund
Nasdaq-100 Index Fund 4,355,621.840 $18,275,638 36,463.978 ***
-30-
*** Less than 1% of the outstanding shares of the Fund as of the Record Date.
Except as indicated in the above table, as of the Record Date, to
the knowledge of the Trusts' management, the officers and Trustees of the Trusts
owned, collectively, less than 1% of the shares of each Fund. To the knowledge
of the Trusts' management, at the close of business on February 28, 2006, the
only persons owning beneficially more than five percent of the outstanding
shares of each Fund were those listed in Appendix E.
The Declaration of Trust of each Trust provides that except where a
larger quorum is required by applicable law, the presence at a shareholder
meeting in person or by proxy of forty percent (40%) of the shares entitled to
vote at the Meeting on a matter constitutes a quorum with respect to that
matter. Thus, a shareholder vote on Proposals No. 1 and No. 3 will take place on
its scheduled date if forty percent (40%) or more of the shares of each Trust
entitled to vote are represented in person or by proxy. Because the 1940 Act
requires that the Proposal No. 2 be approved by the affirmative vote of a
"majority of the outstanding voting securities" (as defined in the 1940 Act) of
each Fund, a shareholder vote on Proposal No. 2 for each Fund will take place on
its scheduled date if more than fifty percent (50%) or more of the shares of the
series of each Fund entitled to vote are represented in person or by proxy.
If a quorum is not present or if a quorum is present but sufficient
votes in favor of any of the Proposals are not received, the meeting may be held
for the purposes of voting on those proposals for which sufficient votes have
been received and the persons named as proxies may propose one or more
adjournments of the meeting to permit further solicitation of proxies with
respect to any proposal for a Fund for which sufficient votes have not been
received. Any such adjournment will require the affirmative vote of a majority
of the votes cast on the question of adjournment in person or by proxy. The
persons named as proxies will vote in favor of such adjournment those proxies,
which they are entitled to vote in favor of a proposal. They will vote against
any such adjournment those proxies required to be voted against a proposal. Any
proxy may be revoked at any time prior to the exercise thereof (i) by submitting
another proxy bearing a later date or by giving written notice of the revocation
to the Secretary of the respective Trust at the address indicated above or by
voting in person at the meeting, or (ii) if written notice of the death or
incapacity of the maker of the proxy is received by the Trust before the vote
pursuant to that proxy is counted, provided, however, that no proxy shall be
valid after the expiration of 11 months from the date of the proxy.
The shareholders may adjourn the Meeting to another date and time by
the vote of a majority of votes represented at the meeting whether in person or
by proxy, whether or not a quorum is present, and the meeting may be held on the
new date and time with no other notice of the adjourned meeting at which the
adjournment is taken, unless a new record date of the adjourned meeting is fixed
or unless adjournment is for more than 60 days from the original date of the
meeting (in which case the Board will set a new record date). If the adjournment
requires setting a new record date, the Trust will give notice of the adjourned
meeting to shareholders of record entitled to vote at the adjourned meeting.
Business may be conducted once a quorum is present and may continue until
adjournment of the Meeting.
In tallying shareholder votes, abstentions (i.e., shares for which a
proxy is presented, but which abstains from voting on one or more matters) and
"nominee non-votes" (i.e., shares held by nominees for which proxies are
presented but as to which (i) instructions have not been received from the
beneficial owners or persons entitled to vote and (ii) the nominee does not have
discretionary voting power on a particular matter) will be counted for purposes
of determining whether a quorum, or majority of voting shares, is present for
the conduct of business at the Meeting and will be voted in favor of any
adjournment proposed. With respect to Proposal 1, abstention and nominee
non-votes, if any, will have no effect. With respect to Proposals 2 and 3,
abstention and nominee non-votes effectively result in a vote "against" such
Proposals. If no instructions are given on an executed proxy that has been
returned to the Trusts, that proxy will be voted "FOR" each Proposal.
Shareholders do not have any appraisal or dissenter rights in connection with
any of the matters discussed in this proxy statement.
-31-
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs in connection with
solicitation of proxies related to the required approvals will be paid by the
Trusts, including any additional solicitation made by letter, telephone or
facsimile. In addition to solicitation by mail, certain officers and
representatives of the Trusts, officers and employees of CCM, who will receive
no extra compensation for their services, may solicit proxies by telephone,
facsimile or personally. In addition, CCM has retained [ ], at an anticipated
cost of approximately $[ ], to solicit proxies from brokers, banks, other
institutional holders and individual shareholders.
Further Information
You can find more information about the Fund's investment policies
in its Prospectus and Statement of Additional Information (SAI), which are
available free of charge.
To request a free copy of the Prospectus or SAI, call us at (800)
225-8778. You can review and copy further information about the Fund, including
the Prospectus or SAI, at the Securities and Exchange Commission's (SEC's)
Public Reference Room in Washington, D.C. To obtain information on the operation
of the Public Reference Room please call (202) 942-8090. Reports and other
information about the Fund are available at the SEC's Web site at www.sec.gov.
You can also obtain copies of this information, upon payment of a duplicating
fee, by writing the Public Reference Section of the SEC, Washington, D.C.,
20549-6009 or by e-mailing the SEC at publicinfo@sec.gov.
You can find further information about the Funds in the Trusts'
annual and semiannual shareholder reports, which discuss the market conditions
and investment strategies that significantly affected the Funds' performance
during its most recent fiscal period. To request a free copy of the most recent
annual or semiannual report, please contact us at (800) 225-8778 or California
Investment Trust Fund Group, 44 Montgomery Street, Suite 2100, San Francisco, CA
94104.
Other Matters to Come Before the Meeting
Neither Board of Trustees is aware of any matters that will be
presented for action at the Meeting other than the matters set forth herein.
Should any other matters requiring a vote of shareholders arise, the proxy in
the accompanying form will confer upon the person or persons entitled to vote
the shares represented by such proxy the discretionary authority to vote matters
in accordance with their best judgment.
-32-
Shareholder Proposals
The Meeting is a special meeting of shareholders. Neither Trust is
required to, nor does either intend to, hold regular meetings of its
shareholders. If such a meeting is called, any shareholder who wishes to submit
a proposal for consideration at the meeting should submit the proposal promptly
to the respective Trust. The Independent Trustees do not consider trustee
candidates recommended by shareholders except as required by law.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
Stephen C. Rogers
Chairman and President
March [_], 2006
APPENDIX A
AUDIT COMMITTEE CHARTER
CALIFORNIA INVESTMENT TRUST
CALIFORNIA INVESTMENT TRUST II
AUDIT COMMITTEE CHARTER
March, 2006
The Board of Trustees (the "Board") of each of California Investment Trust and
California Investment Trust II (each a "Trust" and collectively, the "Trusts")
shall establish an Audit Committee for the Trusts (the "Audit Committee").
I. Statement of Purpose and Function
The function of the Audit Committee is oversight. It is the responsibility of
management to maintain appropriate systems for accounting and internal controls,
and the responsibility of the Trusts' independent public accountant (the
"Auditor") to plan and carry out the audit of the Trusts in accordance with
auditing standards generally accepted in the United States. The Auditor is
ultimately responsible to the Board of Trustees and the Audit Committee, as
representatives of the shareholders.
The purposes of the Audit Committee are to:
o assist the Board in its oversight of the Trusts' accounting and
financial reporting policies and practices by reviewing disclosures
made to the Audit Committee by the Trusts' certifying officers and
the Auditor about any significant deficiency in, or material change
in the operation of, the Trusts' internal controls or material
weaknesses therein, and any fraud involving CCM Partners (the
"Adviser") or any employees or other persons who have a significant
role in the Trusts' internal controls;
o assist the Board in its oversight of the quality and objectivity of
the Trusts' financial statements and the independent audit thereof;
and
o select, oversee and set the compensation of the Auditor and to act
as liaison between the Auditor and the full Board of Trustees.
The Audit Committee shall have the resources and authority appropriate to
discharge its responsibilities, including the authority to retain special
counsel and other experts or consultants at the expense of the Trusts.
II. Audit Committee Composition
The Audit Committee shall be comprised solely of "Independent Trustees" (i.e.,
Trustees who are not "interested persons" of the Trusts as defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act"), and
who are free of any other relationship that, in the opinion of the Board, would
interfere with their exercise of independent judgment as Audit Committee
members). Appointment to the Audit Committee shall conform to all applicable
legal and regulatory criteria. Each member shall be appointed by the full Board,
and a majority of the Independent Trustees of the Board also shall approve each
appointment.
Appendix A-1
The Board shall designate one member as the Chairman of the Audit Committee.
Members of the Audit Committee shall be, or seek to become, generally
knowledgeable in financial and auditing matters as they pertain to the Trusts.
At least annually, the Audit Committee shall consider whether one or more
members of the Audit Committee is an "audit committee financial expert," as such
term is defined by the Securities and Exchange Commission, and whether any such
expert is "independent."(1) The Audit Committee shall report the results of its
deliberations to the full Board for further action as appropriate, including,
but not limited to, a determination by the Board that the Audit Committee
membership includes or does not include one or more "Audit Committee financial
experts" and any related disclosure to be made concerning this matter.
III. Meetings and Reporting
The Audit Committee shall meet at least once a year and shall hold special
meetings as circumstances require. The Audit Committee shall cause minutes of
all meetings of the Audit Committee to be prepared.
The Chairman of the Audit Committee shall report to the Board on the results of
the Audit Committee's reviews and make such recommendations as are deemed
appropriate.
The Audit Committee shall meet with the finance and other personnel of the
Trusts and the Adviser as necessary and appropriate to fulfill the Audit
Committee's oversight role. The Audit Committee shall have unrestricted access
to the Auditor and the Trusts' administrator.
IV. Duties and Responsibilities
To carry out its purposes, the Audit Committee shall have the following duties
and powers (such listing is not intended to limit the authority of the Audit
Committee in achieving its purposes):
1. Selection of Auditor and Approval of Fees.
(a) The Audit Committee shall pre-approve the selection of the Auditor
and shall recommend the selection, retention or termination of the
Auditor to the full Board and, in connection therewith, shall
evaluate the independence of the Auditor, including an evaluation of
the extent to which the Auditor provides any consulting, auditing or
non-audit services to the Adviser or its affiliates. The Audit
Committee shall review the Auditor's specific representations as to
its independence.
- ----------
(1) For purposes of this finding of independence only, in order to be
considered "independent," any such expert must not only be independent for
purposes of the Investment Company Act but also must satisfy the
additional requirement that he or she may not, other than in his or her
capacity as a member of the Audit Committee, the Board, or any other Board
committee, accept directly or indirectly any consulting, advisory, or
other compensatory fee from the Trust.
Appendix A-2
(b) The Audit Committee shall review and approve the fees charged by the
Auditor for audit and non-audit services to be provided to the
Trusts in accordance with the pre-approval requirements set forth
below. The Trusts shall provide for appropriate funding, as
determined by the Audit Committee, to compensate the Auditor for any
authorized service provided to the Trusts.
2. Meetings with Auditor. The Audit Committee shall meet with the Auditor,
including private meetings, prior to the commencement of substantial work
on the audit and following the conclusion of the audit, as well as such
other times as the Audit Committee shall deem necessary or appropriate.
The Auditor shall report directly to the Audit Committee. The Auditor
shall report at least annually, concerning the following and other
pertinent matters:
(a) to review the arrangements for and scope of the annual audit and any
special audits;
(b) to provide the Auditor the opportunity to report to the Audit
Committee, on a timely basis, all critical accounting policies and
practices to be used;
(c) to discuss any matters of concern relating to the Trusts' financial
statements, including: (i) any adjustments to such statements
recommended by the Auditor, or other results of said audit(s), and
(ii) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed
with management, the ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
Auditor;
(d) to provide the Auditor the opportunity to report to the Audit
Committee, on a timely basis, any material written communication
between the Auditor and management such as any management letter or
schedule of unadjusted differences;
(e) to provide the Auditor the opportunity to report all non-audit
services provided to any entity in the "Investment Company
Complex"(3) that were not pre-approved by the Audit Committee;
- ----------
(2) "Investment Company Complex" means the Trusts, the Adviser and any entity
controlled by, controlling or under common control with the Adviser if
such entity is an investment adviser or is engaged in the business of
providing administrative, custodian, underwriting or transfer agent
services to the Trusts or the Adviser.
Appendix A-3
(f) to discuss with the Auditor the amount of all fees received by the
Auditor for providing services of any type to the Adviser and any
affiliate of the Adviser;
(g) to consider the Auditor's comments with respect to the Trusts'
financial policies, procedures and internal accounting controls and
responses thereto by the Trusts' officers, the Adviser and
administrator, as well as other personnel;
(h) to review and receive confirmation of the form of written opinion
the Auditor proposes to render to the Board and shareholders of the
Trusts;
(i) to review the adequacy and effectiveness of relevant internal
controls and procedures and the quality of the staff implementing
those controls and procedures;
(j) to receive periodic reports concerning regulatory changes and new
accounting pronouncements that significantly affect the value of the
Trusts' assets and its financial reporting; and,
(k) to provide the Auditor the opportunity to report on any other matter
that the Auditor deems necessary or appropriate to discuss with the
Audit Committee.
If the Auditor's report on the above-listed (and other pertinent) matters
is not made in person to the Audit Committee within 60 days following the
end of the Trusts' fiscal year, the Auditor shall deliver a written report
to the Audit Committee concerning these matters within such 60-day period.
3. Change in Accounting Principles.
The Audit Committee shall consider the effect upon the Trusts of any
changes in accounting principles or practices proposed by the Auditor or
the Trusts' officers.
4. Audit Related Services and Permissible Non-Audit Services
The Audit Committee shall evaluate all audit-related services and
permissible non-audit services performed or to be performed by the Auditor
to ensure that such services do not impair the independence of the
Auditor. Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review of the
Trusts' financial statements or that are traditionally performed by the
independent auditor and that do not impair the independence of the
Auditor. Permissible non-audit services include tax compliance, tax
planning, tax advice and other routine and recurring services that do not
impair the independence of the Auditor.
Appendix A-4
5. Pre-Approval of Auditor Services.
(a) Pre-Approval Requirements. Before the Auditor is engaged by the
Trusts to render audit related or permissible non-audit services,
either:
(i) The Audit Committee shall pre-approve all audit related
services and permissible non-audit services (e.g., tax
services) to be provided to the Trusts; or
(ii) The Audit Committee shall establish policies and procedures
governing the Auditor's engagement. Any such policies and
procedures must (1) be detailed as to the particular service
and (2) not involve any delegation of the Audit Committee's
responsibilities to the Adviser. The Audit Committee may
delegate to one or more of its members the authority to grant
pre-approvals. The pre-approval policies and procedures shall
include the requirement that the decisions of any member to
whom authority is delegated under this Section 5 shall be
presented to the full Audit Committee at its next scheduled
meeting.
(b) De Minimis Exceptions to Pre-Approval Requirements. Pre-approval for
a service provided to the Trusts other than audit, review or attest
services is not required if: (1) the aggregate amount of all such
non-audit services provided to the Trusts constitutes not more than
5 percent of the total amount of revenues paid by the Trusts to the
Auditor during the fiscal year in which the non-audit services are
provided; (2) such services were not recognized by the Trusts at the
time of the engagement to be non-audit services; and (3) such
services are promptly brought to the attention of the Audit
Committee and are approved by the Audit Committee or by one or more
members of the Audit Committee to whom authority to grant such
approvals has been delegated by the Audit Committee.
(c) Pre-Approval of Non-Audit Services Provided to the Adviser and
Certain Control Persons. With respect to services that have a direct
impact on the operations or financial reporting of the Trusts, the
Audit Committee shall pre-approve all such non-audit services
proposed to be provided by the Auditor to (i) the Adviser and (ii)
any entity controlling, controlled by, or under common control with
the Adviser that provides ongoing services to the Trusts.
Application of De Minimis Exception: The de minimis exceptions set
forth above under Section 5(b) apply to pre-approvals under this
Section (c) as well, except that the "total amount of revenues"
calculation for Section 5(c) services is based on the total amount
of revenues paid to the Auditor by the Trusts and any other entity
that has its services approved under this Section (i.e., the Adviser
or any control person).
Appendix A-5
6. Prohibited Activities of the Auditor.
The Audit Committee shall confirm with the Auditor that the Auditor who is
performing the audit for the Trusts is not performing contemporaneously
(during the audit and professional engagement period) the following
non-audit services for the Trusts, the Adviser, or any other entity in the
Investment Company Complex, any non-audit services prohibited by Section
10A(g) of the Securities Exchange Act of 1934, including any other service
that the Public Company Accounting Oversight Board determines, by
regulation, is impermissible. The Audit Committee may also establish
additional prohibited activities based on the principles that the Auditor
should not: (i) audit its own work; (ii) function as a part of management
of the Trusts, the Adviser, or any other entity in the Investment Company
Complex; or (iii) act as an advocate of the Trusts, the Adviser, or any
other entity in the Investment Company Complex. The Auditor will be
responsible for informing the Audit Committee of whether it believes that
a particular non-audit service is permissible or prohibited pursuant to
applicable regulations and standards.
V. Amendment
The Audit Committee shall review this Charter on an annual basis and recommend
any changes to the full Board. This Charter may be amended by a vote of a
majority of the Board.
