As filed with the Securities and Exchange Commission on April 12, 2005
File Nos. 333-103714 and 811-21317
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 Post-Effective Amendment No. ____
(Check appropriate box or boxes)
PMFM INVESTMENT TRUST
---------------------
(Exact Name of Registrant as Specified in Charter)
1551 Jennings Mill Road - Suite 2400A, Bogart, Georgia 30622
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number: (252) 972-9922
--------------
Julian G. Winters
116 S. Franklin Street, P.O. Box 69, Rocky Mount, North Carolina 27802
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(Name and Address of Agent for Service)
With a copy to:
---------------
Reinaldo Pascual, Esq.
Kilpatrick Stockton LLP
1100 Peachtree Street,
Suite 2800
Atlanta, Georgia 30309
Approximate Date of Proposed Public Offering:
As soon as practicable after the
Registration Statement becomes Effective
----------------------------------------
No filing fee is due because an indefinite number of shares have been deemed to
be registered in reliance on Section 24(f) under the Investment Company Act of
1940, as amended.
MURPHYMORRIS ETF FUND
1551 JENNINGS MILL ROAD - SUITE 2400A
BOGART, GEORGIA 30622
1-800-715-3611
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY 13, 2005
Dear Shareholder:
I am writing to ask for your vote on important matters concerning your
investment in the MurphyMorris ETF Fund (the "MurphyMorris Fund"), a series of
the MurphyMorris Investment Trust (the "Trust"). The Trust's Board of Trustees
has called a special meeting of shareholders (the "Special Meeting") of the
MurphyMorris Fund for 4:00 p.m., Eastern Time, on May 13, 2005 at the offices of
North Carolina Shareholder Services, LLC, the Trust's transfer agent, 116 South
Franklin Street, Rocky Mount, North Carolina 27804.
At the Special Meeting, you will be asked to approve an agreement to reorganize
the MurphyMorris Fund into the PMFM Core Advantage Portfolio Trust (the "PMFM
Fund") in a tax-free reorganization. Please read the enclosed Proxy
Statement/Prospectus carefully for differences in the investment strategies of
the funds. The PMFM Fund is a mutual fund that, like the MurphyMorris Fund,
invests primarily in ETFs. The PMFM Fund is managed by PMFM, Inc. ("PMFM"), a
registered investment advisor, affiliated with MurphyMorris Money Management
Co., the registered investment advisor for the MurphyMorris Fund. The portfolio
managers of the PMFM Fund include most of the same portfolio managers of the
MurphyMorris Fund. As you may know, PMFM has been assisting MurphyMorris Money
Management Co. by handling the back office functions like executing the model
and trading the portfolio since the inception of MurphyMorris Money Management
Co.
If approved by the MurphyMorris Fund's shareholders, you will become a
shareholder of the PMFM Fund on the date that the reorganization occurs. There
are no sales charges or redemption fees imposed in connection with the
reorganization. Again, this is also a tax-free reorganization.
Please read the PMFM Fund's Prospectus, a copy of which is included with
this letter, to learn about its investment objective, strategies, risks and
other important information. Once the reorganization is completed and the
MurphyMorris Fund becomes part of the PMFM fund family you will have access to
three additional PMFM managed mutual funds: the PMFM Managed Portfolio Trust,
which has the same investment objective as the current MurphyMorris Fund, the
PMFM Tactical Preservation Portfolio Trust and the PMFM Tactical Opportunities
Portfolio Trust. As a part of the PMFM fund family you will have a broader range
of investment objectives, without changing the investment management philosophy
which is based on technical market analysis.
After careful consideration, the Board of Trustees of the Trust unanimously
approved this proposal and recommends shareholders vote "FOR" the proposal.
No matter what size your investment is, your vote is critical. Therefore,
whether or not you plan to attend the Special Meeting in person, please read the
Proxy Statement/Prospectus carefully and cast your vote promptly. It is
important that your vote be received no later than the time of the Special
Meeting on May 13, 2005. You may cast your vote by completing, signing, and
returning the enclosed proxy card by mail in the envelope provided.
1
If you have any questions about this transaction or the proxy materials,
please do not hesitate contact me at 706-579-1392, or the Trust by calling toll
free 1-800-715-3611. We appreciate your participation and prompt response in
this matter and thank you for your continued support.
Sincerely
MurphyMorris ETF Fund
Gregory L. Morris
President
April 13, 2005
2
MURPHYMORRIS INVESTMENT TRUST
MURPHYMORRIS ETF FUND
1551 JENNINGS MILL ROAD - SUITE 2400A
BOGART, GEORGIA 30622
1-800-715-3611
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE MURPHYMORRIS ETF FUND
TO BE HELD ON MAY 13, 2005
To the Shareholders:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of the
MurphyMorris ETF Fund (the "MurphyMorris Fund"), a series of the MurphyMorris
Investment Trust (the "Trust"), will be held at the offices of the Trust's
transfer agent, North Carolina Shareholder Services, LLC, 116 South Franklin
Street, Rocky Mount, North Carolina 27804 on May 13, 2005, at 4:00 p.m., Eastern
Time.
At the Special Meeting you will be asked to consider and approve the
following proposals:
(1) To approve a proposed Agreement and Plan of Reorganization between the
Trust, on behalf of the MurphyMorris Fund, and the PMFM Investment Trust on
behalf of one of its series, the PMFM Core Advantage Portfolio Trust (the
"PMFM Fund"), whereby (i) the PMFM Fund would acquire all of the assets of
the MurphyMorris Fund in exchange solely for shares of beneficial interest
in the PMFM Fund and the assumption of all liabilities of the MurphyMorris
Fund and (ii) the MurphyMorris Fund would be subsequently liquidated.
(2) To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
You may vote at the Special Meeting if you are the record owner of shares
of the MurphyMorris Fund as of the close of business on April 1, 2005. If you
attend the Special Meeting, you may vote your shares in person. Even if you do
not attend the Special Meeting, you may vote by proxy by completing, signing,
and returning the enclosed proxy card by mail in the envelope provided.
Your vote is very important to us. Whether or not you plan to attend the
Special Meeting in person, please vote the enclosed proxy. If you have any
questions, please contact the Trust for additional information by calling
toll-free 1-800-715-3611.
By Order of the Board of Trustees of
MurphyMorris Investment Trust
Julian G. Winters
Secretary
April 13, 2005
3
PART A
======
PROXY STATEMENT/PROSPECTUS
APRIL 12, 2005
PROXY STATEMENT FOR:
MURPHYMORRIS ETF FUND
(A SERIES OF THE MURPHYMORRIS INVESTMENT TRUST)
1551 JENNINGS MILL ROAD - SUITE 2400A
BOGART, GEORGIA 30622
1-800-715-3611
PROSPECTUS FOR:
PMFM CORE ADVANTAGE PORTFOLIO TRUST
(A SERIES OF THE PMFM INVESTMENT TRUST)
1551 JENNINGS MILL ROAD - SUITE 2400A
BOGART, GEORGIA 30622
1-866-383-7636
This combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished in connection with the solicitation of proxies by the Board
of Trustees of the MurphyMorris Investment Trust, a Delaware statutory trust
(the "Trust"), on behalf of its series, the MurphyMorris ETF Fund (the
"MurphyMorris Fund"), for a Special Meeting of Shareholders of the MurphyMorris
Fund (the "Special Meeting"). The Special Meeting will be held on May 13, 2005,
at 4:00 p.m., Eastern Time at the offices of the Trust's transfer agent, North
Carolina Shareholder Services, LLC, 116 South Franklin Street, Rocky Mount,
North Carolina 27804. As more fully described in this Proxy
Statement/Prospectus, the purpose of the Special Meeting is to vote on a
proposed Agreement and Plan of Reorganization (the "Reorganization Agreement")
that contemplates the reorganization (the "Reorganization") of the MurphyMorris
Fund into the PMFM Core Advantage Portfolio Trust (the "PMFM Fund"; the
MurphyMorris Fund and the PMFM Fund individually and collectively referred to as
"Fund" and "Funds" respectively), a series of the PMFM Investment Trust, a
Delaware statutory trust (the "PMFM Trust").