Appendix A-6
APPENDIX B
FORM OF NEW INVESTMENT ADVISORY AGREEMENT
FORM OF INVESTMENT ADVISORY AGREEMENT
THIS INVESTMENT ADVISORY AGREEMENT is made this ___ day of _________, 2006
(this "Agreement"), by and between [California Investment Trust] [California
Investment Trust II], a Massachusetts business trust (the "Trust"), on behalf of
the series of the Trust identified herein, and CCM Partners, a limited
partnership organized and existing under the laws of the State of California
(the "Adviser").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission ("SEC") as an open-end, management investment company under the
Investment Company Act of 1940 and the rules and regulations thereunder, as
amended from time to time (the "1940 Act");
WHEREAS, the Trust is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing interests in a
separate portfolio, and the Trust has established multiple series;
WHEREAS, the Adviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940 and the rules and regulations
thereunder, as amended from time to time (the "Advisers Act"); and
WHEREAS, the Trust desires to retain the Adviser to furnish investment
advisory services and certain specifically identified administrative services to
one or more of the series of the Trust, and the Adviser is willing to furnish
such services to such series and the Trust in the manner and on the terms
hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Trust and the
Adviser as follows:
1. Appointment. The Trust hereby appoints CCM Partners to act as Adviser
to [California Tax-Free Income Fund, California Insured Intermediate Fund and
California Tax-Free Money Market Fund][S&P 500 Index Fund, S&P MidCap Index
Fund, S&P SmallCap Index Fund, Equity Income Fund, NASDAQ-100 Index Fund,
European Growth & Income Fund, U.S. Government Securities Fund, Short-Term U.S.
Government Bond Fund and The United States Treasury Trust] (each, a "Fund" and,
together, the "Funds") for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
In the event the Trust wishes to retain the Adviser to render investment
advisory services to one or more series of the Trust other than the Funds, the
Trust shall notify the Adviser in writing. If the Adviser is willing to render
such services, it shall notify the Trust in writing, whereupon such series shall
become a Fund hereunder, and be subject to this Agreement.
Appendix B-1
2. Portfolio Management Duties. Subject to the ultimate supervision and
direction of the Trust's Board of Trustees and the Trust, the Adviser shall
regularly provide the Funds with investment research, advice, management and
supervision and shall furnish a provide a continuous investment program for the
assets of the Funds and determine the composition of the assets of the Funds,
including determination of the purchase, retention, or sale of the securities,
cash, and other investments for the Funds. The Adviser will provide investment
research and analysis, which may consist of computerized investment methodology,
and will conduct a continuous program of evaluation, investment, sales, and
reinvestment of the Funds' assets by determining the securities and other
investments that shall be purchased, entered into, sold, closed, or exchanged
for the Funds, when these transactions should be executed, and what portion of
the assets of the Funds should be held in the various securities and other
investments in which it may invest, and the Adviser is hereby authorized to
execute and perform such services on behalf of the Funds. The Adviser will also
provide to the Funds the administrative services set forth in Sections 2(c),
2(d) and 2(e) hereof. The Adviser will provide the services under this Agreement
in accordance with the Funds' investment objective or objectives, investment
policies, and investment restrictions as stated in the Trust's prospectuses and
statement of additional information, each as supplemented or amended from time
to time (as so supplemented or amended, the "Prospectus and Statement of
Additional Information"), copies of which shall be sent to the Adviser by the
Trust. Without limiting the generality of the foregoing provisions, in
performing these duties, the Adviser:
(a) Is responsible, in connection with its responsibilities under
this Section 2, for decisions to buy and sell securities and other
investments for the Funds, for broker-dealer and futures commission
merchant ("FCM") selection, and for negotiation of commission rates. The
Adviser's primary consideration in effecting a security or other
transaction will be to obtain the best execution for the Funds, taking
into account the factors specified in the Prospectus and Statement of
Additional Information for the Trust, as they may be amended or
supplemented from time to time. Subject to such policies as the Board of
Trustees may determine and consistent with Section 28(e) of the Securities
Exchange Act of 1934 and applicable regulatory interpretations thereof,
the Adviser shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason
of its having caused a Fund to pay a broker or dealer, acting as agent,
for effecting a portfolio transaction at a price in excess of the amount
of commission another broker or dealer would have charged for effecting
that transaction, if the Adviser determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Adviser's overall
responsibilities with respect to the Funds and to its other clients as to
which it exercises investment discretion. To the extent consistent with
these standards, and in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-(2)(T) thereunder, and subject to any
other applicable laws and regulations, the Adviser is further authorized
to allocate the orders placed by it on behalf of the Funds to any
affiliate that is registered as a broker or dealer with the SEC, or to
such brokers and dealers that also provide research or statistical
research and material, or other services to the Funds or the Adviser. Such
allocation shall be in such amounts and proportions as the Adviser shall
determine consistent with the above standards, and, upon request, the
Adviser will report on said allocations to the Trust and the Board of
Trustees of the Trust, indicating the brokers or dealers to which such
allocations have been made and the basis therefor.
Appendix B-2
(b) May, on occasions when the purchase or sale of a security is
deemed to be in the best interest of a Fund as well as any other
investment advisory clients, to the extent permitted by applicable laws
and regulations, but shall not be obligated to, aggregate the securities
to be sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the
Registration Statement. In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in the transaction,
will be made by the Adviser in a manner that is fair and equitable in the
judgment of the Adviser in the exercise of its fiduciary obligations to
the Trust and to such other clients.
(c) Will provide persons satisfactory to the Trust's Board of
Trustees to act as officers and employees of the Trust and a Fund (such
officers and employees, as well as certain Trustees, may be trustees,
directors, officers, partners, or employees of the Adviser or its
affiliates).
(d) Will furnish a Fund with office space and equipment reasonably
necessary for the investment operation of the Fund.
(e) Will furnish a Fund with reports, statements and other data on
securities, economic conditions and other pertinent subjects which the
Trust's Board of Trustees may reasonably request.
(f) Will regularly report to the Trust's Board of Trustees on the
investment program for the Funds and the issuers and securities
represented in the Fund's portfolio and render to the Trust's Board of
Trustees such periodic and special reports with respect to the Fund's
investment activities as the Board may reasonably request;
(g) Shall be responsible for making reasonable inquiries and for
reasonably ensuring that any employee or other affiliated person of the
Adviser has not, to the best of the Adviser's knowledge:
(i) been convicted, in the last ten (10) years, of any felony
or misdemeanor involving the purchase or sale of any security or
arising out of such person's conduct as an underwriter, broker,
dealer, investment adviser, municipal securities dealer, government
securities broker, government securities dealer, transfer agent, or
entity or person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman, or employee of
any investment company, bank, insurance company, or entity or person
required to be registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent
jurisdiction from acting as an underwriter, broker, dealer,
investment adviser, municipal securities dealer, government
securities broker, government securities dealer, transfer agent, or
entity or person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman or employee of
any investment company, bank, insurance company, or entity or person
required to be registered under the Commodity Exchange Act, or from
engaging in or continuing any conduct or practice in connection with
any such activity or in connection with the purchase or sale of any
security.
Appendix B-3
(h) Will treat confidentially and as proprietary information of the
Funds all records and other information related to the Funds, including
the performance records of such Funds, and will not use such records and
information for any purpose other than performance of its responsibilities
and duties hereunder, except after prior notification to and approval in
writing by the Funds or when so requested by the Funds; provided, however,
that records and information need not be treated as confidential if
required to be disclosed under applicable law or regulation or otherwise
in connection with investigations or inquiries contemplated under Section
9 hereof, or if generally available to the public through means other than
by disclosure by the Adviser, or if available from a source other than the
Trust, the Adviser or the Funds which does not owe a duty of
confidentiality to the Trust, the Adviser or the Funds.
(i) Will use its reasonable best efforts (i) to retain the services
of the Portfolio Employees who manage the portfolios of the Funds, from
time to time and (ii) to promptly obtain the services of a Portfolio
Employee acceptable to the Trust if the services of any of the Portfolio
Employees are no longer available to the Adviser.
(j) Will obtain the approval of the Trust prior to designating a new
Portfolio Employee, which consent shall not be unreasonably withheld;
provided, however, that, if the services of a Portfolio Employee are no
longer available to the Adviser due to circumstances beyond the reasonable
control of the Adviser (e.g., voluntary resignation, death or disability),
the Adviser may designate an interim Portfolio Employee who (i) shall be
reasonably acceptable to the Trust and (ii) shall function for a
reasonable period of time until the Adviser designates an acceptable
permanent replacement; provided, however, that if the Trust does not
consent to the designation of a Portfolio Employee, Trust and Adviser
agree to cooperate in good faith to identify a replacement Portfolio
Employee.
(k) Will, to the extent practicable, notify the Trust in advance of
any impending change in Portfolio Employee, portfolio management or any
other material matter that may require disclosure to the Board,
shareholders of the Funds or dealers in Fund shares.
3. Disclosure about Adviser. The Adviser has reviewed the Registration
Statement and represents and warrants that, with respect to the disclosure about
the Adviser or information relating, directly or indirectly, to the Adviser,
such Registration Statement contains, as of the date hereof, no untrue statement
of any material fact and does not omit any statement of a material fact which
was required to be stated therein or necessary to make the statements contained
therein not misleading in light of the circumstances in which they were made.
The Adviser further represents and warrants that it is a duly registered
investment adviser under the Advisers Act and a duly registered investment
adviser in all states in which the Adviser is required to be registered. The
Trust has received a current copy of the Adviser's Uniform Application for
Investment Trust Registration on Form ADV, as filed with the SEC. The Adviser
agrees to provide the Trust with current copies of the Adviser's Form ADV, and
any supplements or amendments thereto.
Appendix B-4
4. Expenses. During the term of this Agreement:
(a) The Adviser shall bear and pay the costs of rendering the
services to be performed by it under this Agreement. In addition, with
respect to the operation of the Fund, the Adviser is responsible for (i)
the compensation of any of the Trust's trustees, officers, and employees
who are affiliates of the Adviser (except for the salary or other
compensation of the Chief Compliance Officer ("CCO") of the Trust who may
be an affiliate of the Adviser, as to which a portion of such compensation
and related costs allocable to his or her duties as the CCO of the Trust
will be reimbursed by the Trust to Adviser to the extent the CCO has
responsibilities that he/she performs for CCM and is paid by CCM, which
amount shall be determined by the Trustees of the Trust), (ii) the
expenses of printing and distributing the Fund's prospectuses, statements
of additional information, and sales and advertising materials (but not
the legal, auditing or accounting fees attendant thereto) to prospective
investors (but not to existing shareholders), and (iii) providing office
space and equipment reasonably necessary for the operation of the Fund.
(b) The Fund is responsible for and has assumed the obligation for
payment of all of its expenses, other than as stated in Section 4(a)
hereof, including but not limited to: 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 Trust for the benefit of a 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 required under the 1940 Act; taxes, if any; expenditures
in connection with meetings of the Fund'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 Trust's Board of Trustees
or members of any advisory board or committee who are not members of,
affiliated with or interested persons of the Adviser (except as otherwise
provided in Section 4(a) hereof with respect to the CCO's compensation and
related costs); insurance premiums on property or personnel of a 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 a 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, if any; and all
other charges and costs of its operation plus any extraordinary and
non-recurring expenses, except as herein otherwise prescribed.
Appendix B-5
(c) In the execution of its duties under this Agreement, the Adviser
is entitled to reimbursement of actual costs incurred by the Adviser for
expenses which are otherwise the obligation of the Funds. The Fund shall
promptly reimburse the Adviser for such costs and expenses, except to the
extent the Adviser has otherwise agreed to bear such expenses.
5. Compensation.
(a) The Fund shall pay to the Adviser, and the Adviser agrees to
accept, as full compensation for all specifically identified
administrative services and investment management and advisory services
furnished or provided to a Fund pursuant to this Agreement, a management
fee as set forth in on Schedule A attached hereto, as may be amended in
writing from time to time by the Trust and the Adviser.
(b) The management fee shall be accrued daily by each Fund and paid
to the Adviser on the first business day of the succeeding month.
(c) The initial fee under this Agreement shall be payable on the
first business day of the first month following the effective date of this
Agreement and shall be prorated as set forth below. If this Agreement is
terminated prior to the end of any month, the fee to the Adviser shall be
prorated for the portion of any month in which this Agreement is in effect
which is not a complete month according to the proportion which the number
of calendar days in the month during which the Agreement is in effect
bears to the number of calendar days in the month, and shall be payable
within ten (10) days after the date of termination.
(d) The fees payable to the Adviser under this Agreement will be
reduced to the extent required under the most stringent expense limitation
applicable to a Fund imposed by any state in which shares of the Fund are
qualified for sale. The Adviser may reduce any portion of the compensation
or reimbursement of expenses due to it pursuant to this Agreement and may
agree to make payments to limit the expenses that are the responsibility
of a Fund under this Agreement. Except as the Adviser may otherwise agree
with respect to the Fund, any such reduction or payment shall be
applicable only to such specific reduction or payment and shall not
constitute an agreement to reduce any future compensation or reimbursement
due to the Adviser hereunder or to continue future payments. Any such
reduction will be agreed to prior to accrual of the related expense or fee
and will be estimated daily and reconciled and paid on a monthly basis.
Any fee withheld pursuant to this paragraph 5(d) from the Adviser shall be
reimbursed by a Fund to the Adviser in the first fiscal year or the second
fiscal year next succeeding the fiscal year of the withholding.
Appendix B-6
(e) The Adviser may agree not to require payment of any portion of
the compensation or reimbursement of expenses otherwise due to it pursuant
to this Agreement prior to the time such compensation or reimbursement has
accrued as a liability of the Fund. Any such agreement shall be applicable
only with respect to the specific items covered thereby and shall not
constitute an agreement not to require payment of any future compensation
or reimbursement due to the Adviser hereunder.
6. Notice of Certain Events.
(a) The Adviser agrees that, if legally permitted, it shall immediately
notify the Trust and the Trust in the event (i) that the SEC or any state has
censured the Adviser; placed limitations upon its activities, functions or
operations; suspended or revoked its registration as an investment adviser; or
has commenced proceedings or an investigation that may result in any of these
actions, and (ii) upon having a reasonable basis for believing that any Fund has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. The Adviser further agrees to notify
the Trust and the Trust immediately of any material fact known to the Adviser
that is not contained in the Registration Statement or prospectus for the Trust
that relates to the Adviser or any Fund, or any amendment or supplement thereto,
or of any statement contained therein that becomes untrue in any material
respect.
(b) The Trust agrees that, if legally permitted, it shall immediately
notify the Adviser in the event (i) that the SEC or any state has censured the
Trust; placed limitations upon either of their activities, functions, or
operations; suspended or revoked the Trust's registration as an investment
adviser; or has commenced proceedings or an investigation that may result in any
of these actions, and (ii) upon having a reasonable basis for believing that a
Fund has ceased to qualify or might not qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code.
7. Independent Contractor. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Trust from time to time, have no authority
to act for or represent the Trust in any way or otherwise be deemed its agent.
The Adviser understands that unless expressly provided herein or authorized from
time to time by the Trust, the Adviser shall have no authority to act for or
represent the Trust in any way or otherwise be deemed the Trust's agent.
8. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, the Adviser hereby agrees that all records which it
maintains for the Funds are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's or the
Trust's request, although the Adviser may, at its own expense, make and retain a
copy of such records. The Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the 1940 Act the records required to be
maintained by Rule 31a-1 under the 1940 Act and to preserve the records required
by Rule 204-2 under the Advisers Act for the period specified in that Rule.
Appendix B-7
9. Cooperation. Each party to this Agreement agrees to cooperate with each
other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC) in connection
with any investigation or inquiry relating to this Agreement, the Trust or the
Funds.
10. Services Not Exclusive. It is expressly understood and agreed that the
services to be rendered by the Adviser to the Funds are not exclusive, and
nothing in this Agreement shall prevent the Adviser (or its affiliates) from
providing similar or different services to other clients (whether or not their
investment objectives and policies are similar to those of the Funds) or from
engaging in other activities so long as its ability to render the services
provided for in this Agreement shall not be impaired thereby. The Trust's
employment of the Adviser is not an exclusive arrangement, and the Trust may
from time to time employ other individuals or entities to furnish it with the
services provided for herein.
11. Adviser's Liability and Indemnification.
(a) The Adviser shall have responsibility for the accuracy and
completeness (and liability for the lack thereof) of the statements in the
Fund's offering materials (including the prospectus, the statement of
additional information, advertising and sales materials), except for
information supplied by the Trust or another third party for inclusion
therein.
(b) The Adviser shall be liable to the Fund for any loss (including
brokerage charges) incurred by the Fund as a result of any improper
investment made by the Adviser.
(c) Except as provided in Section 11(b) hereof and as may otherwise
be required by the 1940 Act or other applicable law, the Trust agrees that
the Adviser, any affiliated person of the Adviser, and each person, if
any, who, within the meaning of Section 15 of the Securities Act of 1933
(the "1933 Act") controls the Adviser shall not be liable to the Trust, or
any Fund or any shareholder of any Fund, for, or subject to any damages,
expenses, or losses in connection with, any act or omission connected with
or arising out of any services rendered under this Agreement (including
any losses that may be sustained in the purchase, holding or sale of any
security by the Funds), except by reason of willful misfeasance, bad faith
or gross negligence in the performance of the Adviser's duties, or by
reason of reckless disregard of the Adviser's obligations and duties under
this Agreement.
(d) The Adviser agrees to reimburse the Trust for any and all costs,
expenses, and counsel and Trustees' fees reasonably incurred by the Trust
in the preparation, printing and distribution of proxy statements,
amendments to its Registration Statement, holdings of meetings of its
shareholders or Trustees, the conduct of factual investigations, any legal
or administrative proceedings (including any applications for exemptions
or determinations by the Securities and Exchange Commission) which the
Trust incurs as the result of action or inaction of the Adviser or any of
its partners where the action or inaction necessitating such expenditures
(i) is directly or indirectly related to any transactions or proposed
transaction in the interests or control of the Adviser or its affiliates
(or litigation related to any pending or proposed future transaction in
such interests or control) which shall have been undertaken without the
prior, express approval of the Trust's Board of Trustees; or (ii) is
within the sole control of the Adviser or any of its affiliates or any of
their officers, partners, employees, or agents. So long as this Agreement
is in effect, the Adviser shall pay to the Trust the amount due for
expenses subject to this subparagraph 11(b) within thirty (30) days after
a bill or statement has been received from the Trust therefor. This
provision shall not be deemed to be a waiver of any claim which the Trust
may have or may assert against the Adviser or others for costs, expenses,
or damages heretofore incurred by the Trust or for costs, expenses or
damages the Trust may hereafter incur which are not reimbursable to it
hereunder.
Appendix B-8
(e) No provision of this Agreement shall be construed to protect any
Trustee or officer of the Trust, or partner or officer of the Adviser,
from liability in violation of Sections 17(h) and (i) of the 1940 Act.
12. Best Efforts and Judgment. The Adviser shall use its best judgment and
efforts in rendering the advice and, services to a Fund as contemplated by this
Agreement.
13. Adviser's Personnel. The Adviser shall, at its own expense (except as
may be otherwise provided in Section 4(a) hereof), maintain such staff and
employ or retain such personnel and consult with such other persons as it shall
from time to time determine to be necessary to the performance of its
obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Adviser shall be deemed to include
persons employed or retained by the Adviser to furnish statistical information,
research, and other factual information, advice regarding economic factors and
trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as the Adviser or the Trust's
Board of Trustees may desire and reasonably request.
14. Reports by Fund to Adviser. Each Fund from time to time will furnish
to the Adviser detailed statements of its investments and assets, and
information as to its investment objective and needs, and will make available to
the Adviser such financial reports, proxy statements, legal and other
information relating to the Fund's investments as may be in its possession or
available to it, together with such other information as the Adviser may
reasonably request.
15. Duration and Termination.
(a) This Agreement shall take effect with respect to each Fund as of the
date hereof or, if later, as of the date set forth next to such Fund's name on
Schedule A hereto, and shall remain in effect for two years from such date, and
continue thereafter on an annual basis with respect to such Fund; provided that
such annual continuance is specifically approved at least annually (a) by the
vote of a majority of the entire Board of Trustees of the Trust, or (b) by the
vote of a majority of the outstanding voting securities (as such term is defined
in the 1940 Act) of such Fund, and provided that continuance is also approved by
the vote of a majority of the members of the Board of Trustees of the Trust who
are not parties to this Agreement or "interested persons" (as such term is
defined in the 1940 Act) of the Trust, the Trust, or the Adviser, cast in person
at a meeting called for the purpose of voting on such approval. This Agreement
may not be materially amended with respect to a Fund without the vote of a
majority of the outstanding voting securities (as such term is defined in the
1940 Act) of such Fund, except to the extent permitted by any exemption or
exemptions that may be granted upon application made to the SEC or by any
applicable SEC rule or No-Action precedent. This Agreement may be terminated:
Appendix B-9
(i) by the Trust at any time with respect to the services provided
by the Adviser, without the payment of any penalty, by vote of a majority
of the entire Board of Trustees of the Trust or by vote of a majority of
the outstanding voting securities (as such term is defined in the 1940
Act) of the Trust or, with respect to a particular Fund, by vote of a
majority of the outstanding voting securities of that Fund, on 60 days'
written notice to the Adviser;
(ii) by the Adviser at any time, without the payment of any penalty,
upon 60 days' written notice to the Trust;
(iii) by the Trust at any time, without the payment of any penalty,
upon 60 days' written notice to the Adviser.
However, any approval of this Agreement by the holders of a majority of
the outstanding voting securities (as such term is defined in the 1940 Act) of a
particular Fund shall be effective to continue this Agreement with respect to
that Fund notwithstanding (a) that this Agreement has not been approved by the
holders of a majority of the outstanding voting securities of any other Fund or
other series of the Trust or (b) that this Agreement has not been approved by
the vote of a majority of the outstanding voting securities of the Trust, unless
such approval shall be required by any other applicable law or otherwise. This
Agreement will terminate automatically with respect to the services provided by
the Adviser in the event of its assignment, as that term is defined in the 1940
Act, by the Adviser, or upon the termination of the Investment Advisory
Agreement.
(b) The Trust and Adviser will cooperate with each other to ensure that
portfolio or other transactions in progress at the date of termination of this
Agreement shall be completed in accordance with the terms of such transactions,
and to this end each party shall provide the other party with all reasonably
necessary information and documentation to secure the implementation thereof.
16. Agreement and Declaration of Trust. A copy of the Agreement and
Declaration of Trust of the Trust and amendments thereto, is on file with the
Secretary of State of the Commonwealth of Massachusetts. The Adviser
acknowledges that it has received notice of and accepts the limitations of the
Trust's liability set forth in Article III, Section 6(b) of its Agreement and
Declaration of Trust. The Adviser agrees that the Trust's obligations under this
Agreement with respect to a Fund shall be limited to the Fund and to its assets,
and that the Adviser shall not seek satisfaction of any such obligation from the
shareholders of the Fund nor from any trustee, officer, employee or agent of the
Trust or the Fund, nor from the assets of shareholders of any other series of
the Trust. Notice is hereby given that this Agreement is executed on behalf of
the Trustees of the Trust as Trustees and not individually, and that the
obligations of or arising out of this Agreement are not binding upon any of the
Trustees, officers or shareholders of the Trust individually.
Appendix B-10
17. Trading in Fund Shares. The Adviser agrees that neither it nor any of
its partners, officers or employees shall take any short position in the shares
of the Fund. This prohibition shall not prevent the purchase of such shares by
any of the officers and partners or bona fide employees of the Adviser or any
trust, pension, profit-sharing or other benefit plan for such persons or
affiliates thereof, at a price not less than the net asset value thereof at the
time of purchase, as allowed pursuant to rules promulgated under the 1940 Act.
18. Conflicts with Trust's Governing Documents and Applicable Laws.
Nothing herein contained shall be deemed to require the Trust or any Fund to
take any action contrary to the Trust's Agreement and Declaration of Trust,
By-Laws, or any applicable statute or regulation, or to relieve or deprive the
Board of Trustees of the Trust of its responsibility for and control of the
conduct of the affairs of the Trust and the Fund.
19. Miscellaneous.
(a) This Agreement shall be governed by the laws of the State of
California without giving effect to the conflict of laws principles thereof,
provided that nothing herein shall be construed to preempt, or to be
inconsistent with, any federal law, regulation, order or rule, including the
1940 Act and the Advisers Act and any rules, regulations or orders of the SEC
promulgated thereunder.
(b) The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) This Agreement embodies the entire agreement and understanding between
the parties hereto, and supersedes all prior agreements and understandings
relating to the subject matter hereof. If any provisions of this Agreement shall
be held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby, and to this extent,
the provisions of this Agreement shall be deemed to be severable. To the extent
that any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise with regard to any party hereunder, such
provisions with respect to other parties hereto shall not be affected thereby.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
Appendix B-11
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
[CALIFORNIA INVESTMENT TRUST] CCM PARTNERS
[CALIFORNIA INVESTMENT TRUST II]
a Massachusetts business trust a California limited partnership
By: _________________ By: _________________
[ ] RFS Partners,
[ ] its General Partner
By: ____________________
Richard F. Shelton, Inc.,
its General Partner
By:_________________
Stephen C. Rogers,
Co-trustee of Richard F. Shelton
Trust, Sole Shareholder of
Richard F. Shelton, Inc.
Appendix B-12
SCHEDULE A
FEE SCHEDULE
Each Fund shall pay to the Adviser, as full compensation for all specifically
identified administrative and investment management and advisory services
furnished or provided to that Fund, pursuant to the Investment Advisory
Agreement, a management fee based upon the Fund's average daily net assets at
the following per annum rates:
- --------------------------------------------------------------------------------
California Tax-Free Income Fund 0.50% of the value of the average
daily net assets up to and
including assets of $100 million;
plus 0.45% of the average daily
net assets over $100 million up to
and including $500 million; plus
0.40% of the average daily net
assets over $500 million.
- --------------------------------------------------------------------------------
California Insured Intermediate Fund 0.50% of the value of the average
daily net assets up to and
including assets of $100 million;
plus 0.45% of the average daily
net assets over $100 million up to
and including $500 million; plus
0.40% of the average daily net
assets over $500 million.
- --------------------------------------------------------------------------------
California Tax-Free Money Market Fund 0.50% of the value of the average
daily net assets up to and
including assets of $100 million;
plus 0.45% of the average daily
net assets over $100 million up to
and including $500 million; plus
0.40% of the average daily net
assets over $500 million.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. Government Securities Fund 0.50% of the value of the average
daily net assets up to and
including assets of $100 million;
plus 0.45% of the average daily
net assets over $100 million up to
and including $500 million; plus
0.40% of the average daily net
assets over $500 million.
- --------------------------------------------------------------------------------
The United States Treasury Trust 0.50% of the value of the average
daily net assets up to and
including assets of $100 million;
plus 0.45% of the average daily
net assets over $100 million up to
and including $500 million; plus
0.40% of the average daily net
assets over $500 million.
- --------------------------------------------------------------------------------
Short-Term U.S. Government Bond Fund 0.50% of the value of the average
daily net assets up to and
including assets of $500 million;
plus 0.45% of the average daily
net assets over $500 million up to
and including $1 billion; plus
0.40% of the average daily net
assets over $1 billion.
- --------------------------------------------------------------------------------
Appendix B-13
- --------------------------------------------------------------------------------
S&P 500 Index Fund 0.25% of the value of the average
daily net assets.
- --------------------------------------------------------------------------------
S&P MidCap Index Fund 0.40% of the value of the average
daily net assets.
- --------------------------------------------------------------------------------
S&P SmallCap Index Fund 0.50% of the value of the average
daily net assets up to and
including assets of $500 million;
plus 0.45% of the average daily
net assets over $500 million up to
and including $1 billion; plus
0.40% of the average daily net
assets over $1 billion.
- --------------------------------------------------------------------------------
NASDAQ-100 Index Fund 0.50% of the value of the average
daily net assets up to and
including assets of $500 million;
plus 0.45% of the average daily
net assets over $500 million up to
and including $1 billion; plus
0.40% of the average daily net
assets over $1 billion.
- --------------------------------------------------------------------------------
European Growth & Income Fund 0.85% of the value of the average
daily net assets.
- --------------------------------------------------------------------------------
Equity Income Fund 0.50% of the value of the average
daily net assets up to and
including assets of $100 million;
plus 0.45% of the average daily
net assets over $100 million up to
and including $500 million; and
plus 0.40% of the average daily
net assets over $500 million.]
- --------------------------------------------------------------------------------
FEE LIMITATIONS
California Investment Trust Funds: To the extent that the gross operating costs
and expenses of each Fund (excluding any extraordinary expenses, such as
litigation) exceed 1.00% of that Fund's average daily net asset value for any
one fiscal year, the Adviser shall reimburse that Fund for the amount of such
excess expenses.
Appendix B-14
APPENDIX C
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION AMONG
CALIFORNIA INVESTMENT TRUST, A MASSACHUSETTS BUSINESS TRUST,
CALIFORNIA INVESTMENT TRUST II, A MASSACHUSETTS BUSINESS TRUST,
AND [CALIFORNIA INVESTMENT TRUST], A
A DELAWARE STATUTORY TRUST
This Agreement and Plan of Reorganization (this "Agreement") is made
as of this [ ] day of [ ], 2006 by and among California Investment Trust ("CIT")
and California Investment Trust II ("CIT II"), each a Massachusetts business
trust (each a "MA-Trust" and collectively, the "MA-Trusts"), and [California
Investment Trust], a Delaware statutory trust (the "DE-Trust") (the MA-Trusts
and the DE-Trust are hereinafter collectively referred to as the "parties").
In consideration of the mutual promises contained herein, and
intending to be legally bound, the parties hereto agree as follows:
1. Plan of Reorganization.
(a) Upon satisfaction or wavier of the conditions precedent described in
Section 3 hereof, each MA-Trust, on behalf of itself and each of its respective
separately designated series, as listed on Exhibit A hereto (collectively, the
"MA-Funds"), will convey, transfer and deliver to the DE-Trust, on behalf of
each of its separately designated series (collectively, the "DE-Funds") (each of
which corresponds to the MA-Fund with the same name, as set forth in Exhibit A),
at the closing provided for in Section 2 (hereinafter referred to as the
"Closing"), all of each MA-Trust's then-existing assets, including the assets of
each MA-Fund (the "Assets"). In consideration thereof, the DE-Trust, on behalf
of each DE-Fund, agrees at the Closing (i) to assume and pay when due all
obligations and liabilities of the corresponding MA-Fund (including such
MA-Fund's pro rata portion of any obligation and liability of the corresponding
MA-Trust), existing on or after the Effective Date of the Reorganization (as
defined in Section 2 hereof), whether absolute, accrued, contingent or
otherwise, including all fees and expenses in connection with this Agreement,
which fees and expenses shall, in turn, include, without limitation, costs of
legal advice, accounting, printing, mailing, proxy solicitation and transfer
taxes, if any (collectively, the "Liabilities"), such Liabilities to become the
obligations and liabilities of the corresponding DE-Fund; and (ii) to deliver to
the corresponding MA-Trust, on behalf of each MA-Fund, in accordance with
paragraph (b) of this Section 1, full and fractional shares of each class of
shares of beneficial interest, without par value, of the corresponding DE-Fund,
equal in number to the number of full and fractional shares of the corresponding
class of shares of beneficial interest, no par value, of that MA-Fund
outstanding at the close of business on the business day immediately preceding
the Effective Date of the Reorganization. The reorganizations contemplated
hereby are each intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code"). The
MA-Trusts, on behalf of each MA-Fund, shall distribute to the MA-Funds'
shareholders the shares of the corresponding DE-Funds in accordance with this
Agreement and the resolutions of the Board of Trustees of each MA-Trust (each
individually and together, the "Board of Trustees") authorizing the transactions
contemplated by this Agreement.
Appendix C-1
(b) In order to effect the delivery of shares described in Section
1(a)(ii) hereof, the DE-Trust will establish an open account on the records of
the DE-Funds for each shareholder of the corresponding MA-Funds and, on the
Effective Date of the Reorganization, will credit to such account full and
fractional shares of beneficial interest, without par value, of the appropriate
class of the DE-Funds equal to the number of full and fractional shares of
beneficial interest such shareholder holds in the corresponding class of the
corresponding MA-Funds at the close of business on the business day immediately
preceding the Effective Date of the Reorganization. At the close of business on
the business day immediately preceding the Effective Date of the Reorganization,
the net asset value per share of each class of shares of each DE-Fund shall be
deemed to be the same as the net asset value per share of the corresponding
class of shares of the corresponding MA-Funds. On the Effective Date of the
Reorganization, each certificate representing shares of a class of an MA-Fund
will be deemed to represent the same number of shares of the corresponding class
of the corresponding DE-Fund, provided, however, new certificates representing
DE-Trust shares will not be issued to shareholders. Simultaneously with the
crediting of the shares of the DE-Funds to the shareholders of record of the
corresponding MA-Funds, the shares of the MA-Funds held by such shareholders
shall be cancelled.
(c) As soon as practicable after the Effective Date of the Reorganization,
each MA-Trust shall take all necessary steps under Massachusetts business trust
law to effect a complete dissolution of such MA-Trust.
(d) The expenses of entering into and carrying out this Agreement will be
borne by the MA-Trusts in such proportion that the net assets of each MA-Trust
bears to the total net assets of both MA-Trusts.
2. Closing and Effective Date of the Reorganization.
The Closing shall consist of (i) the conveyance, transfer and
delivery of the Assets to the DE-Trust, on behalf of the DE-Funds, in exchange
for the assumption and payment, when due, by the DE-Trust, on behalf of the
DE-Funds, of the Liabilities of the corresponding MA-Funds; and (ii) the
issuance and delivery of the DE-Funds' shares in accordance with Section 1(b),
together with related acts necessary to consummate such transactions. The
Closing shall occur either on (a) the business day immediately following the
later of the receipt of all necessary regulatory approvals and the final
adjournment of the meeting of shareholders of each MA-Trust at which this
Agreement is considered and approved, or (b) such later date as the parties may
mutually agree ("Effective Date of the Reorganization"). Solely for purposes of
subsection (a) above, the effectiveness of one or more post-effective amendments
to each MA-Trust's Registration Statement as described below in Section 3(b)(i)
shall not be deemed to be a necessary regulatory approval.