The Reorganization Agreement provides for:
o the transfer of all of the assets of the MurphyMorris Fund to the PMFM
Fund in exchange for Investor Class shares of beneficial interest of
the PMFM Fund;
o the assumption by the PMFM Fund of all of the liabilities of the
MurphyMorris Fund; and
o the distribution of shares of beneficial interest of the PMFM Fund to
the shareholders of the MurphyMorris Fund in connection with the
liquidation of the MurphyMorris Fund.
Because shareholders of the MurphyMorris Fund are being asked to approve
the Reorganization Agreement that will result in the MurphyMorris Fund
shareholders' ultimately holding shares of the PMFM Fund, this Proxy Statement
also serves as a Prospectus for the shares of the PMFM Fund to be issued in
connection with the Reorganization. The MurphyMorris Fund offers one class of
shares. The PMFM Fund offers one class of shares: Investor Class shares. Holders
of shares of the MurphyMorris Fund will receive an amount of Investor Class
shares of the PMFM Fund equal in value to their MurphyMorris Fund shares.
This Proxy Statement/Prospectus, which should be read and retained for
future reference, sets forth concisely the information that a shareholder should
know before voting on the Reorganization Agreement.
HOW TO OBTAIN ADDITIONAL INFORMATION
A Statement of Additional Information ("SAI") relating to this Proxy
Statement/Prospectus dated April 12, 2005, containing additional information
about the Reorganization and the parties thereto, has been filed with the U.S.
Securities and Exchange Commission (the "SEC") and is incorporated herein by
reference, and therefore is legally part of this Proxy Statement/Prospectus. You
may receive a copy of the SAI without charge by contacting the PMFM Trust, c/o
NC Shareholder Services, 116 South Franklin Street, P.O. Box 4365, Rocky Mount,
NC 27803-0365 or by calling toll free 1-866-383-7636.
For more information regarding the MurphyMorris Fund, see the Prospectus
(dated September 28, 2004) and the SAI (dated September 28, 2004) of the Trust
(including the MurphyMorris Fund), which is incorporated herein by reference,
and therefore is legally part of this Proxy Statement/Prospectus. The annual
report dated May 31, 2004 for the MurphyMorris Fund is incorporated herein by
reference, and therefore is legally part of this Proxy Statement/Prospectus. You
may obtain a copy of the MurphyMorris Fund Prospectus, SAI, and annual report
without charge by writing to the MurphyMorris Investment Trust, c/o NC
Shareholder Services, 116 South Franklin Street, P.O. Box 4365, Rocky Mount, NC
27803-0365 or by calling toll free 1-800-715-3611.
For more information regarding the PMFM Fund, see the Prospectus dated
March 10, 2005 and the SAI dated March 10, 2005 of the PMFM Trust (including the
PMFM Fund), which is incorporated herein by reference, and therefore is legally
a part of this Proxy Statement/Prospectus. A COPY OF THE PMFM FUND'S CURRENT
PROSPECTUS IS ENCLOSED WITH THIS MAILING.
You may obtain a copy of the most recent Prospectus, SAI, annual report and
semiannual report for the PMFM Fund by writing to the PMFM Investment Trust, c/o
NC Shareholder Services, 116 South Franklin Street, P.O. Box 4365, Rocky Mount,
NC 27803-0365 or by calling toll free 1-866-383-7636.
In addition, you can copy and review any of the above referenced documents
at the SEC's Public Reference Room in Washington, D.C. You may obtain
information on the operation of the Public Reference Room by calling the SEC at
1-202-942-8090. Reports and other information about the MurphyMorris and PMFM
Trust are available on the EDGAR Database on the SEC's internet site at
http://www.sec.gov. You may obtain copies of this information, after paying a
duplicating fee, by electronic request at the following email address:
publicinfo@sec.gov, or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS COMBINED PROXY STATEMENT/PROSPECTUS AND, IF
SO GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
5
HAVING BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY
JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
______________________________________
THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is April 12, 2005.
6
TABLE OF CONTENTS
QUESTIONS AND ANSWERS......................................................... 8
SYNOPSIS .....................................................................11
The Reorganization .........................................................11
Board Recommendations ......................................................12
Comparison of Business Structures ..........................................13
Comparison of Investment Objectives and Principal Investment Strategies ....13
Comparison of Investment Advisory Services and Fees ........................16
Comparison of Fees and Expenses ...........................................18
Comparison of Purchase, Redemption and Exchange Policies and Procedures.....20
Shareholder Services and Distribution Plan .................................21
Comparison of Distribution Policies ........................................21
Comparison of Net Asset Value Calculation Procedures .......................21
Principal Investment Risk of the Funds .....................................21
INFORMATION ABOUT THE REORGANIZATION .........................................25
The Reorganization Agreement. ..............................................25
Reasons for the Reorganization and Board Considerations.....................25
Tax Considerations..........................................................27
Expenses of the Reorganization..............................................28
Additional Information About PMFM...........................................28
ADDITIONAL INFORMATION ABOUT THE MURPHYMORRIS FUND'S AND PMFM FUND'S
DISTRIBUTORS, ADMINISTRATORS, TRANSFER AND AGENT .............................29
Capitalization..............................................................29
Other Business..............................................................30
General Information.........................................................30
Solicitation of Votes.......................................................30
Quorum......................................................................30
Vote Required...............................................................31
Adjournments................................................................31
Receipt of Shareholder Proposals............................................31
Record Date and Outstanding Shares..........................................31
Security Ownership of Certain Beneficial Owners and Management..............31
Financial Statements and Experts............................................32
Legal Matters...............................................................32
Information About the Funds.................................................32
EXHIBIT A................................................................... A-1
7
_____________________________
QUESTIONS & ANSWERS
_____________________________
We recommend that you read the complete Proxy Statement/Prospectus
carefully. For your convenience, we have prepared these questions and answers to
provide a brief overview of the proposal to be voted on.
_____________________________
Q. WHAT IS THE PROPOSAL UNDER CONSIDERATION?
A. The proposal under consideration is the proposed transfer of the assets of
the MurphyMorris Fund to the PMFM Fund, a newly formed series of shares of
the PMFM Trust. Shareholders of the MurphyMorris Fund are being asked to
vote on whether to approve the proposed transaction (such proposed
transaction is referred to as the "Reorganization").
Q: WHY IS A SHAREHOLDER MEETING BEING HELD?
A: The proposed transaction that you are being asked to approve as a
shareholder of the MurphyMorris Fund is a plan of reorganization that would
result in you becoming a shareholder of the PMFM Fund and no longer being a
shareholder of the MurphyMorris Fund. The PMFM Fund is an investment
company like the MurphyMorris Fund, but it is a part of the PMFM Trust, a
different (but affiliated) mutual fund family. The PMFM Fund's investment
objective is the same as the MurphyMorris Fund, but the investment strategy
of the PMFM Fund is different than the MurphyMorris Fund. The proposed
Reorganization requires shareholder approval in order to be consummated,
and so a meeting of each Fund's shareholders is being held to seek that
approval. Please refer to the Proxy Statement/Prospectus for a detailed
explanation of the proposed plan of reorganization and for a more complete
description of the PMFM Fund.
Q: WHO WILL ADVISE THE PMFM FUND ONCE THE REORGANIZATION IS COMPLETED?
A: PMFM, Inc. ("PMFM") will manage the new PMFM Fund. PMFM is an affiliate of
MurphyMorris Money Management Co. ("MurphyMorris"), the investment adviser
to the MurphyMorris Fund. The current portfolio management team of
MurphyMorris (Donald Beasley and Tim Chapman) are the majority owners of
PMFM and members of the PMFM portfolio management team. Greg Morris,
currently the President and Treasurer of the MurphyMorris Fund and
Treasurer of MurphyMorris, is also a member of the PMFM portfolio
management team for the PMFM Fund. Therefore, the portfolio managers and
president of the MurphyMorris Fund will also lead the management of the
PMFM Fund. More information about PMFM and its investment team appears
below under "COMPARISON OF INVESTMENT ADIVOSRY SERVICES AND FEES" and
"ADDITIONAL INFORMATION ABOUT PMFM."
Q: WILL I HAVE TO PAY ANY SALES LOAD, COMMISSION OR OTHER SIMILAR FEE IN
CONNECTION WITH THE REORGANIZATION?
8
A: You will pay no sales load, commission or other similar fee in connection
with the Reorganization.
Q: HOW DO OPERATING EXPENSES PAID BY THE PMFM FUND COMPARE TO THOSE PAYABLE BY
THE MURPHYMORRIS FUND?
A: The fees and expenses for the PMFM Fund are expected to be substantially
the same as those for the MurphyMorris Fund. PMFM's fee for investment
advisory services for the PMFM Fund will be the same as MurphyMorris'
advisory fee for the MurphyMorris Fund (annualized rate of 1.25% of daily
net assets). In addition, PMFM has entered into an expense limitation
agreement with the PMFM Fund that is substantially the same as the expense
limitation agreement that MurphyMorris has with the MurphyMorris Fund.
Therefore, the PMFM Fund's expected annual operating expenses (exclusive of
interest, taxes, brokerage fees and commissions, extraordinary expenses and
payments, if any, under the PMFM Fund's 12b-1 Plan) will be limited to
2.25% (the same rate as the MurphyMorris Fund's expense cap) of the average
daily net assets of the PMFM Fund for the fiscal year ending May 31, 2005.
More information about the PMFM Fund's fees and expenses appears below
under "COMPARISON OF FEES AND EXPENSES."
Q: HOW WILL THE REORGANIZATION AFFECT ME?
A: If the proposed plan of reorganization is approved and the Reorganization
is consummated, the assets and liabilities of the MurphyMorris Fund will be
combined with those of the PMFM Fund; an account will be set up in your
name at PMFM Trust; and you will receive Investor Class shares of the PMFM
Fund. The value of the shares of the PMFM Fund you receive in the
Reorganization will equal the value of the shares of the MurphyMorris Fund
you own immediately prior to the Reorganization, based on their net asset
value. No certificates for shares will be issued in connection with the
Reorganization.
Q: WILL I HAVE TO PAY ANY FEDERAL TAXES AS A RESULT OF THE REORGANIZATION?
A: The Reorganization as proposed is expected to qualify as a "reorganization"
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended. If the Reorganization so qualifies, you will not recognize any
gain or loss as a result of the exchange of your shares of the MurphyMorris
Fund for shares of the PMFM Fund.
Q: HOW DOES THE BOARD OF TRUSTEES RECOMMEND THAT I VOTE?
A: After careful consideration, the Board of Trustees of the Trust ("Board")
have determined that the proposed Reorganization will benefit the
shareholders of the MurphyMorris Fund and recommend that you cast your vote
"FOR" the proposed plan of reorganization. The Board believes that that
shareholders of the MurphyMorris Fund will benefit from, among other
things: (i) continued management by the MurphyMorris Fund portfolio
management team members and President in a new fund with the same
investment objective and a strategy with similaries to that of the
MurphyMorris Fund; (ii) the greater resources, larger staff, and fund
options offered by the PMFM Trust that shareholders will enjoy by combining
the MurphyMorris Fund with the PMFM Fund; and (iii) the greater potential,
relative to the MurphyMorris Fund's prospects as a stand-alone fund, for
growth of assets as part of the PMFM Trust. The Board also believes that
9
the Reorganization presents a more attractive alternative to the
MurphyMorris Fund than continuing operations as a single fund family or
liquidation. See "REASONS FOR THE REORGANIZATION" and "BOARD
CONSIDERATIONS" for a detailed discussion of the Board's considerations in
approving the Reorganization.
Q: WHAT IF I REDEEM OR EXCHANGE MY SHARES BEFORE THE REORGANIZATION TAKES
PLACE?
A: If you choose to redeem or exchange your shares before the Reorganization
takes place, the redemption or exchange will be treated as a normal
redemption or exchange of shares and, generally, will be a taxable
transaction.
Q: HOW DO I CAST MY VOTE, AS A TECHNICAL MATTER?
A: You may cast your vote by mail or you may attend the Special Meeting. To
vote by mail, please mark your vote on the enclosed proxy card and sign,
date and return the card in the postage-paid envelope provided.
Q: WHEN WILL THE REORGANIZATION OCCUR?
A: If approved by shareholders, the Reorganization is expected to occur in
May 2005, promptly following the shareholders meeting.
Q: WHOM DO I CONTACT FOR FURTHER INFORMATION?
A: You may contact your financial adviser for further information. You may
also call the MurphyMorris Fund at 800-715-3611 or visit MurphyMorris
Fund's website at www.murphymorris.com, where you can send us an e-mail
message by selecting "Contact Us."
10
SYNOPSIS
This synopsis is qualified in its entirety by reference to the additional
information contained elsewhere in this Proxy Statement/Prospectus, including
the exhibits and documents incorporated by reference herein, including without
limitation, the Reorganization Agreement, a copy of which is attached to this
Proxy Statement/Prospectus as Exhibit A. Shareholders should read this entire
Proxy Statement/Prospectus carefully.
For a detailed discussion of the topics discussed in this synopsis
regarding the PMFM Fund, see the PMFM Fund's Prospectus dated March 10, 2005 and
Statement of Additional Information dated March 10, 2005, each of which is
incorporated by reference into, and is legally part of, this Proxy
Statement/Prospectus. For a detailed discussion of the topics discussed in this
synopsis regarding the MurphyMorris Fund, see the MurphyMorris Fund's Prospectus
dated September 28, 2004 and Statement of Additional Information dated September
28, 2004, each of which is incorporated by reference into, and is legally part
of, this Proxy Statement/Prospectus.
THE REORGANIZATION
At a meeting held on March 4, 2005 the Board, including all of the trustees
of the Trust ("Trustees") who are not "interested persons" (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")) of the Trust (the
"Independent Trustees"), considered and unanimously approved the Reorganization
Agreement and the Reorganization.
Subject to the approval of the shareholders of the MurphyMorris Fund, the
Reorganization Agreement provides for:
o the transfer of all of the assets of the MurphyMorris Fund to the PMFM
Fund in exchange for Investor Class shares of beneficial interest of
the PMFM Fund;
o the assumption by the PMFM Fund of all of the liabilities of the
MurphyMorris Fund; and
o the distribution of shares of beneficial interest of the PMFM Fund to
the shareholders of the MurphyMorris Fund in connection with the
liquidation of the MurphyMorris Fund.
The Reorganization is scheduled to be effective as of 4:00 P.M., Eastern
Time, on the Closing Date (as defined in the Reorganization Agreement). Pursuant
to the Reorganization, each shareholder of the MurphyMorris Fund will become the
owner of the number of full and/or fractional shares of the PMFM Fund having an
aggregate net asset value equal to the aggregate net asset value of the
shareholder's shares of the MurphyMorris Fund as of the close of business on the
Closing Date. See "INFORMATION ABOUT THE REORGANIZATION" below.
Approval of the Reorganization requires approval of the lesser of (a) 67%
or more of the shares of the MurphyMorris Fund present at the Special Meeting or
represented by proxy if the holders of more than 50% of the outstanding shares
are present at the Special Meeting or represented by proxy; or (b) a majority of
the outstanding voting securities of the MurphyMorris Fund. Shareholders are
entitled to one vote per each dollar (and fractional vote for each fractional
dollar) of the net asset value of each share (including fractional shares) that
they own of the MurphyMorris Fund. See "General Information" below. If the
MurphyMorris Fund's shareholders do not approve the Reorganization, the Board
11
will consider other alternatives, including the possible liquidation of the
MurphyMorris Fund.
In considering whether to approve the Reorganization you should note that
the Reorganization is not expected to cause you to recognize any taxable gains
or losses on the disposition of your shares of the MurphyMorris Fund and
acquisition of shares of the PMFM Fund.