3. Conditions Precedent.
The obligations of the MA-Trusts and the DE-Trust to effectuate the
transactions hereunder shall be subject to the satisfaction of each of the
following conditions, unless waived by the parties:
Appendix C-2
(a) Such authority and orders from the U.S. Securities and Exchange
Commission (the "Commission") and state securities commissions as may be
necessary to permit the parties to carry out the transactions contemplated by
this Agreement shall have been received;
(b) (i) One or more post-effective amendments to each MA-Trust's
Registration Statement on Form N-lA ("Registration Statement") under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended (the "1940 Act"), containing such amendments to such Registration
Statement as are determined by the officers of each Trust to be necessary and
appropriate as a result of this Agreement, shall have been filed with the
Commission; (ii) the DE-Trust shall have adopted as its own such Registration
Statement, as so amended; (iii) the most recent post-effective amendment or
amendments to each MA-Trust's Registration Statement shall have become
effective, and no stop order suspending the effectiveness of the Registration
Statement shall have been issued, and no proceeding for that purpose shall have
been initiated or threatened by the Commission (other than any such stop order,
proceeding or threatened proceeding which shall have been withdrawn or
terminated); and (iv) for each MA-Trust, an amendment of the Form N-8A
Notification of Registration filed pursuant to Section 8(a) of the 1940 Act
("Form N-8A") reflecting the change in legal form of such MA-Trust to a Delaware
statutory trust shall have been filed with the Commission and the DE-Trust shall
have expressly adopted each such amended Form N-8A as its own for purposes of
the 1940 Act;
(c) Each party shall have received legal opinion(s), to the effect that,
assuming the reorganization contemplated hereby is carried out in accordance
with this Agreement and the laws of the State of Delaware, and in accordance
with customary representations provided by the parties in a certificate(s)
delivered to counsel, the reorganizations contemplated by this Agreement each
qualify as a "reorganization" under Section 368 of the Code, and thus will not
give rise to the recognition of income, gain or loss for federal income tax
purposes to the MA-Funds, the DE-Funds or the shareholders of the MA-Funds or
the DE-Funds;
(d) Each MA-Trust shall have received legal opinion(s), dated the
Effective Date of the Reorganization, addressed to and in form and substance
reasonably satisfactory to the MA-Trusts, to the effect that (i) the DE-Trust is
a statutory trust duly formed, validly existing, and in good standing under the
laws of the State of Delaware; (ii) this Agreement and the transactions
contemplated thereby and the execution and delivery of this Agreement have been
duly authorized and approved by all requisite statutory trust action of the
DE-Trust and this Agreement, assuming due execution and delivery by the
DE-Trust, is a legal, valid and binding agreement of the DE-Trust, enforceable
in accordance with its terms; and (iii) the shares of the DE-Trust to be issued
in the reorganization have been duly authorized and, upon issuance thereof in
accordance with this Agreement, will have been validly issued and fully paid and
will be nonassessable by the DE-Trust;
(e) The DE-Trust shall have received legal opinion(s), dated the Effective
Date of the Reorganization, addressed to and in form and substance reasonably
satisfactory to the DE-Trust, to the effect that: (i) each MA-Trust is validly
existing and is in good standing under the laws of the Commonwealth of
Massachusetts; (ii) each MA-Trust is an open-end investment company of the
management type registered under the 1940 Act; and (iii) this Agreement and the
transactions contemplated hereby and the execution and delivery of this
Agreement have been duly authorized and approved by all requisite business trust
action of each MA-Trust and this Agreement, assuming due execution and delivery
by the MA-Trusts, is a legal, valid and binding agreement of each MA-Trust,
enforceable against each MA-Trust in accordance with its terms;
Appendix C-3
(f) The shares of the DE-Funds are eligible for offering to the public in
those states of the United States and jurisdictions in which the shares of the
corresponding MA-Funds are currently eligible for offering to the public so as
to permit the issuance and delivery by the DE-Trust, on behalf of the DE-Funds,
of the shares contemplated by this Agreement to be consummated;
(g) This Agreement and the transactions contemplated hereby shall have
been duly adopted and approved by the appropriate action of the Board of
Trustees and the shareholders of the MA-Trusts;
(h) The shareholders of each MA-Trust shall have voted to direct the
corresponding MA-Trust to vote, and each MA-Trust shall have voted, as the
initial shareholders of each class of the DE-Trust, to:
(1) Elect as Trustees of the DE-Trust the following individuals:
Messrs. Stephen C. Rogers, James W. Miller, Jr., Harry Holmes and John B. Sias
[and Kevin T. Kogler and Stephen H. Sutro];
(2) Approve an Investment Advisory Agreement between CCM Partners
("CCM") and the DE-Trust which is substantially identical to the then-current
Investment Advisory Agreement, as amended to date, between CCM and CIT, on
behalf of each of its respective series;
(3) Approve an Investment Advisory Agreement between CCM and the
DE-Trust, which is substantially identical to the then-current Investment
Advisory Agreement, as amended to date, between CCM and CIT II, on behalf of
each of its respective series;
(i) The Trustees of the DE-Trust shall have duly adopted and approved this
Agreement and the transactions contemplated hereby and shall have taken the
following actions at a meeting duly called for such purposes:
(1) Approval of the Investment Advisory Agreements described in
paragraphs (h)(2) and (3) of this Section 3 between CCM and the DE-Trust;
(2) Approval of the assignment to the DE-Trust of the Custody
Agreement, dated January 3, 2005, as amended to date, among CIT, CIT II and U.S.
Bank National Association;
(3) Selection of Tait, Weller & Baker LLP as the DE-Trust's
independent auditors for the fiscal year ending August 31, 2006;
Appendix C-4
(4) Approval of the assignment to the DE-Trust of the Fund
Accounting and Services Agreement, dated December 3, 2004, among CIT, CIT II and
ALPS Mutual Funds Services, Inc.;
(5) Approval of the assignment to the DE-Trust of the Transfer
Agency and Service Agreement, dated December 3, 2004, among CIT, CIT II and ALPS
Mutual Funds Services, Inc.;
(6) Approval of the assignment to the DE-Trust of the Underwriting
Agreement between CIT and RFS Partners;
(7) Approval of the assignment to the DE-Trust of the Underwriting
Agreement between CIT II and RFS Partners;
(8) Approval of the assignment to the DE-Trust of the Restated Fund
Administration Servicing Agreement between CIT and CCM;
(9) Approval of the assignment to the DE-Trust of the Restated Fund
Administration Servicing Agreement between CIT II and CCM;
(10) Approval of the assignment to the DE-Trust of (a) the
Distribution Plan of CIT II pursuant to Rule 12b-1 under the 1940 Act; and (b)
the Rule 18f-3 Plan of CIT II;
(11) Authorization of the issuance by the DE-Trust, on behalf of
each DE-Fund, prior to the Effective Date of the Reorganization, of one share of
each series of shares of beneficial interest of each DE-Fund to the
corresponding MA-Trust, on behalf of the corresponding MA-Fund, in consideration
for the payment of $1.00 for each such share for the purpose of enabling each
MA-Trust to vote on the matters referred to in paragraph (h) of this Section 3,
it being agreed that each such share issued shall be redeemed immediately prior
to the consummation of the Reorganization;
(12) Submission of the matters referred to in paragraph (h) of this
Section 3 to the MA-Trusts as initial shareholders of each class of each
DE-Fund; and
(13) Authorization of the issuance and delivery by the DE-Trust, on
behalf of each DE-Fund, of shares of the DE-Funds on the Effective Date of the
Reorganization and the assumption by the DE-Funds of the Liabilities of the
corresponding MA-Funds in exchange for the Assets of the corresponding MA-Funds
pursuant to the terms and provisions of this Agreement.
At any time prior to the Closing, any of the foregoing conditions
may be waived or amended, or any additional terms and conditions may be fixed,
in the discretion of the management or the Board of Trustees of either MA-Trust
or the management or Board of Trustees of the DE-Trust.
Appendix C-5
4. Dissolution of the MA-Trusts.
Promptly following the consummation of the distribution of each
class of shares of the DE-Funds to holders of the corresponding class of shares
of the corresponding MA-Funds under this Agreement, the officers of each
MA-Trust shall take all steps necessary under Massachusetts business trust law
to dissolve its business trust status, including publication of any necessary
notices to creditors.
5. Termination.
The Board of Trustees of either MA-Trust may terminate this
Agreement and abandon the reorganization contemplated hereby, notwithstanding
approval thereof by the shareholders of the MA-Trusts, at any time prior to the
Effective Date of the Reorganization if, in the judgment of such Board, the
facts and circumstances make proceeding with this Agreement inadvisable.
6. Entire Agreement.
This Agreement embodies the entire agreement between the parties
hereto and there are no agreements, understandings, restrictions or warranties
among the parties hereto other than those set forth herein or herein provided
for.
7. Further Assurances.
The MA-Trusts and the DE-Trust shall each take such further action
as may be reasonably requested by another party or necessary or desirable and
proper to consummate the transactions contemplated hereby.
8. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
9. Governing Law.
This Agreement and the transactions contemplated hereby shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.
[Remainder of page intentionally left blank]
Appendix C-6
IN WITNESS WHEREOF, the MA-Trusts and the DE-Trust have each caused
this Agreement and Plan of Reorganization to be executed on its behalf by its
duly authorized representatives, all as of the day and year first-above written.
CALIFORNIA INVESTMENT TRUST,
a Massachusetts business trust
By __________________________________
Name: ________________________________
Title:
CALIFORNIA INVESTMENT TRUST II,
a Massachusetts business trust
By __________________________________
Name: ________________________________
Title:
[CALIFORNIA INVESTMENT TRUST],
a Delaware statutory trust
By____________________________________
Name: ________________________________
Title: _______________________________
Appendix C-7
Exhibit A
Corresponds to:
MA-Funds DE-Funds
-------- --------
California Tax-Free Income Fund California Tax-Free Income Fund
California Insured Intermediate Fund California Insured Intermediate Fund
California Tax-Free Money Market Fund California Tax-Free Money Market Fund
S&P 500 Index Fund S&P 500 Index Fund
S&P MidCap Index Fund S&P MidCap Index Fund
S&P SmallCap Index Fund S&P SmallCap Index Fund
Equity Income Fund Equity Income Fund
European Growth & Income Fund European Growth & Income Fund
Nasdaq-100 Index Fund Nasdaq-100 Index Fund
U.S. Government Securities Fund U.S. Government Securities Fund
The United States Treasury Trust The United States Treasury Trust
Short-Term U.S. Government Bond Fund Short-Term U.S. Government Bond Fund
Appendix C-8
APPENDIX D
A COMPARISON OF GOVERNING DOCUMENTS AND STATE LAW
A COMPARISON OF GOVERNING DOCUMENTS AND STATE LAW
A Comparison of:
The Law Governing Delaware Statutory Trusts and
The Charter Documents of California Investment Trust
and California Investment Trust
Under Such Law
With
The Law Governing Massachusetts Business Trusts and
The Charter Documents of California Investment Trust and
California Investment Trust II
Under Such Law
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Governing Documents/ A Delaware statutory trust The Massachusetts business
Governing Body (a "DST") is formed by a trusts, California
governing instrument and Investment Trust and
the filing of a California Investment
certificate of trust with Trust II (collectively,
the Delaware Secretary of the "MBT"), are created by
State. The Delaware law filing a declaration of
governing a DST is trust with the Secretary
referred to in this of the Commonwealth of the
comparison as the Commonwealth of
"Delaware Act." Massachusetts and with the
clerk of every city or
town in Massachusetts
where the trust has a
usual place of business.
A DST is an unincorporated The MBT is an
association organized unincorporated association
under the Delaware Act organized under the
whose operations are Massachusetts statute
governed by its governing governing business trusts
instrument (which may (the "Massachusetts
consist of one or more Statute") and is
instruments). Its considered to be a hybrid,
business and affairs are having characteristics of
managed by or under the both corporations and
direction of one or more common law trusts. The
trustees (referred to MBT's operations are
herein as the "trustees" governed by a trust
or the "board"). instrument and by-laws.
The business and affairs
of the MBT are managed by
or under the direction of
a board of trustees
(referred to herein as the
"trustees" or "the board").
If a DST is, becomes, or
will become, prior to or
within 180 days following
its first issuance of
beneficial interests, a
registered investment
company under the
Investment Company Act of
1940, as amended (the
"1940 Act"), such DST is
not required to have a
trustee who is a resident
of Delaware or who has a
principal place of
business in Delaware;
provided that notice that
the DST is or will become
such a registered
investment company is set
forth in the DST's
certificate of trust and
the DST has a registered
office and a registered
agent for service of
process in Delaware.
Appendix D-1
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
The governing instrument The governing instrument
for the DST, California for the MBT, California
Investment Trust (the "DE Investment Trust and
Trust"), is comprised of California Investment
an agreement and Trust II (collectively,
declaration of trust (the the "Trust"), is comprised
"DE Declaration") and of an Amended Declaration
by-laws (the "DE of Trust (the "MA
By-Laws"). The DE Trust's Declaration") and Amended
governing body is the By-Laws (the "MA
board. By-Laws"). Any and all
references to the MA
Declaration and the MA
By-Laws shall be deemed to
apply equally to the
respective Amended
Declaration of Trust and
Amended By-Laws of both
California Investment
Trust and California
Investment Trust II. The
Trust's governing body is
a board of trustees.
Each trustee of the DE The MA Declaration
Trust holds office for the provides that, except in
lifetime of the DE Trust the event of resignation
or until such trustee's or removal (as described
earlier death, below), each trustee shall
resignation, removal, hold office until the next
retirement or inability meeting of shareholders
otherwise to serve, or, if and until his successor is
sooner than any such elected and qualified to
events, until the next serve as trustee.
meeting of shareholders
called for the purpose of
electing trustees, or
consent of shareholders in
lieu thereof for the
election of trustees, and
until the election and
qualification of his or
her successor.
Designation of Under the Delaware Act, Under the Massachusetts
Ownership Shares or the ownership interests in Statute, the ownership
Interests a DST are denominated as interests in the MBT are
"beneficial interests" and denominated as "beneficial
are held by "beneficial interests" and are held by
owners." However, there "beneficial owners."
is flexibility as to how a However, there is
governing instrument flexibility as to how a
refers to "beneficial governing instrument
interests" and "beneficial refers to "beneficial
owners" and the governing interests" and "beneficial
instrument may identify owners" and the governing
"beneficial interests" and instrument may identify
"beneficial owners" as "beneficial interests" and
"shares" and "beneficial owners" as
"shareholders," "shares" and "shareholders,"
respectively. respectively.
The DE Trust's beneficial The Trust's beneficial
interests, without par interests, without par
value, are designated as value, are designated as
"shares" and its "shares" and its
beneficial owners are beneficial owners are
designated as designated as
"shareholders." This "shareholders." This
comparison will use the comparison will use the
"share" and "shareholder" "share" and "shareholder"
terminology. terminology.
Appendix D-2
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Series and Classes Under the Delaware Act, The Massachusetts Statute
the governing instrument is largely silent as to
may provide for classes, the MBT's ability to issue
groups or series of one or more series or
shares, shareholders or classes of beneficial
trustees, having such interests or any
relative rights, powers requirements for the
and duties as set forth in creation of such series or
the governing instrument. classes, although the
Such classes, groups or trust documents creating
series may be created in the MBT may provide
the DST's governing methods or authority to
instrument or otherwise in create such series or
the manner provided in the classes without seeking
governing instrument. No shareholder approval.
state filing is necessary
and, unless required by
the governing instrument,
shareholder approval is
not needed. Except to the
extent otherwise provided
in the governing
instrument of a DST, where
the DST is a registered
investment company under
the 1940 Act, any class,
group or series of shares
established by the
governing instrument shall
be a class, group or
series preferred as to
distributions or dividends
over all other classes,
groups or series with
respect to assets
specifically allocated to
such class, group or
series as contemplated by
Section 18 (or any
amendment or successor
provision) of the 1940 Act
and any regulations issued
thereunder.
The DE Declaration The MA Declaration
authorizes the board to authorizes an unlimited
divide the DE Trust's number of shares, which
shares into separate and may be further divided
distinct series and to into separate series or
divide a series into classes. The MA
separate classes of shares Declaration also provides
as permitted by the that the trustees, in
Delaware Act. Such series their discretion, may
and classes will have the authorize the issuance of
rights, powers and duties multiple series or
set forth in the DE classes, and the different
Declaration unless series or classes shall be
otherwise provided in established and
resolutions of the board designated, and the
with respect to such variations in the relative
series or class. The rights and preferences as
board may classify or between the different
reclassify any unissued series or classes shall be
shares or any shares of fixed and determined by
the DE Trust or any series the trustees, provided
or class, that were that all shares shall be
previously issued and are identical except that
reacquired, into one or there may be variations so
more series or classes fixed and determined
that may be established between different series
and designated from time or classes as to
to time. investment objective,
purchase price, rights of
redemption and the price,
terms and manner of
redemption, special and
relative rights as to
dividends and on
liquidation, conversion
rights, conditions under
which the several series
or classes shall have
separate voting rights or
no voting rights, and such
other matters, as the
trustees deem
appropriate. The trustees
may classify or reclassify
any unissued shares or any
shares previously issued
and reacquired of any
series or class into one
or more other series, or
one or more other classes
that may be established
and designated from time
to time.
Appendix D-3
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
The DE Declaration The MA Declaration
provides that the provides that the
establishment and establishment and
designation of any series designation of any series
or class shall be or class of shares shall
effective, without the be effective upon the
requirement of shareholder execution by a majority of
approval, upon the the then trustees of an
adoption of a resolution instrument setting forth
by not less than a such establishment and
majority of the then board designation and the
of trustees, which relative rights and
resolution shall set forth preferences of such
such establishment and series, or as otherwise
designation and may provided in such
provide, to the extent instrument. At any time
permitted by the Delaware that there are no shares
Act, for rights, powers outstanding of any
and duties of such series particular series or class
or class (including previously established and
variations in the relative designated, the trustees
rights and preferences as may, by an instrument
between the different executed by majority of
series and classes) their number, abolish that
otherwise than as provided series or class and the
in the DE Declaration. establishment and
The board has approved designation thereof.
resolutions that, together
with the DE Declaration
and the DE By-Laws,
provide the shareholders
of each series and class
of the DE Trust with
substantially the same
rights, powers and duties,
as the shareholders of the
corresponding series and
class of the Trust.
Assets and Liabilities Assets and Liabilities
The DE Declaration also The MA Declaration
provides that each series provides that all
of the DE Trust shall be consideration received by
separate and distinct from the Trust for the issue or
any other series of the DE sale of shares of a
Trust, and each class of a particular series,
series shall be separate together with all assets
and distinct from any in which such
other class of the consideration is invested
series. The DE Trust or reinvested, all income,
shall maintain separate earnings, profits and
and distinct records on proceeds thereof,
the books of the DE Trust including any proceeds
for each series and each derived from the sale,
class of a series. The DE exchange or liquidation of
Trust shall hold and such assets, and any funds
account for the assets and or payments derived from
liabilities belonging to any reinvestment of such
any such series separately proceeds in whatever form
from the assets and the same may be, shall
liabilities of the DE irrevocably belong to that
Trust or any other series series for all purposes,
and shall hold and account subject only to the rights
for the liabilities of creditors of such
belonging to any such series, and shall be so
class of a series recorded upon the books of
separately from the account of the Trust. In
liabilities of the DE the event that there are
Trust, the series or any any assets, income,
other class of the earnings, profits, and
series. If any assets or proceeds thereof, funds,
liabilities which are not or payments which are not
readily identifiable as readily identifiable as
assets or liabilities of a belonging to any
particular series, then particular series, the
the board, or an trustees or their delegate
appropriate officer as shall allocate them among
determined by the board, any one or more of the
shall allocate such assets series established and
or liabilities to, between designated from time to
or among any one or more time in such manner and on
of the series in such such basis as the
manner and on such basis trustees, in their sole
as the board, in its sole discretion, deem fair and
discretion, deems fair and equitable. Each such
equitable. Each such allocation by the trustees
allocation by or under the or their delegate shall be
direction of the board conclusive and binding
shall be conclusive and upon the shareholders of
binding upon the all series for all
shareholders of all series purposes. No holder of
for all purposes. shares of any series shall
Liabilities, debts, have any claim on or right
obligations, costs, to any assets allocated or
charges, reserves and belonging to any other
expenses related to the series. The assets
distribution of, and other belonging to each
identified expenses that particular series shall be
should properly be charged with the
allocated to, the shares liabilities of the Trust
of a particular class may allocated to that series
be charged to and borne and all expenses, costs,
solely by such class. The charges and reserves
bearing of expenses solely attributable to that
by a particular class of series which are not
shares may be readily identifiable as
appropriately reflected in belonging to any
(in a manner determined by particular class, and any
the board), and may affect general liabilities,
the net asset value expenses, costs, charges
attributable to, and the or reserves of the Trust
dividend, redemption and which are not readily
liquidation rights of, identifiable as belonging
such class. Each to any particular series
allocation of liabilities, shall be allocated and
debts, obligations, costs, charged by the trustees or
charges, reserves and their delegate to and
expenses by or under the among any one or more of
direction of the board the series. All persons
shall be conclusive and extending credit to,
binding upon the contracting with, or
shareholders of all having any claim against a
classes for all purposes. particular series of the
Trust shall look only to
the assets of that
particular series for
payment of such credit,
contract or claim.
Appendix D-4
Dividends and Distributions Dividends and Distributions
The DE Declaration The MA Declaration
provides that no dividend provides that each holder
or distribution, of shares of a series or
including, without class thereof shall be
limitation, any entitled to receive his
distribution paid upon pro rata share of
dissolution of the DE distributions of income
Trust or of any series, and capital gains made
nor any redemption of, the with respect to such
shares of any series or series or class net of
class of such series shall liabilities, expenses,
be effected by the DE costs, charges and
Trust other than from the reserves belonging and
assets held with respect allocated to such series
to such series, nor, or class. The MA
except as specifically Declaration also provides
provided in the DE that dividends and
Declaration, shall any distributions on shares of
shareholder of any a particular series or
particular series class thereof may be paid
otherwise have any right or credited in such manner
or claim against the and with such frequency as
assets held with respect the trustees may determine
to any other series or the as long as consistent with
DE Trust generally, the MA Declaration, which
except, in the case of a may be daily or otherwise,
right or claim against the pursuant to a standing
assets held with respect resolution or resolutions
to any other series, to adopted only once or with
the extent that such such frequency as the
shareholder has such a trustees may determine, to
right or claim under the the holders of shares of
DE Declaration as a that series or class, from
shareholder of such other such of the income and
series. The DE capital gains, accrued or
Declaration provides that realized, from the assets
dividends and belonging to that series,
distributions on shares of as the trustees may
a particular series or determine, after providing
class may be paid or for actual and accrued
credited in such manner liabilities belonging to
and with such frequency as that series or class or
the trustees may after retaining such
determine, which may be amounts as the trustees
daily or otherwise, may deem desirable to use
pursuant to a standing in the conduct of the
resolution or resolutions Trust's current or future
adopted only once or with business requirements.
such frequency as the All dividends and
trustees may determine, to distributions on shares of
the holders of shares of a particular series or
that series or class, from class shall be distributed
such of the income or pro rata to the holders of
capital gains, accrued or that series or class in
realized, from the assets proportion to the number
belonging to that series, of shares of that series
as the trustees may or class held by such
determine, after providing holders at the date and
for actual and accrued time of record established
liabilities belonging to for the payment of such
that series or class or dividends or
after retaining such distributions.
Appendix D-5
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
amounts as the trustees
may deem desirable to use
in the conduct of the DE
Trust's current or future
business requirements.
All dividends and
distributions on shares of
a particular series or
class shall be distributed
pro rata to the holders of
that series or class in
proportion to the number
of shares of that series
or class held by such
holders at the date and
time of record established
for the payment of such
dividends or
distributions, except that
in connection with any
dividend or distribution
program or procedure the
trustees may determine
that no dividend or
distribution shall be
payable on shares as to
which the shareholder's
purchase order and/or
payment have not been
received by the time or
times established by the
trustees under such
program or procedure.
Such dividends and
distributions may be made
in cash or shares or a
combination thereof as
determined by the trustees
or pursuant to any program
that the trustees may have
in effect at the time for
the election by each
shareholder of the mode of
the making of such
dividend or distribution
to that shareholder. Any
such dividend or
distribution paid in
shares will be paid at the
net asset value thereof
determined in accordance
with the provisions of the
DE Declaration. The
dividends and
distributions of
investment income and
capital gains with respect
to shares of a class shall
be in such amount as may
be declared from time to
time by the trustees, and
such dividends and
distributions may vary
between the classes to
reflect differing
allocations of the
expenses of the DE Trust
between the classes to
such extent and for such
purposes as the trustees
deem appropriate.
Before payment of any
dividend there may be set
aside out of any funds of
the DE Trust, or the
applicable series,
available for dividends
such sum or sums as the
board may from time to
time, in its absolute
discretion, think proper
as a reserve fund to meet
contingencies, or for
equalizing dividends, or
for repairing or
maintaining any property
of the DE Trust, or any
series, or for such other
lawful purpose as the
board shall deem to be in
the best interests of the
DE Trust, or the
applicable series, as the
case may be, and the board
may abolish any such
reserve in the manner in
which it was created.
Appendix D-6
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Amendments to The Delaware Act provides The Massachusetts Statute
Governing Documents broad flexibility as to provides broad flexibility
the manner of amending as to the manner of
and/or restating the amending or restating the
governing instrument of a governing instrument of
DST. Amendments to the DE the MBT. The
Declaration that do not Massachusetts Statute
change the information in provides that the trustees
the DST's certificate of shall, within thirty (30)
trust are not required to days after the adoption of
be filed with the Delaware any amendment to the
Secretary of State. declaration of trust, file
a copy with the Secretary
of the Commonwealth of the
Commonwealth of
Massachusetts and with the
clerk of every city or
town in Massachusetts
where the Trust has a
usual place of business.
Declaration of Trust Declaration of Trust
Under Article IX of the DE The MA Declaration may be
Declaration, the DE amended by any instrument
Declaration may be in writing signed by a
restated and/or amended at majority of the trustees.
any time by approval (i)
by vote of the
shareholders in accordance
with Article III, Section
6 and Article V of the DE
Declaration; or (ii) by
vote of not less than a
majority of the board at a
properly convened meeting
or by an instrument in
writing signed by not less
than a majority of the
board; provided that, to
the extent that the DE
Declaration, the 1940 Act
or the requirements of any
securities exchange on
which shares are listed
for trading, requires, in
addition to, or apart
from, such approval by
action of the board,
approval of such
restatement rights with
respect to any shares of
the DE Trust by reducing
the amount payable thereon
upon the liquidation of
the DE Trust or by
diminishing or eliminating
any voting rights
pertaining to reducing the
amount payable thereon
upon liquidation, except
with the vote or consent
of the holders of
two-thirds of the shares
outstanding and entitled
to vote.
Appendix D-7
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
By-Laws By-Laws
The DE By-Laws may be The MA By-Laws may be
amended, restated or altered, amended or
repealed or new by-laws repealed, or new by-laws
may be adopted by the may be adopted (a) by a
affirmative vote of a Majority Shareholder Vote
majority of the (as that term is defined
outstanding shares in the 1940 Act), or (b)
entitled to vote. The DE by the trustees, provided,
By-Laws may also be however that no MA By-Law
amended, restated or may be amended, adopted or
repealed or new by-laws repealed by the trustees
may be adopted by the if such amendment,
board, by a vote of not adoption or repeal
less than a majority of requires, pursuant to law,
the trustees present at a the MA Declaration or the
meeting at which a quorum MA By-Laws, a vote of
is present. shareholders.
Certificate of Trust
Pursuant to the DE
Declaration, amendments
and/or restatements of the
certificate of trust shall
be made at any time by the
board, without approval of
the shareholders, to
conform the certificate of
trust to any amendment in
the DE Declaration or DE
By-laws or to correct any
inaccuracy contained
therein. Any such
amendments/restatements of
the certificate of trust
must be executed by at
least one (1) trustee and
filed with the Delaware
Secretary of State in
order to become effective.
Preemptive Rights Under the Delaware Act, a The MA Statute contains no
and Redemption of governing instrument may specific provision with
Shares contain any provision respect to the rights,
relating to the rights, duties or obligations of
duties and obligations of shareholders.
the shareholders. Unless
otherwise provided in the
governing instrument, a
shareholder shall have no
preemptive right to
subscribe to any
additional issue of shares
or another interest in a
DST.
The DE Declaration The MA Declaration
provides that no provides that the shares
shareholder shall have the of the Trust do not
preemptive or other right entitle the holder thereof
to subscribe for new or to preference, preemptive,
additional shares or other appraisal, conversion or
securities issued by the exchange rights, except as
DE Trust or any series the trustees may determine
thereof. with respect to any series
of shares.
Unless otherwise provided All shares of the Trust
in the DE Trust's are redeemable at the
prospectus relating to the redemption price
outstanding shares, as determined in the manner
such prospectus may be set forth in the MA
amended from time to time, Declaration.
the DE Trust shall
purchase the outstanding
shares offered by any
shareholder for redemption
upon such shareholder's
compliance with the
procedures set forth in
the DE Declaration and/or
such other procedures as
the board may authorize.
The DE Trust shall pay the
net asset value for such
outstanding shares offered
for redemption (excluding
any applicable redemption
fee or sales charges), in
accordance with the DE
Declaration, the DE
By-Laws, the 1940 Act and
other applicable law. The
DE Trust will pay
shareholders for such
redemption of shares
within seven days after
the date the redemption
request is received in
proper form and/or
compliance with such other
procedures authorized by
the board; provided, that
if payment is made other
than exclusively in cash,
any securities to be
delivered as part of such
payment shall be delivered
as promptly as any
necessary transfers of
such securities on the
books of the several
corporations whose
securities are to be
delivered practicably can
be made, which may not
necessarily occur within
such seven-day period.
The DE Trust is not liable
for any delay of any
corporation or other
person in transferring
such securities.
Appendix D-8
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
The DE Trust's obligations
to redeem shares may be
suspended or postponed by
the board (i) during any
time the New York Stock
Exchange (the "Exchange")
is closed for other than
weekends or holidays; (ii)
if permitted by the rules
of the U.S Securities and
Exchange Commission
("SEC"), during periods
when trading on the
Exchange is restricted; or
(iii) during any National
Financial Emergency (as
defined in the DE
Declaration). The board
may, in its discretion,
terminate the suspension
relating to a National
Financial Emergency, as
the case may be, on the
first business day on
which the Exchange reopens
or the period specified
above expires (as to
which, in the absence of
an official ruling by the
SEC, the determination of
the board is conclusive).
The DE Trust's payments
for redemption of such
outstanding shares shall
be made in cash, but may,
at the option of the board
or an authorized officer,
be made in kind or
partially in cash and
partially in kind. For
any payment in kind, the
board, or its authorized
officers, will have
absolute discretion as to
what security or
securities of the DE Trust
or the applicable series
shall be distributed in
kind and the amount of the
same; and the securities
shall be valued for
purposes of distribution
at the value at which they
were appraised in
computing the then current
net asset value of the
shares, provided that any
shareholder who cannot
legally acquire securities
so distributed in kind by
reason of the prohibitions
of the 1940 Act or the
provisions of the Employee
Retirement Income Security
Act of 1974, as amended,
or any other applicable
law, shall receive cash.
Shareholders shall bear
the expenses of in-kind
transactions.
Appendix D-9
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
In addition, at the option
of the board, the DE Trust
may, from time to time,
without the vote of the
shareholders, but subject
to the 1940 Act, redeem
outstanding shares or
authorize the closing of
any shareholder account,
subject to such conditions
as may be established by
the board.
Dissolution and The DE Trust shall be The Trust must be
Termination Events dissolved upon the first terminated (i) by the
to occur of the affirmative vote of the
following: (i) upon the holders of not less than
vote of the holders of not two-thirds of the shares
less than a majority of outstanding of each Series
the shares of the DE Trust entitled to vote at any
entitled to vote; (ii) at meeting of shareholders;
the discretion of the or (ii) by the trustees by
board at any time there written notice to the
are no shares outstanding shareholders.
of the DE Trust or upon at
least thirty days' prior
written notice to the
shareholders of the DE
Trust; (iii) upon the
sale, conveyance and
transfer of all of the
assets of the DE Trust to
another entity; or (iv)
upon the occurrence of a
dissolution or termination
event pursuant to any
provision of the DE
Declaration or the
Delaware Act.
A particular series shall
be dissolved upon the
first to occur of the
following: (i) upon the
vote of the holders of not
less than a majority of
the shares of that series
entitled to vote; (ii) at
the discretion of the
board at any time there
are no shares outstanding
of that series or upon at
least thirty days' prior
written notice to the
shareholders of such
series; (iii) upon the
occurrence of a
dissolution or termination
event for that series
pursuant to any provision
of the DE Declaration or
the Delaware Act; or (iv)
upon any event that causes
the dissolution of the DE
Trust.
A particular class shall
be terminated upon the
first to occur of the
following: (i) upon the
vote of the holders of not
less than a majority of
the outstanding shares of
that class entitled to
vote; (ii) at the
discretion of the board at
any time there are no
shares outstanding of that
class; or (iii) upon the
dissolution of the series
of which the class is a
part.
Appendix D-10
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Liquidation upon Under the Delaware Act, a The Massachusetts Statute
Dissolution or DST that has dissolved does not contain specific
Termination shall first pay or make provisions with respect to
reasonable provision to the liquidation upon
pay all known claims and dissolution or termination
obligations, including of the MBT.
those that are contingent,
conditional and unmatured,
and all known claims and
obligations for which the
claimant is unknown. Any
remaining assets shall be
distributed to the
shareholders or as
otherwise provided in the
governing instrument.
Under the Delaware Act, a
series that has dissolved
shall first pay or make
reasonable provision to
pay all known claims and
obligations of the series,
including those that are
contingent, conditional
and unmatured, and all
known claims and
obligations of the series
for which the claimant is
unknown. Any remaining
assets of the series shall
be distributed to the
shareholders of such
series or as otherwise
provided in the governing
instrument.
The DE Declaration The MA Declaration
provides that any provides that, upon
remaining assets of the termination of the Trust,
dissolved DE Trust and/or after paying or otherwise
each series thereof (or providing for all charges,
the particular dissolved taxes, expenses and
series, as the case may liabilities belonging,
be) shall be distributed severally, to each Series,
to the shareholders of the the Trust shall, in
DE Trust and/or each accordance with such
series thereof (or the procedures as the Trustees
particular dissolved consider appropriate,
series, as the case may reduce the remaining
be) ratably according to assets belonging to each
the number of shares of Series to distributable
the DE Trust and/or such form in cash or shares or
series thereof (or the other securities, or any
particular dissolved combination thereof, and
series, as the case may distribute the proceeds
be) held of record by the belonging to each Series
several shareholders on to the Shareholders of
the date for such that Series, as a Series,
dissolution distribution; ratably according to the
provided, however, that if number of shares of that
the outstanding shares of Series held by the several
a series are divided into Shareholders on the date
classes, any remaining of termination.
assets held with respect
to such series shall be
distributed to each class
of such series according
to the net asset value
computed for such class
and within such particular
class, shall be
distributed ratably to the
shareholders of such class
according to the number of
shares of such class held
of record by the several
shareholders on the date
for such dissolution
distribution.
Appendix D-11
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Voting Rights, Under the Delaware Act, The Massachusetts Statute
Meetings, Notice, the governing instrument does not contain specific
Quorum, Record Dates may set forth any provisions with respect to
and Proxies provision relating to the voting rights of the
trustee and shareholder shareholders of the MBT.
voting rights, including
the withholding of such
rights from certain
trustees or shareholders.