BOARD RECOMMENDATIONS
For the reasons set forth in the section entitled "Reasons for the
Reorganization and Board Considerations," the Board, including the Independent
Trustees, unanimously recommends that you approve the Reorganization Agreement.
The Board considered, with the assistance of independent counsel to the
Independent Trustees, a variety of different factors prior to approving the
Reorganization Agreement, including, without limitation:
(1) each MurphyMorris Fund shareholder will receive shares of the PMFM Fund
equal in value to its MurphyMorris Fund shares;
(2) the Reorganization allows for the continued management by the
MurphyMorris Fund portfolio management team members (with the support of
additional PMFM portfolio management team members) and the President of the
MurphyMorris Fund in a new fund with the same investment objective and a
strategy with similarities to that of the MurphyMorris Fund;
(3) the affiliated relationship between the PMFM Trust and the MurphyMorris
Investment Trust, and the potential benefits for shareholders of joining a
series of the PMFM Trust;
(4) historical performance and inflows, outflows and asset levels of the
MurphyMorris Fund since its inception, its current prospects for increasing
growth as a stand-alone fund, and the combined pro forma asset levels and future
growth prospects of the PMFM Fund as part of the PMFM Trust (assuming that the
Reorganization occurs);
(5) the anticipated expenses of the PMFM Fund will be substantially the
same as the current expenses of the MurphyMorris Fund;
(6) the agreement by the investment advisor of the MurphyMorris Fund,
MurphyMorris, to pay the expenses related to the Reorganization;
(7) the anticipated tax-free nature of the Reorganization and the effect of
the Reorganization on certain tax losses of the funds; and
(8) the potential benefits to the shareholders of MurphyMorris in
connection with the Reorganization.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE REORGANIZATION.
----------------------------------------------------------
12
COMPARISON OF BUSINESS STRUCTURES
The MurphyMorris Fund is a series of the MurphyMorris Investment Trust, and
the PMFM Fund is a series of the PMFM Investment Trust. Each of the Trust and
the PMFM Trust is an open-end management investment company organized as a
Delaware statutory trust offering redeemable shares in different classes and/or
series. The MurphyMorris Fund is the only series of the Trust, and it offers one
class of shares, the Investor Class. The PMFM Fund is one of four series of the
PMFM Trust, and it offers one class of shares, the Investor Class.
The declaration of trust and bylaws for each of the Trust and PMFM Trust
are substantially identical and there are no material differences between the
rights of shareholders of the MurphyMorris Fund and the rights of shareholders
of the PMFM Fund.
The Board and the Board of Trustees of the PMFM Trust ("PMFM Board")
formulate the general policies of each of the MurphyMorris Fund and the PMFM
Fund and PMFM Trust's other series, respectively. Each board meets regularly to
review performance, investment activities and practices and to discuss matters
relating to their respective series.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
Investment Objectives. The investment objectives of the MurphyMorris Fund
and the PMFM Fund are the same, as shown below.
- ----------------------- --------------------------------------- -------------------------------------------
MURPHYMORRIS FUND PMFM FUND
- ----------------------- --------------------------------------- -------------------------------------------
INVESTMENT OBJECTIVE
To seek capital appreciation. To seek capital appreciation.
- ----------------------- --------------------------------------- -------------------------------------------
13
Principal Investment Strategies. The principal investment strategies of the
MurphyMorris Fund and the PMFM Fund are set forth below.
- ------------------- ---------------------------------------- ----------------------------------------
MurphyMorris Fund PMFM Fund
- ------------------- ---------------------------------------- ----------------------------------------
PRINCIPAL To achieve its objective, the To achieve its investment objective, the
INVESTMENT MurphyMorris Fund invests primarily in PMFM Fund invests primarily in ETFs and
STRATEGY exchange-traded funds ("ETFs") and in Cash Positions. The PMFM Fund utilizes a
cash or cash equivalent positions ("Cash core and satellite investment strategy.
Positions"). The MurphyMorris Fund's The PMFM Fund will invest generally as
assets are allocated primarily among follows:
different ETFs and Cash Positions using
a rules-based quantitatively driven o The Core Position. 50% of the PMFM
asset allocation model which determines Fund's assets will be invested in
a weighted average score for "market broad-based market index positions,
risk" based on a combination of factors such as the S&P 500 Index, the
, such as the following technical and Russell 2000 Index, the S&P 400
fundamental indicators: Mid-Cap Index, the Dow Jones
Industries Index, the EAFE (Europe,
o Market breadth; Australia and Far East) Index (each a
o Trend line; "Broad Market Index") These Broad
o Interest rates; and Market Indexes are designed to
o Relative strength reflect the performance of different
o Sector Performance types of markets (e.g., the U.S.
equity market or foreign markets).
Based on the asset allocation model, the Through the core position, the PMFM
MurphyMorris Fund purchases and sells Fund will be exposed to the
shares of different index-based ETFs, performance of selected U.S. and
sector-based ETFs, fixed-income ETFs and international equity markets as a
Cash Positions that MurphyMorris Fund's whole. The percentage of the core
investment advisor, MurphyMorris, deems portfolio invested in different Broad
to be best positioned to participate in Market Indexes may change as PMFM
market gains during rising markets or to Fund's investment advisor, PMFM,
protect the Fund during declining deems appropriate or necessary based
markets. Under normal circumstances, the on its analysis and allocation
MurphyMorris Fund will invest at least models.
80% of its assets in ETFs.
o The Satellite Position. 50% of the
PMFM Fund's assets will be invested
primarily in market sector index
positions (e.g., healthcare indexes,
utilities indexes, real estate
indexes, etc.) and Cash Positions
using an allocation model and
risk-based ranking system similar to
the PMFM Managed Portfolio Trust (see
the PMFM Fund Prospectus for a
detailed description of the principal
investment strategy of the PMFM
Managed Portfolio Trust). The
satellite position will not be
designed to hedge the core position,
however, some investment positions
may hedge a portion of the core
position.
The PMFM Fund will seek to blend the
benefits of the market exposure gained
through investing in Broad Market
Indexes with the benefits of an actively
managed market-sector rotation investing
strategy. Under this approach, generally
one half of the PMFM Fund will be
invested in broad-based U.S. and foreign
equity markets as a whole and one half
of the PMFM Fund will be actively
managed in market sector positions
selected by PMFM in an attempt to
outperform the equity markets.
- ------------------- ---------------------------------------- ----------------------------------------
14
Key Issues and Differences in Investment Strategies. The principal
investment strategies of the MurphyMorris Fund and the PMFM Fund have some
important similarities. Each of the funds invests primarily in exchange traded
funds (ETFs). An ETF is an investment company that holds a portfolio of common
stocks designed to track the performance of a particular securities index (or
sector of an index), like the S&P 500 or NASDAQ, or a portfolio of bonds that
may be designed to track a bond index. Because ETFs may be traded like stocks on
a securities exchange (e.g., the American Stock Exchange), ETFs may be purchased
and sold throughout the trading day, based on their market price. Each share of
an ETF represents an undivided ownership interest in the portfolio held by an
ETF.
In addition to investing primarily in ETFs, the MurphyMorris Fund and the
PMFM Fund will be similar in that their portfolio investment decisions are
based, subject to the discretion of the Fund's investment team, on the same
quantitatively driven asset allocation and risk-assessement models. Each of the
Funds is also non-diversified, which generally means that they may hold fewer
securities in their portfolios than funds electing to be "diversified."