If voting rights are
granted, the governing
instrument may contain any
provision relating to
meetings, notice
requirements, written
consents, record dates,
quorum requirements,
voting by proxy and any
other matter pertaining to
the exercise of voting
rights. The governing
instrument may also
provide for the
establishment of record
dates for allocations and
distributions by the DST.
The DE Declaration The MA Declaration
provides that, subject to provides that shareholders
its Article III, Section shall have power to vote
6, the shareholders shall only with respect to the
have the power to vote following matters: (i)
only (i) on such matters election of trustees; (ii)
required by the DE termination of the Trust
Declaration, the DE as provided in the MA
By-Laws, the 1940 Act, Declaration; (iii)
other applicable law and mergers, consolidations,
any registration statement sales or disposition of
of the DE Trust, the all of the assets of the
registration of which is Trust; (iv) to the same
effective; and (ii) on extent as the stockholders
such other matters as the of a California business
board may consider corporation as to whether
necessary or desirable. or not to initiate or
maintain certain
derivative or class
actions on behalf of the
Trust or its shareholders;
and (v) other matters as
required by the MA
Declaration, the MA
By-laws, the 1940 Act or
any registration of the
Trust with the SEC, or as
the trustees may consider
necessary or desirable.
Until shares are issued,
the trustees may exercise
all rights of shareholders
and may take any action
required by law, the MA
Declaration or the MA
By-Laws to be taken by
shareholders.
One Vote Per Share One Vote Per Share
Subject to Article III, The MA Declaration
Section 6 of the DE provides that each whole
Declaration relating to share shall be entitled to
voting by series and one vote as to any matter
classes, the DE on which it is entitled to
Declaration provides that vote and each fractional
each share is entitled to share shall be entitled to
one vote and each a proportionate fractional
fractional share is vote, except that shares
entitled to a fractional held in the treasury of
vote. the Trust shall not be
voted and that the
trustees may, in
conjunction with the
establishment of any
series of shares,
establish conditions under
which the several series
shall have separate voting
rights or no voting rights.
Appendix D-12
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Voting by Series or Class Voting by Series or Class
In addition, the DE The MA Declaration
Declaration provides that provides that all Shares
all shares of the DE Trust of the Trust entitled to
entitled to vote on a vote on a matter shall
matter shall vote on the vote separately by
matter, separately by Series. That is, the
series and, if applicable, Shareholders of each
by class, provided that: Series shall have the
(i) where the 1940 Act right to approve or
requires all shares of the disapprove matters
DE Trust to be voted in affecting each respective
the aggregate without Series as if the
differentiation between Series were separate
the separate series or companies. There are
classes, then all of the however two exceptions
DE Trust's shares shall to voting by separate
vote in the aggregate; and Series. First if the 1940
(ii) if any matter affects Act requires all Shares
only the interests of some of the Trust to be voted
but not all series or in the aggregate without
classes, then only the differentiation between
shareholders of such the separate Series or
affected series or classes where the matter is a
shall be entitled to vote Trust-wide matter
on the matter. affecting the Trust such
as the election of
Trustees, then all the
Trust's Shares shall be
entitled to vote on a
one-vote-per-Share
basis. Second, if any
matter affects only the
interests of some but not
all Series, then only
such affected Series
shall be entitled to vote
on the matter.
Shareholders' Meetings Shareholders' Meetings
The Delaware Act does not The MA Statute does not
mandate annual mandate that the MBT hold
shareholders' meetings. annual shareholders'
meetings.
The DE By-Laws authorize The MA By-Laws do not
the calling of a address a requirement that
shareholders' meeting by the trustees have a
the board, the chairperson meeting of the
of the board, the shareholders. In the
president or any event that the trustees,
vice-president of the DE the chairman of the
Trust for the purpose of trustees, or the president
(i) taking action upon any determine to have a
matter deemed by the board meeting of the
to be necessary or shareholders, it shall be
desirable, including, but held at such place within
not limited to, electing or without the
trustees or removing one Commonwealth of
or more trustees; or (ii) Massachusetts on such day
taking action upon any and at such time as the
matter requested by trustees shall designate,
shareholders at the provided that proper
request of the notice is given to
shareholders holding not shareholders. Special
less than ten percent of meetings of shareholders
the shares; provided that, are not addressed in the
the board, in its sole MA By-Laws.
discretion, has approved
the call and holding of
such shareholders' meeting
that is requested by
shareholders; and provided
further that, a
shareholders' meeting for
the purpose of electing
trustees, or removing one
or more trustees, shall be
called by the president or
any vice-president of the
DE Trust at the request of
the shareholders holding
not less than ten percent
of the shares. Any
shareholders' meeting
called at the request of
shareholders shall be
called and held, provided
that, in the sole
discretion of the board,
such shareholders pay the
reasonably estimated cost
of preparing and mailing
the notice thereof.
However, no meeting may be
called at the request of
shareholders to consider
any matter that is
substantially the same as
a matter voted upon at a
shareholders' meeting held
during the preceding
twelve months, unless
requested by holders of a
majority of all shares
entitled to be voted at
such meeting.
Appendix D-13
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
The DE By-Laws provide The MA By-Laws further
that notice of any meeting provide that notice of all
of shareholders shall be meetings of shareholders,
given to each shareholder stating the date, time,
entitled to vote at such and place of the meeting
meeting in accordance with and the general nature of
Article II, Section 4 of the business to be
the DE By-Laws not less transacted at the meeting,
than ten nor more than one shall be given either
hundred and twenty days personally or by
before the date of the first-class mail or
meeting. The notice shall telegraphic or other
specify (i) the place, written communication,
date and hour of the charges prepaid, to each
meeting, and (ii) the shareholder at the address
general nature of the of that shareholder
business to be transacted appearing on the books of
and to the extent required the Trust or its transfer
by the 1940 Act, the agent or given by the
purpose or purposes shareholder to the Trust
thereof. If any notice for the purpose of
addressed to a notice. Notice shall be
shareholder, at the deemed given if no such
address on record with the address appears for the
DE Trust, is returned to shareholder on the Trust's
the DE Trust marked to books or is given. If a
indicate the notice cannot notice is returned by the
be delivered at that postal service as
address, all future undeliverable, all future
notices or reports shall notices shall be deemed to
be deemed to have been have been duly given
duly given without further without further mailing.
mailing, or substantial All notices shall be sent
equivalent thereof, if or otherwise given not
such notices shall be less than seven (7) nor
available to the more than seventy-five
shareholder on written (75) days before the date
demand of the shareholder of the meeting. If action
at the offices of the DE is proposed to be taken at
Trust. any meeting for approval
of a financial interest,
amendment of the MA
Declaration,
reorganization of the
Trust, or voluntary
dissolution of the Trust,
the notice shall also
state the general nature
of that proposal. In
addition, the name of any
trustee nominee to be
elected at a meeting shall
be given in the notice.
The MA By-Laws further
provide that the
transactions of a meeting
of shareholders, however
called and noticed and
wherever held, shall be as
valid as though had at a
meeting duly held after
regular call and notice if
a quorum be present either
in person or by proxy and
if either before or after
the meeting each person
entitled to vote who was
not present in person or
by proxy signs a written
waiver of notice or a
consent to a holding of
the meeting or an approval
of the minutes. In
general, except for
objection at the meeting,
attendance by a person at
a meeting shall also
constitute a waiver of
notice of that
meeting.
Appendix D-14
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Record Dates Record Dates
As set forth above, the The Massachusetts Statute
Delaware Act authorizes does not contain a
the governing instrument specific provision that
of a DST to set forth any addresses the record dates
provision relating to of meetings of
record dates. shareholders of the MBT.
In order to determine the
shareholders entitled to
notice of, and to vote at,
a shareholders' meeting,
the DE Declaration
authorizes the board to
fix a record date. The
record date may not
precede the date on which
it is fixed by the board
and it may not be more
than one hundred and
twenty days nor less than
ten days before the date
of the shareholders'
meeting. The DE By-Laws
provide that notice of a
shareholders' meeting
shall be given to
shareholders entitled to
vote at such meeting not
less than ten nor more
than one hundred and
twenty days before the
date of the meeting.
To determine the
shareholders entitled to
vote on any action without
a meeting, the DE
Declaration authorizes the
board to fix a record
date. The record date may
not precede the date on
which it is fixed by the
board nor may it be more
than ninety days after the
date on which the
resolution fixing the
record date is adopted by
the board.
Pursuant to the DE
Declaration, if the board
does not fix a record
date: (i) the record date
for determining
shareholders entitled to
notice of, and to vote at,
a meeting will be the day
before the date on which
notice is given or, if
notice is waived, on the
day before the date of the
meeting; and (ii) the
record date for
determining shareholders
entitled to vote on any
action by consent in
writing without a meeting,
(a) when no prior action
by the board has been
taken, shall be the day on
which the first signed
written consent is
delivered to the DE Trust,
or (b) when prior action
of the board has been
taken, shall be the day on
which the board adopts the
resolution taking such
prior action.
Appendix D-15
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
To determine the
shareholders of the DE
Trust or any series or
class thereof entitled to
a dividend or any other
distribution of assets of
the DE Trust or any series
or class thereof (other
than in connection with a
merger, consolidation,
conversion, or
reorganization, which is
governed by Article VIII
of the DE Declaration),
the DE Declaration
authorizes the board (i)
to fix a record date,
which may not precede the
date on which it is fixed
by the board nor may it be
more than sixty days
before the date such
dividend or distribution
is to be paid; (ii) to
adopt standing resolutions
fixing record dates and
related payment dates at
periodic intervals of any
duration; and/or (iii) to
delegate to an appropriate
officer or officers the
determination of such
periodic record and/or
payment dates for such
dividends and/or
distributions. The board
may set different record
dates for different series
or classes.
The MA By-Laws provide
that shareholders entitled
to vote at any meeting of
shareholders or to vote or
entitled to give consent
to action with a meeting
shall be determined in
accordance with the
provisions of the MA
Declaration, as in effect
at such time. For
purposes of determining
the shareholders entitled
to vote, the trustees may
fix in advance a record
date which shall not be
more than seventy-five
(75) days nor less than
seven (7) days before the
date of any such meeting
as provided in the MA
Declaration. If the
trustees do not so fix a
record date, the record
date shall be at the close
of business on the
business day next
preceding the day on which
notice is given or, if
notice is waived, at the
close of business on the
business day next
preceding the day on which
the meeting is held;
however, the record date
for determining
shareholders entitled to
give consent to action in
writing without a meeting,
when no prior action by
the trustees has been
take, shall be the day on
which the first written
consent is given or, when
prior action of the
trustees has been taken,
shall be at the close of
business on the day on
which the trustees adopt
the resolution relating to
that action or the
seventy-fifty day before
the date of such other
action, whichever is
later.
Appendix D-16
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Quorum for Shareholders' Quorum for Shareholders'
Meeting Meeting
To transact business at a The MA Declaration
shareholders' meeting, the provides that except where
DE Declaration provides a larger quorum is
that a majority of the required by applicable
shares entitled to vote at law, the presence at a
the meeting, which are shareholder meeting in
present in person or person or by proxy of
represented by proxy, forty percent (40%) of the
shall constitute a quorum shares entitled to vote at
at such meeting, except the Meeting on a matter
when a larger quorum is constitutes a quorum with
required by the DE respect to that matter.
Declaration, the DE
By-Laws, applicable law or
any securities exchange on
which such shares are
listed for trading, in
which case such quorum
shall comply with such
requirements. When a
separate vote by one or
more series or classes is
required, a majority of
the shares of each such
series or class entitled
to vote at a shareholders'
meeting of such series or
class, which are present
in person or represented
by proxy, shall constitute
a quorum at such series or
class meeting, except when
a larger quorum is
required by the DE
Declaration, the DE
By-Laws, applicable law or
the requirements of any
securities exchange on
which outstanding shares
of such series or class
are listed for trading, in
which case such quorum
shall comply with such
requirements.
Shareholder Vote Shareholder Vote
The DE Declaration The MA Declaration
provides that, subject to provides that except when
any provision of the DE a larger vote is required
Declaration, the DE by any provision of the MA
By-Laws, the 1940 Act or Declaration, the MA
other applicable law that By-Laws or applicable law
requires a different vote: (i) in all matters other
(i) in all matters other than the election of
than the election of trustees, a majority of
trustees, the affirmative the shares voted at a
"vote of a majority of the shareholders' meeting at
outstanding voting which a quorum is present,
securities" (as defined in shall decide any
the 1940 Act) of the DE questions; and (ii)
Trust entitled to vote at trustees shall be elected
a shareholders' meeting at by a plurality of the
which a quorum is present, votes except. Pursuant to
shall be the act of the the MA Declaration, where
shareholders; and (ii) a separate vote by series
trustees shall be elected and, if applicable, by
by not less than a class is required, the
plurality of the votes preceding sentence shall
cast of the holders of apply to such separate
shares entitled to vote votes by series and class.
present in person or
represented by proxy at a
shareholders' meeting at
which a quorum is
present. Pursuant to the
DE Declaration, where a
separate vote by series
and, if applicable, by
class is required, the
preceding sentence shall
apply to such separate
votes by series and class.
Appendix D-17
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Shareholder Vote on Shareholder Vote on
Certain Transactions Certain Transactions
Pursuant to the DE The MA Declaration
Declaration, the board, by provides that the Trust
vote of a majority of the may merge or consolidate
trustees, may cause the with any other
merger, consolidation, corporation, association,
conversion, share exchange trust or other
or reorganization of the organization or may sell,
DE Trust, or the lease or exchange all or
conversion, share exchange substantially all of the
or reorganization of any Trust property, including
series of the DE Trust, its goodwill, upon such
without the vote of the terms and conditions and
shareholders of the DE for such consideration
Trust or such series, as when and as authorized at
applicable, unless such any meeting of
vote is required by the shareholders called for
1940 Act; provided the purpose by the
however, that the board affirmative vote of a
shall provide at least majority of the holders of
thirty days' prior written not less than two-thirds
notice to the shareholders of the shares outstanding
of the DE Trust or such and entitled to vote, or
series, as applicable, of by an instrument or
such merger, instruments in writing
consolidation, conversion, without a meeting,
share exchange or consented to by the
reorganization. holders of not less than
two-thirds of such shares,
or by such other vote as
If permitted by the 1940 may be established by the
Act, the board, by vote of trustees with respect to
a majority of the any series of shares;
trustees, and without a provided, however, that,
shareholder vote, may if such merger,
cause the DE Trust or any consolidation, sale, lease
one or more series to or exchange is recommended
convert to a master feeder by the trustees, the vote
structure and thereby or written consent of the
cause series of the DE holders of a majority of
Trust to either become shares outstanding and
feeder funds into a master entitled to vote, or by
fund, or to become master such other vote as may be
funds into which other established by the
funds are feeder funds. trustees with respect to
any series of shares,
shall be sufficient
authorization; and any
such merger,
consolidation, sale, lease
or exchange shall be
deemed for all purposes to
have been accomplished
under and pursuant to the
statutes of the
Commonwealth of
Massachusetts.
The MA Declaration
provides that with the
approval of the holders of
a majority of the shares
outstanding and entitled
to vote, or by such other
vote as may be established
by the trustees with
respect to any series of
shares, the trustees may
cause to be organized or
assist in organizing a
corporation or
corporations under the
laws of any jurisdiction
or any other trust,
partnership, association
or other organization to
take over all of the Trust
property or to carry on
any business in which the
Trust shall directly or
indirectly have any
interest, and to sell,
convey and transfer the
Trust property to any such
corporation, trust,
association or
organization in exchange
for the shares or
securities thereof or
otherwise, and to lend
money to, subscribe for
the shares or securities
of, and enter into any
contracts with any such
corporation, trust,
partnership, association
or organization in which
the Trust holds or is
about to acquire shares or
any other interest. The
trustees may also cause a
merger or consolidation
between the Trust or any
successor thereto and any
such corporation, trust,
partnership, association
or other organization if
and to the extent
permitted by law, as
provided under the law
then in effect. The MA
Declaration also provides
that nothing contained
therein shall be construed
as requiring approval of
shareholders for the
trustees to organize or
assist in organizing one
or more corporations,
trusts, partnerships,
associations or other
organizations and selling,
conveying or transferring
a portion of the trust
property to such
organization or entities.
Appendix D-18
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Cumulative Voting Cumulative Voting
The DE Declaration The MA Declaration
provides that shareholders provides that there shall
are not entitled to be no cumulative voting in
cumulative voting in the the election of trustees.
election of trustees or on
any other matter.
Proxies Proxies
Under the Delaware Act, The MA Statute does not
unless otherwise provided contain specific
in the governing provisions with respect to
instrument of a DST, on the shareholders of the
any matter that is to be MBT voting by proxy.
voted on by the trustees
or the shareholders, the
trustees or shareholders
(as applicable) may vote
in person or by proxy and
such proxy may be granted
in writing, by means of
"electronic transmission"
(as defined in the
Delaware Act) or as
otherwise permitted by
applicable law. Under the
Delaware Act, the term
"electronic transmission"
is defined as any form of
communication not directly
involving the physical
transmission of paper that
creates a record that may
be retained, retrieved and
reviewed by a recipient
thereof and that may be
directly reproduced in
paper form by such a
recipient through an
automated process.
The DE By-Laws permit a The MA By-Laws provide
shareholder to authorize that every person entitled
another person to act as to vote for trustees or on
proxy by the following any other matter shall
methods: execution of a have the right to do so
written instrument or by either in person or by one
"electronic transmission" or more agents authorized
(as defined in the by a written proxy signed
Delaware Act), telephonic, by the person and filed
computerized, with the Secretary of the
telecommunications or Trust. A proxy shall be
another reasonable deemed signed if the
alternative to the shareholder's name is
execution of a written placed on the proxy by the
instrument. Unless a shareholder or the
proxy expressly provides shareholder's
otherwise, it is not valid attorney-in-fact. A
more than eleven months validly executed proxy
after its date. In which does not state that
addition, the DE By-Laws it is irrevocable shall
provide that the continue in full force and
revocability of a proxy effect unless (i) revoked
that states on its face by the person executing it
that it is irrevocable before the vote pursuant
shall be governed by the to that proxy by a writing
provisions of the General delivered to the Trust
Corporation Law of the stating that the proxy is
State of Delaware. revoked or by a subsequent
proxy executed by or
attendance at the meeting
and voting in person by
the person executing that
proxy; or (ii) written
notice of the death or
incapacity of the maker of
that proxy is received by
the Trust before the vote
pursuant to that proxy is
counted; provided however,
that no proxy shall be
valid after the expiration
of eleven (11) months from
the date of the proxy
unless otherwise provided
in the proxy. The
revocability of a proxy
that states on its face
that it is irrevocable
shall be governed by the
provisions of the
California General
Corporation Law.
Appendix D-19
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Action by Written Consent Action by Written Consent
Under the Delaware Act, The MA Declaration does
unless otherwise provided not contain specific
in the governing provisions with respect to
instrument of a DST, on action taken by written
any matter that is to be consent of the
voted on by the trustees shareholders or the
or the shareholders, such trustees of the MBT.
action may be taken
without a meeting, without
prior notice and without a
vote if a written
consent(s), setting forth
the action taken, is (are)
signed by the trustees or
shareholders (as
applicable) having not
less than the minimum
number of votes that would
be necessary to take such
action at a meeting at
which all trustees or
interests in the DST (as
applicable) entitled to
vote on such action were
present and voted. Unless
otherwise provided in the
governing instrument, a
consent transmitted by
"electronic transmission"
(as defined in the
Delaware Act) by a trustee
or shareholder (as
applicable) or by a
person(s) authorized to
act for a trustee or
shareholder (as
applicable) will be deemed
to be written and signed
for this purpose.
Appendix D-20
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Shareholders. The DE Shareholders. The MA
Declaration authorizes By-Laws provide that any
shareholders to take action which may be taken
action without a meeting at any meeting of
if a written consent (s) shareholders may be taken
setting forth the action without a meeting and
taken is (are) signed by without prior notice if a
the holders of a majority consent in writing setting
of the shares entitled to forth the action so taken
vote on that action (or is signed by the holders
such different proportion of outstanding shares
thereof as shall be having not less than the
required by law, the DE minimum number of votes
Declaration or the DE that would be necessary to
By-laws for approval of authorize or take that
such action.) A consent action at a meeting at
transmitted by "electronic which all shares entitled
transmission" (as defined to vote on that action
in the Delaware Act) by a were present and voted.
shareholder or by a
person(s) authorized to
act for a shareholder
shall be deemed to be
written and signed for
purposes of this provision.
Board of Trustees. The DE Board of Trustees. The MA
Declaration also By-Laws provide that any
authorizes the board or action required or
any committee of the board permitted to be taken at
to take action without a any meeting of the
meeting and without prior trustees may be taken by
written notice if a the trustees without a
written consent(s) setting meeting if a majority of
forth the action taken is the trustees shall
(are) executed by trustees individually or
having not less than the collectively consent in
minimum number of votes writing to that action.
necessary to take that Such action by written
action at a meeting at consent shall have the
which the entire board or same force and effect as a
any committee thereof, as majority vote of the
applicable, is present and trustees.
voting. A consent
transmitted by "electronic
transmission" (as defined
in the Delaware Act) by a
trustee shall be deemed to
be written and signed for
purposes of this provision.
Removal of Trustees The governing instrument The MA Statute does not
of a DST may contain any contain specific
provision relating to the provisions with respect to
removal of trustees; the removal of the
provided however, that trustees of the MBT.
there shall at all times
be at least one trustee of
the DST.
Under the DE Declaration, The MA Declaration
any trustee may be provides that any of the
removed, with or without trustees may be removed
cause, (i) by the board, (provided the aggregate
by action of a majority of number of trustees after
the trustees then in such removal shall not be
office; or (ii) by less than the number
shareholders at any required by the MA
meeting called for that Declaration) with cause,
purpose. by the action of
two-thirds of the
remaining trustees.
Vacancies on Board The DE By-Laws provide The MA Declaration
of Trustees that vacancies on the provides that the term of
board may be filled by not office of a trustee shall
less than a majority vote terminate and a vacancy
of the trustee(s) then in shall occur in the event
office, regardless of the of the death, resignation,
number and even if less removal, bankruptcy,
than a quorum. However, a adjudicated incompetence
shareholders' meeting or other incapacity to
shall be called to elect perform the duties of the
trustees if required by office of a trustee. No
the 1940 Act. such vacancy shall operate
to annul the MA
In the event all trustee Declaration or to revoke
offices become vacant, an any existing agency
authorized officer of the created pursuant to the
investment adviser that terms of the MA
has the greatest amount of Declaration. In the case
assets of the DE Trust of an existing vacancy,
under management shall including a vacancy
serve as the sole existing by reason of an
remaining trustee increase in the number of
(effective upon the trustees, subject to the
vacancy in office of the provisions of Section
last trustee) and shall, 16(a) of the 1940 Act, the
as soon as practicable, remaining trustees shall
fill all of the vacancies fill such vacancy by the
on the board; provided appointment of such other
that the percentage of person as they in their
trustees who are discretion shall see fit,
Disinterested Trustees (as made by a written
defined in the DE By-Laws) instrument signed by a
shall be no less than that majority of the trustees.
required by the 1940 Act. Any such appointment shall
Upon the qualification of not become effective,
the trustees, the however, until the person
authorized officer of the named in the written
investment adviser shall instrument of appointment
resign as trustee and a shall have accepted in
shareholders' meeting writing such appointment
shall be called, as and agreed in writing to
required by the 1940 Act, be bound by the terms of
to elect trustees. the MA Declaration. An
appointment of a trustee
may be made in
anticipation of a vacancy
to occur at a later date
by reason of retirement,
resignation or increase in
the number of trustees,
provided that such
appointment shall not
become effective prior to
such retirement,
resignation or increase in
the number of trustees.
Appendix D-21
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Whenever a vacancy in the Whenever a vacancy in the
board shall occur, until number of trustees shall
such vacancy is filled or occur, until such vacancy
the number of authorized is filled in the manner
trustees constituting the provided in the MA
board is decreased Declaration, the trustees
pursuant to the DE in office, regardless of
Declaration, the their number, shall have
trustee(s) then in office, all the powers granted to
regardless of the number the trustees and shall
and even if less than a discharge all the duties
quorum, shall have all the imposed upon the trustees
board's powers and shall by the MA Declaration. A
discharge all the board's written instrument
duties as though such certifying the existence
number constitutes the of such vacancy signed by
entire board. a majority of the trustees
shall be conclusive
evidence of the existence
of such vacancy.
Shareholder Liability Under the Delaware Act, The Massachusetts Statute
except to the extent does not include an
otherwise provided in the express provision relating
governing instrument of a to the limitation of
DST, shareholders of a DST liability of the
are entitled to the same beneficial owners of the
limitation of personal MBT. Therefore, the
liability extended to owners of the MBT could
shareholders of a private potentially be liable for
corporation organized for the obligations of the
profit under the General MBT, notwithstanding any
Corporation Law of the express provision in the
State of Delaware (such governing instrument
shareholders are generally stating that the
not liable for the beneficial owners are not
obligations of the personally liable in
corporation). connection with trust
property or the acts,
obligations or affairs of
the MBT.
Under the DE Declaration, The MA Declaration
shareholders are entitled provides that no
to the same limitation of shareholder shall be
personal liability as that subject to any personal
extended to shareholders liability whatsoever to
of a private corporation any persons in connection
organized for profit under with Trust property or the
the General Corporation acts, obligations or
Law of the State of affairs of the Trust. If
Delaware. However, the any shareholder, as such,
board may cause any is made a party to any
shareholder to pay for suit or proceeding to
charges of the DE Trust's enforce any such
custodian or transfer, liability, he shall not,
dividend disbursing, on account thereof, be
shareholder servicing or held to any personal
similar agent for services liability. The Trust
provided to such shall indemnify and hold
shareholder by setting off each shareholder harmless
such amount due from such from and against all
shareholder from the claims and liabilities, to
amount of (i) declared but which such shareholder may
unpaid dividends or become subject by reason
distributions owed such of his being or having
shareholder, or (ii) been a shareholder, and
proceeds from the shall reimburse such
redemption by the DE Trust shareholder for all legal
of shares from such and other expenses
shareholder pursuant to reasonably incurred by him
Article VI of the DE in connection with any
Declaration. such claim or liability.
The rights accruing to a
shareholder under the MA
Declaration shall not
exclude any other right to
which such shareholder may
be lawfully entitled, nor
shall anything therein
contained restrict the
right of the Trust to
indemnify or reimburse a
shareholder in any
appropriate situation even
though not specifically
provided for therein.
Appendix D-22
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Trustee/Agent Subject to the provisions The Massachusetts Statute
Liability in the governing does not include an
instrument, the Delaware express provision limiting
Act provides that a the liability of the
trustee or any other trustees of the MBT. The
person appointed, elected trustees of the MBT could
or engaged to manage the potentially be held
DST, when acting in such personally liable for the
capacity, will not be obligations of the MBT.
personally liable to any
person other than the DST
or a shareholder of the
DST for any act, omission
or obligation of the DST
or any trustee. To the
extent that at law or in
equity, a trustee has
duties (including
fiduciary duties) and
liabilities to the DST and
its shareholders, such
duties and liabilities may
be expanded or restricted
by the governing
instrument.
The DE Declaration The MA Declaration
provides that any person provides that no trustee,
who is or was a trustee, officer, employee or agent
officer, employee or other of the Trust shall be
agent of the DE Trust or subject to any personal
is or was serving at the liability whatsoever to
request of the DE Trust as any person, other than the
a trustee, director, Trust or its shareholders,
officer, employee or other in connection with Trust
agent of another property or the affairs of
corporation, partnership, the Trust, save only that
joint venture, trust or arising from bad faith,
other enterprise (an willful misfeasance, gross
"Agent"), when acting in negligence or reckless
the Agent's capacity as disregard for his duty to
such, will be liable to such person; and all such
the DE Trust and to any persons shall look solely
shareholder solely for to the Trust property for
such Agent's own willful satisfaction of claims of
misfeasance, bad faith, any nature arising in
gross negligence or connection with the
reckless disregard of the affairs of the Trust. If
duties involved in the any trustee, officer,
conduct of such Agent employee or agent, as
(such conduct referred to such, of the Trust is made
as "Disqualifying a party to any suit or
Conduct"). Subject to the proceeding to enforce any
preceding sentence, (i) a such liability, he shall
trustee shall not be not, on account thereof,
liable for errors of be held to any personal
judgment or mistakes of liability.
fact or law; and (ii) an
Agent will not be liable The MA Declaration further
for any act, omission, provides that no trustee,
neglect or wrongdoing of officer, employee or agent
any other Agent or any of the Trust shall be
officer, employee, liable to the Trust, its
consultant, investment shareholders, or to any
adviser, principal shareholder, trustee,
underwriter, officer, employee, or
administrator, fund agent thereof for any
accountant or accounting action or failure to act
agent, custodian, and/or (including without
transfer, dividend limitation the failure to
disbursing or shareholder compel in any way any
servicing agent of the DE former or acting trustee
Trust. No Agent, when to redress any breach of
acting in such capacity, trust) except for his own
shall be personally liable bad faith, willful
to any person (other than misfeasance, gross
the DE Trust or its negligence or reckless
shareholders as described disregard of his duties.
Appendix D-23
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
above) for any act,
omission or obligation of
the DE Trust or any
trustee of the DE Trust.
The trustees, officers and
employees of the DE Trust
may rely on the advice of
counsel or experts as
described in the DE
Declaration. No officer
or trustee shall be liable
for any act or omission in
accordance with such
advice and no inference
concerning liability shall
arise from a failure to
follow such advice.
Indemnification Subject to such standards Although the Massachusetts
and restrictions, if any, Statute is silent as to
contained in the governing the indemnification of
instrument of a DST, the trustees, officers and
Delaware Act authorizes a shareholders,
DST to indemnify and hold indemnification is
harmless any trustee, expressly provided for in
shareholder or other the MA Declaration.
person from and against
any and all claims and
demands.
Pursuant to the DE The MA Declaration
Declaration, the DE Trust provides that every person
will indemnify any trustee who is, or has been a
or officer who was or is a trustee or officer of the
party or is threatened to Trust shall be indemnified
be made a party to any by the Trust against all
proceeding by reason of liability and against all
the fact that such trustee expenses reasonably
or officer is or was a incurred or paid by him in
trustee or officer against connection with any claim,
attorneys' fees and action, suit or proceeding
certain other expenses, in which he becomes
judgments, fines, involved as a party or
settlements and other otherwise by virtue of his
amounts incurred in being or having been a
connection with such trustee or officer and
proceeding if such trustee against amounts paid or
or officer acted in good incurred by him in the
faith or in the case of a settlement thereof. The
criminal proceeding, had words "claim," "action,"
no reasonable cause to "suit," or "proceeding"
believe such trustee's or shall apply to all claims,
officer's conduct was actions, suits or
unlawful. However, there proceedings (civil,
is no right to criminal, or other;
indemnification for any including appeals), actual
liability arising from the or threatened; and the
trustee's or officer's words "liability" and
Disqualifying Conduct, and "expenses" shall include,
in accordance therewith, without limitation,
no indemnification shall attorneys' fees, costs,
be provided to a trustee judgments, amounts paid in
or officer (i) against any settlement, fines,
liability to the DE Trust penalties and other
or its shareholders by liabilities.
reason of a final
adjudication by the court
or other body before which
the proceeding was brought
that the trustee or
officer engaged in
Disqualifying Conduct,
(ii) with respect to any
matter as to which shall
have been finally
adjudicated not to have
acted in good faith or in
Appendix D-24
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
the reasonable belief that
the trustee's or officer's
action was in, or not
opposed to, the best
interest of the DE Trust,
or (iii) in the event of a
settlement or other
disposition not involving
a final adjudication
resulting in payment by
the trustee or officer,
unless there has been
either a determination
that such trustee or
officer did not engage in
Disqualifying Conduct (a)
by the court or other body
approving the settlement
or other disposition or by
a reasonable
determination, based upon
a review of readily
available facts (as
opposed to a full
trial-type inquiry) that
he did not engage in such
conduct; (b) by written
opinion of independent
legal counsel; or (c) by
vote of a majority of the
Disinterested Trustees of
the DE Trust acting on the
matter (provided that a
majority of such trustees
then in office act on the
matter).
The DE Declaration also
provides that, as used in
Article VII, a trustee or
officer shall include such
Person's heirs, executors
and administrators.
The DE Declaration
provides that nothing
contained in Article VII
of the DE Declaration
shall affect any right to
indemnification to which
Persons (as defined in the
DE Declaration) may be
entitled by contract, to
the extent not
inconsistent with
applicable law, or
otherwise under law, and
notwithstanding any
provision to the contrary
in the DE Declaration, any
contract between the DE
Trust and any independent
contractor that is or may
be deemed an Agent, as a
consequence of providing
services or products to
the DE Trust pursuant to
such contract, shall take
precedence over the
provisions of Article VII
and govern with respect to
(i) the liability of such
independent contractor to
the DE Trust, any
shareholder or any other
Person, (ii) the
indemnification of, or
advancement of expenses
to, such independent
contractor by the DE
Trust, and (iii) any other
contractual rights or
obligations of such
independent contractor
under such contract to the
extent that the provisions
of, and the rights and
obligations under, such
contract are in conflict
with, or are not addressed
by, the provisions of
Article VII.
Appendix D-25
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Expenses incurred by an Expenses of preparation
Agent in defending any and presentation of a
proceeding may be advanced defense to any claim,
by the DE Trust before the action, suit or proceeding
final disposition of the of the character described
proceeding on receipt of above shall be advanced by
an undertaking by or on the Trust prior to final
behalf of the Agent to disposition thereof upon
repay the amount of the receipt of an undertaking
advance if it is by or on behalf of the
ultimately determined that recipient to repay such
the Agent is not entitled amount if it is ultimately
to indemnification by the determined that he is not
DE Trust; provided that entitled to
either (i) such indemnification under the
undertaking is secured by MA Declaration, provided
a surety bond or some that either (i) such
other appropriate security undertaking is secured by
or the DE Trust shall be a surety bond or some
insured against losses other appropriate security
arising out of any such or the Trust shall be
advances, or (ii) a insured against losses
majority of the arising out of any such
Disinterested Trustees advances; or (ii) a
acting on the matter majority of the
(provided that a majority Disinterested Trustees
of such trustees then in acting on the matter
office act on the matter) (provided that a majority
or independent legal of the Disinterested
counsel in a written Trustees then in office
opinion, shall determine, act on the matter) or an
based upon a review of independent legal counsel
readily available facts in a written opinion,
(as opposed to a full shall determine, based
trial-type inquiry), that upon a review of readily
there is reason to believe available facts (as
that the recipient opposed to a full
ultimately will be found trial-type inquiry), that
entitled to there is reason to believe
indemnification. that the recipient
ultimately will be found
entitled to
indemnification.