The primary differences between the investment strategies for the
MurphyMorris Fund and the PMFM Fund are:
o The MurphyMorris Fund is required to invest, under normal
circumstances, more than 80% of its assets in ETFs. While it is
generally anticipated that the PMFM Fund will likely invest more than
80% of its assets in ETFs under normal circumstances as well; however,
there is no requirement that the PMFM Fund do so.
o The PMFM Fund will invest 50% of its assets under normal circumstances
in ETFs or other investment companies tracking Broad Market Indices in
order to, among other things, ensure that a significant portion of the
portfolio is always invested invested in broad U.S. and/or foreign
markets. This portion of the PMFM Fund's portfolio is referred to as
its "Core Position." The MurphyMorris Fund has no such requirement
regarding investment in Broad Market Indices.
o The PMFM Fund will invest the other 50% of its assets under normal
circumstances in ETFs or other investment companies tracking market
sectors and Cash Positions using an active sector rotation strategy,
seeking to invest in market sectors that are appreciating and seeking
to avoid market sectors that are falling in value. This portion of the
PMFM Fund's portfolio is referred to as its "Satellite Position." The
MurphyMorris Fund does not have an emphasis on market sectors like the
Satellite Position of the PMFM Fund, however, the MurphyMorris Fund's
strategy may emphasize investments in sectors from time to time.
Compared to the MurphyMorris Fund, which is generally an asset allocation
fund that rotates assets between ETFs tracking various securities indexes and
market sector indexes and Cash Positions, the PMFM Fund generally represents a
more rigid strategy designed to ensure that at least 50% of the PMFM Fund is
always invested in Broad Market Indices.
Additional Investment Strategies, Issues and Differences Among the Funds
Each Fund may invest in all types of ETFs, such as index based ETFs, sector
based ETFs and fixed income ETFs. Each Fund may hold ETFs with portfolios
comprised of domestic or foreign stocks or bonds or any combination thereof.
However, due to legal limitations, each Fund will be prevented from purchasing
more than 3% of an ETF's outstanding shares unless (i) the ETF or the Fund has
received an order for exemptive relief from the 3% limitation from the
15
Securities and Exchange Commission ("SEC") that is applicable to the Fund; and
(ii) the ETF and the Fund take appropriate steps to comply with any conditions
in such order.
In cases where these legal limits prevent either Fund from buying a
particular ETF, the Fund may instead invest in a similar index or sector-based
mutual fund or other investment company ("Index Funds"), or a similar basket of
stocks (a group of securities related by index or sector that are pre-selected
by, and made available through, certain brokers at a discounted brokerage rate)
("Stock Baskets"). Each Fund may also invest in Index Funds or Stock Baskets
when the Fund's investment adviser believes they represent more attractive
opportunities than similar ETFs.
In addition, each Fund may invest in all types of Cash Positions, such as
money market instruments, U.S. Government obligations, commercial paper,
repurchase agreements and other cash or cash equivalent positions. Each Fund
also has the flexibility to invest in equity securities and other types of
securities when the Fund's investment adviser believes they offer more
attractive opportunities. Accordingly, each Fund may hold positions in common
stocks of domestic and foreign companies and corporate and/or government bonds
from time to time.
Temporary Defensive Positions. Each Fund may, from time to time, take
temporary defensive positions that are inconsistent with the Fund's principal
investment strategies in an attempt to respond to adverse market, economic,
political or other conditions. In such circumstances, either Fund may also hold
up to 100% of its portfolio in Cash Positions for reasons inconsistent with the
Fund's principal investment strategy. When either Fund takes a temporary
defensive position, the Fund may not be able to achieve its investment
objective.
Other Investment Policies. Other investment policies of the MurphyMorris
Fund are summarized in the MurphyMorris Fund's Statement of Additional
Information dated September 28, 2004, a copy of which is available upon request,
without charge, by writing MurphyMorris ETF Fund, c/o NC Shareholder Services,
116 South Franklin Street, Post Office Box 4365, Rocky Mount, North Carolina
27803-0365 or calling (800) 715-3611.
Other investment policies of the PMFM Fund are summarized in its Statement
of Additional Information dated March 10, 2005, a copy of which is available
upon request, without charge, by writing PMFM Funds - Investor Class, c/o NC
Shareholder Services, 116 South Franklin Street, Post Office Box 4365, Rocky
Mount, North Carolina 27803-0365 or calling (866) 383-7636.
COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES
The investment advisory fees paid by the MurphyMorris Fund and the PMFM
Fund are the same: monthly compensation based on the applicable Fund's average
daily net assets at the annual rate of 1.25%. In addition, the investment
advisors for each Fund (MurphyMorris and PMFM, respectively), have entered into
an expense limitation agreements (each an "Expense Limitation Agreement") under
which each has agreed to waive or reduce its fees and to assume other expenses
of the applicable Fund, if necessary, in an amount that limits the Fund's annual
operating expenses (exclusive of interest, taxes, brokerage fees and
commissions, extraordinary expenses, and payments, if any, under the Rule 12b-1
Plan) to not more than 2.25% of the average daily net assets of the applicable
Fund. The provisions of each of these Expense Limitation Agreements are
substantially the same, and each is expected to continue from year-to-year,
subject to the approval of the applicable Fund's Board of Trustees.
16
As noted elsewhere in this Proxy Statement/Prospectus, PMFM and
MurphyMorris are affiliates due to common ownership and management, and they
share the same address. Specific information regarding each investment advisory
firm is set forth below:
MurphyMorris Management and the MurphyMorris Fund. MurphyMorris, the
investment advisor of the MurphyMorris Fund, is located at 1551 Jennings Mill
Road, Suite 2400A, Bogart, Georgia 30622. MurphyMorris is controlled by Donald
L. Beasley, Timothy A. Chapman and Gregory L. Morris. Mr. Morris is the
Treasurer of MurphyMorris, and the Treasurer and President of the MurphyMorris
Fund. He is also a trustee of the MurphyMorris Trust, and has been a portfolio
manager for PMFM since November 2004. Mr. Chapman and Mr. Beasley serve as the
portfolio management team for the MurphyMorris Fund and have managed the Fund
since its inception in 2003. Mr. Chapman is a co-founder and has been a Vice
President of MurphyMorris since 1996, and has been Vice President of the
MurphyMorris Fund since its inception. Mr. Beasley is a co-founder and has been
Secretary of MurphyMorris since 1996. Mr. Beasley and Mr. Chapman are also
co-founders and have been principal shareholders, portfolio managers and
officers of PMFM since its inception in 1993. They are also members of the
portfolio management team for the PMFM Fund. Biographies for Mr. Chapman and Mr.
Beasley are set forth under "Additional Information About PMFM." The Statement
of Additional Information provides additional information about Mr. Chapman's
and Mr. Beasley's compensation from MurphyMorris, other accounts they manage and
their ownership of securities in the MurphyMorris Fund and the PMFM Fund.
As compensation for its investment advisory services, MurphyMorris receives
monthly compensation based on MurphyMorris Fund's average daily net assets at
the annual rate of 1.25%; subject to the terms of the Expense Limitation
Agreement. MurphyMorris has entered into an agreement with PMFM to license
PMFM's proprietary, rules-based quantitatively driven asset allocation model
research software to assist it in managing the MurphyMorris Fund. MurphyMorris
pays PMFM a fee of 15% of its gross investment advisory fees from the
MurphyMorris Fund under the terms of the license agreement. As of March 31,
2005, MurphyMorris had approximately $ 14.7 million in assets under management.
PMFM and the PMFM Fund. PMFM, the investment advisor of the PMFM Fund, is
also located at 1551 Jennings Mill Road, Suite 2400A, Bogart, Georgia 30622.
PMFM is controlled by Timothy Chapman and Donald Beasley. Mr. Beasley is the
President of PMFM and is a Trustee of the PMFM Funds. He is also Secretary of
MurphyMorris. Mr. Chapman is the Secretary and Treasurer of PMFM and the
President of the PMFM Trust. He is also a Vice President of MurphyMorris and
Vice President of the MurphyMorris Fund. Mr. Chapman, Mr. Beasley, and Mr.
Morris are part of the portfolio management team for the PMFM Fund. Additonal
members of the PMFM Fund investment team are Judson P. Doherty and Joseph G.
Ezernack.
As compensation for its investment advisory services, PMFM receives monthly
compensation based on the PMFM Fund's average daily net assets at the annual
rate of 1.25%; subject to the terms of PMFM's Expense Limitation Agreement. As
of March 31, 2005, PMFM had approximately $760 million in assets under
management.
Biographies for Mr. Beasley, Mr. Chapman, Mr. Morris, Mr. Doherty and Mr.