A "Disinterested Trustee" As used herein, a
for this purpose is one "Disinterested Trustee" is
(i) who is not an one (i) who is an
"Interested Person" of the "Interested Person" of the
DE Trust (including anyone Trust (including anyone
who has been exempted from who has been exempted from
being an "Interested being an "Interested
Person" by any rule Person" by any rule,
regulation or order of the regulation or order of the
SEC, and (ii) against whom SEC), and (ii) against
none of such actions, suit whom none of such actions,
or other proceeding on the suits or other proceedings
same or similar grounds is or another action, suit or
then or has been pending. other proceeding on the
Note that the Securities same or similar grounds is
Act of 1933, as amended, then or had been pending.
in the opinion of the SEC, Note that the Securities
and the 1940 Act also Act of 1933, as amended,
limit the ability of the in the opinion of the SEC,
DE Trust to indemnify and the 1940 Act also
certain persons, including limit the ability of the
trustees and officers. Trust to indemnify certain
persons, including
trustees and officers.
Agents and employees of
the DE Trust who are not
trustees or officers of
the DE Trust may be
indemnified under the same
standards and procedures
described above, at the
discretion of the trustees.
An "Agent" for this
purpose is any person who
is or was an employee or
other agent of the DE
Trust or is or was serving
at the request of the DE
Trust as a trustee,
director, officer,
employee or other agent of
another corporation,
partnership, joint
venture, trust or other
enterprise.
Appendix D-26
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Insurance The Delaware Act is silent The Massachusetts Statute
as to the right of a DST does not contain specific
to purchase insurance on provisions with respect to
behalf of its trustees or the ability of the MBT to
other persons. obtain insurance on behalf
of its trustees or other
persons.
However, as the policy of The MA Declaration
the Delaware Act is to provides that the rights
give maximum effect to the of indemnification
principle of freedom of provided for therein (as
contract and to the described above) may be
enforceability of insured against by
governing instruments, the policies maintained by the
DE Declaration authorizes Trust.
the board, to the fullest
extent permitted by The MA Declaration further
applicable law, to provides that the trustees
purchase with DE Trust shall, at all times,
assets, insurance for maintain insurance for the
liability and for all protection of the Trust's
expenses of an Agent in property, its
connection with any shareholders, trustees,
proceeding in which such officers, employees and
Agent becomes involved by agents in such amount as
virtue of such Agent's the trustees shall deem
actions, or omissions to adequate to cover possible
act, in its capacity or tort liability, and such
former capacity with the other insurance as the
DE Trust, whether or not trustees in their sole
the DE Trust would have judgment shall deem
the power to indemnify advisable.
such Agent against such
liability.
Shareholder Right of Under the Delaware Act, The Massachusetts Statute
Inspection except to the extent does not contain specific
otherwise provided in the provisions relating to
governing instrument and shareholders' rights of
subject to reasonable inspection.
standards established by
the trustees, each
shareholder has the right,
upon reasonable demand for
any purpose reasonably
related to the
shareholder's interest as
a shareholder, to obtain
from the DST certain
information regarding the
governance and affairs of
the DST.
To the extent permitted by The MA By-Laws provide
Delaware law and the DE that the MA By-Laws shall
By-Laws, a shareholder, be open to inspection by
upon reasonable written shareholders at all
demand to the DE Trust for reasonable times during
any purpose reasonably office hours at the
related to such Trust's principal
shareholder's interest as executive office. The
a shareholder, may inspect minutes and accounting
certain information as to books and records of the
the governance and affairs Trust shall be open to
of the DE Trust during inspection upon the
regular business hours. written demand of any
However, reasonable shareholder or holder of a
standards governing, voting trust certificate
without limitation, the at any reasonable time
information and documents during usual business
to be furnished and the hours for a purpose
time and location of reasonably related to the
furnishing the same, will holder's interests as a
be established by the shareholder or as the
board or, in case the holder of a voting trust
board does not act, any certificate; the
officer to whom such power inspection may be made in
is delegated in the DE person or by an agent or
By-Laws. In addition, as attorney. Financial and
permitted by the Delaware income statements of the
Act, the DE By-Laws also Trust shall be kept on
authorize the board or, in file in the principal
case the board does not executive office of the
act, any officer to whom Trust for at least twelve
such power is delegated in (12) months, and each such
the DE By-Laws, to keep statement shall be
confidential from exhibited at all
shareholders for such reasonable times to any
period of time as deemed shareholder demanding an
reasonable any information examination of any such
that the board or such statement, or a copy shall
officer, as applicable, be mailed to any such
reasonably believes to be shareholder.
Appendix D-27
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
in the nature of trade
secrets or other Chapter 156D, Section
information that the board 16.02 of the Massachusetts
or such officer, as General Laws provides that
applicable, in good faith a shareholder of a
believes would not be in Massachusetts business
the best interests of the corporation, upon advance
DE Trust to disclose or written notice of at least
that could damage the DE five days, is generally
Trust or that the DE Trust entitled to inspect and
is required by law or by copy, during regular
agreement with a third business hours at the
party to keep confidential. office where they are
maintained, copies of
certain of the
corporations books and
records. However, certain
records relating meetings
of the boards, accounting
records and shareholder
records require that a
shareholder satisfy
certain conditions,
including demonstrating a
proper purpose for the
request.
Derivative Actions Under the Delaware Act, a The Massachusetts Statute
shareholder may bring a does not contain specific
derivative action if provisions addressing
trustees with authority to derivative actions.
do so have refused to
bring the action or if a
demand upon the trustees
to bring the action is not
likely to succeed. A
shareholder may bring a
derivative action only if
the shareholder is a
shareholder at the time
the action is brought and:
(i) was a shareholder at
the time of the
transaction complained
about or (ii) acquired the
status of shareholder by
operation of law or
pursuant to the governing
instrument from a person
who was a shareholder at
the time of the
transaction. A
shareholder's right to
bring a derivative action
may be subject to such
additional standards and
restrictions, if any, as
are set forth in the
governing instrument.
The DE Declaration
provides that, subject to
the requirements set forth
in the Delaware Act, a
shareholder(s) may bring a
derivative action on
behalf of the DE Trust
only if the shareholder
(s) first makes a pre-suit
demand upon the board to
bring the subject action
unless an effort to cause
the board to bring such
action is excused. A
demand on the board shall
only be excused if a
majority of the board, or
a majority of any
committee established to
consider the merits of
such action, has a
material personal
financial interest in the
action at issue. A
trustee shall not be
deemed to have a material
personal financial
interest in an action or
otherwise be disqualified
from ruling on a
shareholder demand by
virtue of the fact that
such trustee receives
remuneration from his or
her service on the board
of the DE Trust or on the
boards of one or more
investment companies with
the same or an affiliated
investment adviser or
underwriter.
Appendix D-28
Delaware Statutory Trust Massachusetts Business Trust
--------------------------- ----------------------------
Management The DE Trust, upon The Trust is an open-end
Investment Company completion of the management investment
Classification Reorganization, will be an company under the 1940 Act
open-end management (i.e., a management
investment company under investment company whose
the 1940 Act (i.e., a securities are redeemable).
management investment
company whose securities
are redeemable).
Appendix D-29
APPENDIX E
5% SHAREHOLDERS
As of February 28, 2006 the following shareholders, to the Trusts'
knowledge, owned beneficially more than 5% of a Fund's outstanding shares, as
noted.
MONEY FUND:
R. J. Fisher 2004 Family Trust (10.81%)
DDF Y2K Family Trust (6.66%)
J. & L. Fisher (6.59%)
M. Tobin Trust (5.73%)
P.O. Box 387
San Francisco, CA 94104
INSURED FUND:
National Financial Services Corp. (14.08%) J. P. Young Trust (12.21%)
200 Liberty Street Lobby 5 W. Budge Non-Exempt QTIP Trust (5.63%)
New York, NY 10281-5500 P.O. Box 387
San Francisco, CA 94104
TREASURY TRUST:
W. Edwards Revocable Trust (8.62%)
D. Fisher Charitable Remainder Trust (7.27%)
P.O. Box 387
San Francisco, CA 94104
TREASURY TRUST - CLASS K:
MBV Law (14.75%) University Games (8.25%)
855 Front St. 2030 Harrison Street
San Francisco, CA 94111 San Francisco, CA 94110
SSL Law Firm (6.29%) Ceon Corporation (5.27%)
2755 Campus #245 1600 Seaport Blvd, Suite 160
San Mateo, CA. 94403 Redwood City, CA. 94063
Hearing and Speech Center of N. CA (10.01%)
P.O. Box 387
San Francisco, CA 94104
SHORT-TERM GOVERNMENT FUND - CLASS K:
Tarlton Properties, Inc. (30.07%) MBV Law (11.12%)
955 Alma Street 855 Front St.
Palo Alto, CA. 94301-2405 San Francisco, CA 94111
Caltag Laboratories, Inc. (11.56%) JAE Properties, Inc. (5.79%)
1849 Old Bayshore Blvd, #200 191 Military East, Suite A
Burlingame, CA 94010 Benicia, CA 94510
Appendix E-1
GOVERNMENT FUND - CLASS K:
Tarlton Properties, Inc. (9.14%) Armer/Norman & Associates (6.01%)
955 Alma Street 4200 18th Street
Palo Alto, CA. 94301-2405 San Francisco, CA. 94114
Kelly & Rossi (5.%)
1065 Hillsdale Blvd. #225
Foster City, CA 94404
S&P 500 FUND:
SEI Trust (12.56%) Charles Schwab & Co. (10.10%)
One Freedom Valley Drive 101 Montgomery Street
Oaks, PA 19456 San Francisco, CA 94104
Appendix E-2
S&P 500 FUND - CLASS K:
Tarlton Properties, Inc. (10.31%) Courtney Enterprises (5.74%)
955 Alma Street 800 S. Broadway, Suite 300
Palo Alto, CA. 94301-2405 Walnut Creek, CA 94596
University Games (5.58%) MBV Law (6.44%)
2030 Harrison Street 855 Front St.
San Francisco, CA 94110 San Francisco, CA 94111
MIDCAP FUND:
Charles Schwab & Co. (11.78%) SEI Trust (11.59%)
101 Montgomery Street One Freedom Valley Drive
San Francisco, CA 94104 Oaks, PA 19456
Standard Insurance Co. (10.58%) National Financial Services Corp. (5.77%)
1100 SW Sixth Avenue 200 Liberty Street Lobby 5
Portland, OR 97204 New York, NY 10281-5500
MIDCAP FUND - CLASS K:
Tarlton Properties, Inc. (14.14%) MBV Law (5.39%)
955 Alma Street 855 Front St.
Palo Alto, CA. 94301-2405 San Francisco, CA 94111
Nth Power (5.54%) Paramount Elevator Corporation (5.86%)
50 California St. Suite 840 249 Fallon St.
San Francisco, CA 94111 Oakland, CA 94607
Golden Gate Software (8.57%) Case Central.com, Inc. (5.77%)
301 Howard Street #2100 760 Market Street, Suite 200
San Francisco, CA. 94105 San Francisco, CA. 94102
EQUITY INCOME FUND:
T. Abel IRA (8.82%)
J. F. Cornuelle Trust (6.09%)
P.O. Box 387
San Francisco, CA 94104
EQUITY INCOME FUND - CLASS K:
Courtney Enterprises (8.56%) Golden Gate Software (7.30%)
800 S. Broadway, Suite 300 301 Howard Street #2100
Walnut Creek, CA 94596 San Francisco, CA. 94105
Appendix E-3
Kelly & Rossi (5.97%) Hearing and Speech Center of N. CA (5.25%)
1065 Hillsdale Blvd. #225 P.O. Box 387
Foster City, CA 94404 San Francisco, CA 94104
SMALLCAP FUND:
Charles Schwab & Co. (10.92%) J. S. Newman (10.24%)
101 Montgomery Street P.O. Box 387
San Francisco, CA 94104 San Francisco, CA 94104
SMALLCAP FUND - CLASS K:
Tarlton Properties, Inc. (11.02%) Paramount Elevator Corporation (5.65%)
955 Alma Street 249 Fallon St.
Palo Alto, CA. 94301-2405 Oakland, CA 94607
Nth Power (6.65%) Case Central.com, Inc. (5.44%)
50 California St. Suite 840 760 Market Street, Suite 200
San Francisco, CA 94111 San Francisco, CA. 94102
Golden Gate Software (10.07%)
301 Howard Street #2100
San Francisco, CA. 94105
NASDAQ-100 FUND:
Charles Schwab & Co. (28.48%) National Investor Services Corp. (5.06%)
101 Montgomery Street 55 Water Street, 32nd Floor
San Francisco, CA 94104 New York, NY 10041-0028
N. E. Grenzebach (5.97%)
P.O. Box 387
San Francisco, CA 94104
Appendix E-4
NASDAQ-100 FUND - CLASS K:
Ceon Corporation (9.90%) Case Central.com, Inc. (8.67%)
1600 Seaport Blvd, Suite 160 760 Market Street, Suite 200
Redwood City, CA. 94063 San Francisco, CA. 94102
Bayrisk Insurance Brokers, Inc. (5.22%) Nth Power (6.37%)
920 Minturn St. 50 California St. Suite 840
Alameda, CA 94501 San Francisco, CA 94111
Golden Gate Software (10.27%)
301 Howard Street #2100
San Francisco, CA. 94105
EUROPEAN GROWTH & INCOME FUND:
Doughtronics, Inc. (5.84%) MG Trust Company FBO Wild Brain inc. 401k Plan (5.84%)
2730 - 9th Street P.O. Box 387
Berkeley, CA 94710 San Francisco, CA 94104
EUROPEAN GROWTH & INCOME FUND - CLASS K:
Golden Gate Software (8.35%) Nth Power (5.44 %)
301 Howard Street #2100 50 California St. Suite 840
San Francisco, CA. 94105 San Francisco, CA 94111
University Games (5.53%) Courtney Enterprises (5.19%)
2030 Harrison Street 800 S. Broadway, Suite 300
San Francisco, CA 94110 Walnut Creek, CA 94596
SHORT-TERM GOVERNMENT FUND:
W. Edwards Revocable Trust (25.77%)
Callan Family Trust (19.96%)
P.O. Box 387
San Francisco, CA 94104
Appendix E-5
APPENDIX F
FORM OF PROXY
PROXY
[Shareholder Name]
[Title (if applicable)]
[Address]
[Fund Name] [Shares Held]
CALIFORNIA INVESTMENT TRUST
CALIFORNIA INVESTMENT TRUST II
SPECIAL MEETING OF SHAREHOLDERS
May 12, 2006
SOLICITED ON BEHALF OF
THE BOARD OF TRUSTEES OF
CALIFORNIA INVESTMENT TRUST AND
CALIFORNIA INVESTMENT TRUST II
The undersigned hereby appoints Rodney D. Yee and Michael
O'Callaghan, and each of them, as proxies of the undersigned, each with the
power to appoint his substitute, for the Special Meeting of Shareholders of
California Investment Trust and California Investment Trust II (each, a "Trust")
and each series thereof (each, a "Fund") to be held on May 12, 2006, at the
offices of ALPS Mutual Fund Services, Inc., the Funds' transfer agent and fund
accountant, at 1625 Broadway, Suite 2200, Denver, Colorado, 80202, and at any
and all adjournments thereof (the "Meeting"), to cast on behalf of the
undersigned, as designated below, all votes the undersigned is entitled to cast
at the Meeting and otherwise to represent the undersigned at the Meeting with
all powers possessed by the undersigned if personally present at the Meeting.
The undersigned hereby acknowledges receipt of the Notice of the Meeting and the
accompanying Proxy Statement and revokes any proxy heretofore given with respect
to such Meeting. Capitalized terms used without definition have the meanings
given to them in the accompanying Proxy Statement.
The votes entitled to be cast will be cast as instructed below. A
SIGNED PROXY WILL BE VOTED IN FAVOR OF THE PROPOSALS LISTED BELOW UNLESS YOU
HAVE SPECIFIED OTHERWISE. You may vote only if you held shares in the Fund at
the close of business on February 28, 2006. Please sign, date and return this
proxy promptly. Your signature authorizes the proxies to vote in their
discretion on such other business as may properly come before the Meeting
including, without limitation, all matters incident to the conduct of the
Meeting.
Please indicate your vote by an "x" in the appropriate box below.
1. To elect Trustees of the Trust. The nominees are: Stephen C.
Rogers, Harry Holmes, John B. Sias, James W. Miller, Jr., Kevin T. Kogler and
Stephen H. Sutro.
Appendix F-1
To withhold authority to vote for an individual nominee, mark the
"For All Except" box and strike a line through the nominee's name in the list
above.
For |_| Withhold |_| For All Except |_|
2. Approval of new investment advisory agreements between the Fund
and CCM Partners, the investment adviser to the Fund.
For |_| Withhold |_| Abstain |_|
3. Approval of Agreement and Plan of Reorganization that provides
for the reorganization of each Trust from a Massachusetts business trust into a
single Delaware statutory trust.
For |_| Withhold |_| Abstain |_|
4. Transact such other business as may properly come before the
Meeting.
Dated: __________________, 2006
[Shareholder Name]
Dated: __________________, 2006
[Signature(s) (if held jointly)]
Please sign exactly as name or names appear on your shareholder
account statement. When signing as attorney, trustee, executor, administrator,
custodian, guardian or corporate officer, please give full title. If shares are
held jointly, each shareholder should sign.
Appendix F-2