Ezernack are set forth below under "Additional Information About PMFM." The
Statement of Additional Information provides additional information about PMFM's
17
compensation of each portfolio management team member, other accounts they
manage and their ownership of securities in the PMFM Fund.
COMPARISON OF FEES AND EXPENSES
Like all mutual funds, the MurphyMorris Fund and the PMFM Fund incur
certain expenses in their respective operations and, as a shareholder, you pay
these expenses indirectly. The following tables compare the various fees and
expenses that a shareholder incurred from an investment in the MurphyMorris Fund
as of the fiscal year ended May 31, 2004 to the estimated fees and expenses of
the PMFM Fund and the pro forma estimated expenses of the PMFM Fund, assuming
the Reorganization Agreement is approved and the Reorganization had been
consummated. Actual expense information for the PMFM Fund for an historical
period is not provided because the PMFM Fund has not made a public offering of
its shares and has had (and will have) only nominal assets as of the date of
this Proxy Statement/Prospectus and prior to the completion of the
Reorganization.
- --------------------------------------- -------------------------- --------------------- -------------------
Pro forma
Shareholder Fees Combined
(Fees Paid Directly From Your PMFM Fund
Investment) MurphyMorris Fund PMFM Fund
- --------------------------------------- -------------------------- --------------------- -------------------
Maximum Sales Charge (Load) Imposed
On Purchases(as a percentage of None None None
offering price)
- --------------------------------------- -------------------------- --------------------- -------------------
Redemption Fee None None None
- --------------------------------------- -------------------------- --------------------- -------------------
- --------------------------------------- ------------------------- ---------------------- -------------------
Pro Forma
Annual Fund Operating Expenses Combined
(expenses that are deducted from Fund PMFM Fund
assets) MurphyMorris Fund PMFM Fund
- --------------------------------------- ------------------------- ---------------------- -------------------
Management Fees 1.25% 1.25% 1.25%
- --------------------------------------- ------------------------- ---------------------- -------------------
Distribution and/or Service (12b-1) 0.25% 0.25% 0.25%
Fees
- --------------------------------------- ------------------------- ---------------------- -------------------
Other Expenses 0.94% 1.00%^3 1.00%^3
----- ----- -----
- --------------------------------------- ------------------------- ---------------------- -------------------
Total Annual Fund Operating Expenses 2.44%^1,3 2.50%^2,3 2.50%^2, 3
===== ===== =====
- --------------------------------------- ------------------------- ---------------------- -------------------
^1 "Total Annual Fund Operating Expenses" are based upon actual expenses for
the fiscal year ending May 31, 2004. MurphyMorris has entered into an
Expense Limitation Agreement with the MurphyMorris Fund under which it has
agreed to waive or reduce its fees and to assume other expenses of the
Fund, if necessary, in an amount that limits the Fund's annual operating
expenses (exclusive of interest, taxes, brokerage fees and commissions,
extraordinary expenses and payments, if any, under the Rule 12b-1 Plan) to
not more than 2.25% of the average daily net assets of the Fund for the
fiscal year ending May 31, 2005. As a result, the Fund's "Total Annual Fund
Operating Expenses" (excluding interest, taxes, brokerage fees and
commissions and extraordinary expenses) will be limited to 2.50%. It is
expected that the Expense Limitation Agreement will continue from
18
year-to-year, provided such continuance is approved by the Board of
Trustees of the Fund.
^2 Since the PMFM Fund is newly organized, the expenses in the chart are based
on estimated expenses. PMFM has entered into an Expense Limitation
Agreement with the PMFM Fund under which it has agreed to waive or reduce
its fees and to assume other expenses of that Fund, if necessary, in an
amount that limits the Fund's annual operating expenses (exclusive of
interest, taxes, brokerage fees and commissions, extraordinary expenses and
payments, if any, under the Rule 12b-1 Plan) to not more than 2.25% of the
average daily net assets of that Fund for the fiscal year ending May 31,
2005. As a result, the Fund's "Total Annual Fund Operating Expenses"
(excluding interest, taxes, brokerage fees and commissions and
extraordinary expenses) will be limited to 2.50% each, as indicated in the
table. It is expected that the Expense Limitation Agreement will continue
from year-to-year, provided such continuance is approved by the Board of
Trustees of the Fund.
^3 The differences in the "Other Expenses" and "Total Annual Fund Operating
Expenses" of the MurphyMorris Fund and the PMFM Fund reflect the fact that
the MurphyMorris Fund's fees and expenses are actual expenses for the
fiscal year ended May 31, 2004 and the fees and expenses of the PMFM Fund
are based on estimated expenses. If the PMFM Fund has the same level of
assets as the MurphyMorris Fund had during the fiscal year ended May 31,
2004, then the PMFM Fund's fees and expenses will generally be the same as
those shown in the chart for the MurphyMorris Fund.
Example:
The following examples are intended to help you compare the costs of
investing in the MurphyMorris Fund, the PMFM Fund and the combined PMFM Fund.
Since all mutual funds use the same hypothetical conditions, this example should
help you compare the costs of investing in the MurphyMorris Fund and the PMFM
Fund, and the combined PMFM Fund versus other mutual funds. This example assumes
the following conditions:
(1) You invest $10,000 in the specified fund for the periods shown;
(2) You reinvest all dividends and distributions;
(3) You redeem all of your shares at the end of those periods;
(4) You earn a 5% total return; and
(5) The Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the following table
shows you what your costs may be under the conditions listed above.
- ----------------------------------------- ----------------- ----------------- ----------------- -----------
Fund 1 Year 3 Years 5 Years 10 Years
- ----------------------------------------- ----------------- ----------------- ----------------- -----------
MurphyMorris Fund $247 $761 $1301 $2776
- ----------------------------------------- ----------------- ----------------- ----------------- -----------
PMFM Fund* $253 $779 n/a n/a
- ----------------------------------------- ----------------- ----------------- ----------------- -----------
Pro Forma Combined PMFM Fund* $253 $779 n/a n/a
- ----------------------------------------- ----------------- ----------------- ----------------- -----------
* Because the PMFM Fund is a new fund, the expenses are only given for the
one-year and three-year periods in the table above
19
COMPARISON OF PURCHASE, REDEMPTION AND EXCHANGE POLICIES AND PROCEDURES
The following chart highlights the purchase, redemption, and exchange
policies and procedures of the shares of the MurphyMorris Fund and the shares of
the PMFM Fund. As shown in the chart, the purchase and redemption policies for
the MurphyMorris Fund and the PMFM Fund are the same, but the PMFM Fund offers
exchange privileges with other funds in the PMFM Funds family that are not
offered by the MurphyMorris Fund. For a more complete discussion of each share
class' purchase, redemption and exchange policies and procedures, please see the
applicable section(s) of the respective Fund's prospectus.
- --------------------------------------------------- ---------------------------- ---------------------------
Purchase, Redemption, And Exchange Policies And
Procedures MurphyMorris Fund PMFM Fund
- --------------------------------------------------- ---------------------------- ---------------------------
Minimum Initial Purchase The minimum investment The minimum investment
required to open an required to open an
account is $1,000. account is $1,000.
- --------------------------------------------------- ---------------------------- ---------------------------
Additional Investment The minimum additional The minimum additional
investment is $250 ($100 investment is $250 ($100
for those participating in for those participating
an automatic investment in an automatic
plan). investment plan).
- --------------------------------------------------- ---------------------------- ---------------------------
Purchases By check, money order , By check, money order ,
wire transfer, and wire transfer, and
automatic investment plan. automatic investment plan.
Through the Fund's Through the Fund's
distributor or through an distributor or through an
intermediary such as an intermediary such as an
authorized broker-dealer. authorized broker-dealer.
- --------------------------------------------------- ---------------------------- ---------------------------
Redemptions By telephone (unless By telephone (unless
specifically declined), specifically declined),
mail, wire (under certain mail, wire (under certain
limited conditions), and limited conditions), and
systematic withdrawal plan. systematic withdrawal
plan.
- --------------------------------------------------- ---------------------------- ---------------------------
Exchanges N/A Shareholders may exchange
Investor Class shares for
Investor Class shares of
any other series of the
PMFM Trust at the net
asset value.
The PMFM Trust reserves
the right to suspend,
terminate, or amend the
terms of the exchange
privilege upon prior
written notice to the
shareholders.
- --------------------------------------------------- ---------------------------- ---------------------------
20
SHAREHOLDER SERVICES AND DISTRIBUTION PLAN
Each of the MurphyMorris Fund and the PMFM Fund has adopted a Distribution
Plan in accordance with Rule 12b-1 ("Distribution Plan") under the 1940 Act
providing that the Fund will pay the annual rate of up to 0.25% of the average
daily net assets of the Fund for activities primarily intended to result in the
sale of Fund shares. For each Fund, these activities include reimbursement to
entities for providing distribution and shareholder servicing with respect to
the Fund's shares. Because the 12b-1 fees are paid out of a mutual fund's assets
on an on-going basis, these fees, over time, will increase the cost of an
investment in a mutual fund and may cost you more than paying other types of
sales charges.
There are no material differences in the Distribution Plans for the
MurphyMorris Fund and the PMFM Fund with respect to their respective Investor
Class of shares.
COMPARISON OF DISTRIBUTION POLICIES
The MurphyMorris Fund and the PMFM Fund each distribute substantially all
of its investment income, if any, quarterly and substantially all of its capital
gains, if any, annually. Dividends and distributions of each Fund are
automatically reinvested in additional shares of the respective class of that
Fund, unless the shareholder elects to receive distributions in cash.
If the Reorganization Agreement is approved by shareholders of the
MurphyMorris Fund, then prior to the Closing, the MurphyMorris Fund intends on
distributing to its shareholders all undistributed net investment income and
undistributed realized net capital gains.
COMPARISON OF NET ASSET VALUE CALCULATION PROCEDURES
The net asset value per share for both the MurphyMorris Fund and the PMFM
Fund is calculated by dividing the value of the applicable Fund's total assets,
less liabilities (including Fund expenses, which are accrued daily), by the
total number of outstanding shares of that Fund. The net asset value per share
of each Fund is normally determined at the time regular trading closes on the
New York Stock Exchange ("NYSE"), currently 4:00 p.m. Eastern time, Monday
through Friday, except when the NYSE closes earlier. In determining the value of
each Fund's total assets, portfolio securities are generally calculated at
market value by quotations from the primary market in which they are traded.
Instruments with maturities of 60 days or less are valued at amortized cost,
which approximates market value. Securities and assets for which representative
market quotations are not readily available or which cannot be accurately valued
using normal pricing procedures are valued at fair value as determined in good
faith under policies approved by the applicable Fund's Board of Trustees.
There are no material differences in the procedures for calculating NAV for
the MurphyMorris Fund and the PMFM Fund.
PRINCIPAL INVESTMENT RISKS OF THE FUNDS
The following is a summary only of the principal risk factors of the
MurphyMorris Fund and the PMFM Fund. For additional information about the risks
of investing in the MurphyMorris Fund, see its Prospectus and Statement of
21
Additional Information. For additional information about the risks of investing
in the PMFM Fund, see its Prospectus and Statement of Additional Information.
Because the Funds have investment objectives and use investment techniques
that are similar, the risks of investing in the MurphyMorris Fund are
substantially the same as the risks of investing in the PMFM Fund. You may lose
money on your investment in either Fund. There can be no assurance that either
Fund will be successful in meeting its investment objectives. Each Fund is
subject to market risks, management style risks, risks related to its "fund of
funds" structure, sector risks, fixed income risks, foreign securities risks,
tracking risks, risks related to ETF net asset value and market price and
portfolio turnover, and non-diversified fund risks. In addition, the PMFM Fund
is subject to small capitalization companies risks since it may invest a higher
percentage of its assets in small capitalization companies from time to time
than the MurphyMorris Fund does.
A chart showing the principal investment risks of an investment in each
Fund is set forth below, and a description of each risk is set forth below the
chart:
- -------------------------------------- ------------------------------------ --------------------------------
Principal Risk Factor MurphyMorris Fund PMFM Fund
- -------------------------------------- ------------------------------------ --------------------------------
Market Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Management Style Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
"Fund of funds" Structure Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Sector Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Fixed Income Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Foreign Securities Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Tracking Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
ETF NAV Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Portfolio Turnover Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Non-Diversified Fund Risks X X
- -------------------------------------- ------------------------------------ --------------------------------
Small Capitalization Companies Risks X
- -------------------------------------- ------------------------------------ --------------------------------
Market Risks: Each of the Funds is subject to market risks. Market risk refers
to the risk that the value of securities in a Fund's portfolios may decline due
to daily fluctuations in the securities markets generally. Each Fund's
performance per share will change daily based on many factors, including
fluctuation in interest rates, the quality of the instruments in the Fund's
investment portfolio, national and international economic conditions and general
equity market conditions. In a declining stock market, stock prices for all
companies (including those in the Funds' portfolios) may decline, regardless of
their long-term prospects.
Management Style Risks: Each of the Funds is subject to the risks associated
with management style. The share price of each Fund changes daily based on the
performance of the securities in which it invests. The ability of either Fund to
meet its investment objective is directly related to its investment advisor's
allocation of the Fund's assets. The investment advisor's judgments about the
attractiveness, value and potential appreciation of particular investments in
which the applicable Fund invests may prove to be incorrect and there is no
guarantee that the investment advisor's judgment will produce the desired
results. In addition, either Fund may allocate its assets so as to
under-emphasize or over-emphasize investments under the wrong market conditions,
in which case the Fund's value may be adversely affected.
22
"Fund of Funds" Structure: Each of the Funds is subject to the risks associated
with a "fund of funds" structure. The term "fund of funds" is typically used to
describe investment companies, such as the Funds, whose primary investment
strategy involves investing in other investment companies, such as ETFs and
index or sector-basted mutual funds or other investments companies ("Other
Investment Companies"). Under the 1940 Act, neither Fund may acquire shares of
an ETF or other investment company if, immediately after such acquisition, the
Fund and its affiliated persons would hold more than 3% of the ETF's or
investment company's total outstanding stock unless (i) the ETF or the
applicable Fund has received an order for exemptive relief from the 3%
limitation from the SEC that is applicable to the Fund; and (ii) the ETF and the
applicable Fund take appropriate steps to comply with any conditions in such
order. Accordingly, the 3% limitation may prevent a Fund from allocating its
investments in the manner the Fund's investment advisor considers optimal, or
cause the Fund's investment advisor to select Other Investment Companies or
stock baskets (a group of securities related by index or sector that are
pre-selected by, or made available through, certain brokers at a discounted
brokerage rate) as alternatives to the investment the Fund's investment advisor
considers optimal.
Since each Fund is a "fund of funds," your cost of investing in each Fund
will generally be higher than the cost of investing directly in ETFs or other
investment company shares. By investing in either Fund, you indirectly bear fees
and expenses charged by the underlying ETFs and investment companies in which
the Fund invests in addition to the Fund's direct fees and expenses.
Furthermore, the use of a fund of funds structure could affect the timing,
amount and character of distributions to you and therefore may increase the
amount of taxes payable by you. Each Funds is best suited for long-term
investors.
Sector Risks: Each Fund is subject to the risks associated with the focus of its
assets in securities of a particular sector. Sector risk is the possibility that
securities within the same group of industries will decline in price due to
sector-specific market or economic developments. If a Fund invests more heavily
in a particular sector, the value of its shares may be especially sensitive to
factors and economic risks that specifically affect that sector. As a result,
the Fund's share price may fluctuate more widely than the value of shares of a
mutual fund that invests in a broader range of industries. Additionally, some
sectors could be subject to greater government regulation than other sectors.
Therefore, changes in regulatory policies for those sectors may have a material
effect on the value of securities issued by companies in those sectors. The
sectors in which each Fund may invest in more heavily will vary.
Fixed Income Risks: There are risks associated with the potential investment of
each Fund's assets in fixed income investments, which include credit risk,
interest risk, maturity risk and investment-grade securities risk. These risks
could affect the value of a particular investment by each Fund, possibly causing
that Fund's share price and total return to be reduced and fluctuate more than
other types of investments. Additional information about fixed income risks can
be found in each Fund's SAI.
Tracking Risks: Investment in each Fund should be made with the understanding
that the ETFs and Other Investment Companies in which a Fund may invest will not
be able to replicate exactly the performance of the indices they track because
the total return generated by the securities will be reduced by transaction
costs incurred in adjusting the actual balance of the securities. In addition,
the ETFs and Other Investment Companies in which each Fund invests will incur
expenses not incurred by their applicable indices. Certain securities comprising
the indices tracked by the ETFs or other investment companies may, from time to
time, temporarily be unavailable, which may further impede the ETFs' and other
investment companies' ability to track their applicable indices.
23
Risks Related to ETF Net Asset Value and Market Price: Each of the Funds is
subject to the risks associated with investing in ETFs. Both Funds may invest in
ETFs and the market value of the ETF shares may differ from their net asset
value. This difference in price may be due to the fact that the supply and
demand in the market for ETF shares at any point in time is not always identical
to the supply and demand in the market for the underlying basket of securities.
Accordingly, there may be times when an ETF share trades at a premium or
discount to its net asset value.
Foreign Securities Risk: Each of the Funds is subject to the risks associated
with investing in securities issued by companies whose principal business
activities are outside the United States. Investing in securities issued by
companies whose principal business activities are outside the United States may
involve significant risks not present in domestic investments. For example,
there is generally less publicly available information about foreign companies,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of cash or other assets held by a Fund,
political or financial instability, or diplomatic and other developments which
could affect such investments. Further, economies of particular countries or
areas of the world may differ favorably or unfavorably from the economy of the
United States. Foreign securities often trade with less frequency and volume
than domestic securities and therefore may exhibit greater price volatility.
Additional information about foreign securities risk can be found in each Fund's
SAI.
Risks Related to Portfolio Turnover: Each of the Funds is subject to the risks
associated with portfolio turnover, which is a ratio indicating how often the
securities in a mutual fund's portfolio change during a year's time. Higher
numbers indicate a greater number of changes, and lower numbers indicate a
smaller number of changes. Either Fund may sell portfolio securities without
regard to the length of time they have been held in order to take advantage of
new investment opportunities or changing market conditions. Since portfolio
turnover may involve paying brokerage commissions and other transaction costs,
there could be additional expenses for either Fund. High rates of portfolio
turnover could lower performance of a Fund due to increased costs and may also
result in the realization of capital gains. If a Fund realizes capital gains
when it sells its portfolio investments, it must generally distribute those
gains to shareholders, increasing their taxable distributions. Under normal
circumstances, the anticipated portfolio turnover rate for each Fund is expected
to be more than 100%.
Non-diversified Fund Risk: Each of the Funds is subject to the risks related to
non-diversified funds. In general, a non-diversified fund may invest a greater
percentage of its assets in a particular issue and may own fewer securities than
other mutual funds. Accordingly, a non-diversified fund is generally subject to
the risk that a large loss in an individual issue will cause a greater loss for
the fund than it would if the fund were required to hold a larger number of
securities or smaller positions.
Small Capitalization Companies Risk: The PMFM Fund is subject to the risks
associated with investing in small capitalization companies (i.e., companies
with less than $1 billion in capitalization). Investing in the securities of
small capitalization companies generally involves greater risk than investing in
larger, more established companies. The securities of small companies usually
have more limited marketability and therefore may be more volatile and less
liquid than securities of larger, more established companies or the market
24
averages in general. Because small companies normally have fewer shares
outstanding than larger companies, it may be more difficult to buy or sell
significant amounts of such shares without an unfavorable impact on prevailing
prices. Small companies often have limited product lines, markets, or financial
resources and lack management depth, making them more susceptible to market
pressures. Small capitalization companies are typically subject to greater
changes in earnings and business prospects than are larger, more established
companies.
INFORMATION ABOUT THE REORGANIZATION
THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization may be consummated
are set forth in the Reorganization Agreement. Although significant provisions
of the Reorganization Agreement are summarized below, this summary is qualified
in its entirety by reference to the Reorganization Agreement, a copy of which is
attached as Exhibit A.
The Reorganization Agreement provides for: (i) the transfer, as of the
Closing Date, of all of the assets of the MurphyMorris Fund in exchange solely
for shares of beneficial interest of the PMFM Fund and the assumption by the
PMFM Fund of all of the MurphyMorris Fund's liabilities; and (ii) the
distribution of shares of beneficial interest of the PMFM Fund to shareholders
of the MurphyMorris Fund, as provided for in the Reorganization Agreement. The
MurphyMorris Fund will then be liquidated.
After the Reorganization each shareholder of the MurphyMorris Fund will own
shares of the PMFM Fund having an aggregate value equal to the aggregate value
of the shares in the MurphyMorris Fund held by that shareholder as of the
Closing Date. Shares of the PMFM Fund will not be represented by physical
certificates.
Until the Closing Date, shareholders of the MurphyMorris Fund will continue
to be able to redeem their shares. Redemption requests received after the
Closing Date will be treated as requests received by the PMFM Fund for the
redemption of its shares. The obligations of the Funds under the Reorganization
Agreement are subject to various conditions, including approval of the
shareholders of the MurphyMorris Fund. Please refer to Exhibit A to review the
terms and conditions of the Reorganization Agreement.
Related Party Transactions. In connection with the consummation of the
Reorganization, PMFM and MurphyMorris have agreed to a merger pursuant to which
the shareholders of MurphyMorris (Mr. Morris, Mr. Beasley and Mr. Chapman) will
receive shares of PMFM in exchange for their MurphyMorris shares, and
MurphyMorris will be liquidated. MurphyMorris has agreed to pay the expenses
related to the Reorganization.
REASONS FOR THE REORGANIZATION AND BOARD CONSIDERATIONS
The Board, including all of its Independent Trustees, has determined that
the Reorganization is in the best interests of the shareholders of the
MurphyMorris Fund and that the interests of the MurphyMorris Fund's shareholders
will not be diluted as a result of the Reorganization. The Board has unanimously
approved the Reorganization Agreement and has recommended that the shareholders
of the MurphyMorris Fund vote in favor of the Reorganization by approving the
Reorganization Agreement.
25
In approving the Reorganization Agreement and making its recommendation to
shareholders, the Board considered a number of factors, with the assistance of
independent counsel to the Independent Trustees of the Board, including the
following issues related to the Reorganization:
(1) Each MurphyMorris Fund shareholder will receive shares of the PMFM Fund
equal in value to its shares of the MurphyMorris Fund.
(2) The Reorganization allows for the continued management by the
MurphyMorris Fund portfolio management team members (with the support of
additional PMFM portfolio management team members) and the President of the
MurphyMorris Fund in a new fund with the same investment objective and a
strategy with similarities to that of the MurphyMorris Fund. In connection with
the foregoing, the Board also considered the compatibility of and the
differences between the investment strategies, policies and restrictions of the
MurphyMorris Fund and the PMFM Fund.
(3) The affiliated relationship between the PMFM Trust and the MurphyMorris
Investment Trust, and the potential benefits for shareholders of joining a
series of the PMFM Trust. In connection with the foregoing, the Board considered
that: (a) the PMFM Trust is a larger mutual fund family than the MurphyMorris
Trust, with significantly more assets and a greater variety of fund offerings
(four funds versus one); (b) MurphyMorris and PMFM have substantial overlap in
their management, ownership and portfolio management teams; and (c) PMFM Trust,
relative to the MurphyMorris Trust, maintain a significantly more diverse and
extensive distribution network to grow overall assets.
(4) The historical performance and inflows, outflows and asset levels of
the MurphyMorris Fund since its inception, its current prospects for increasing
growth as a stand-alone fund, and the combined pro forma asset levels and future
growth prospects of the PMFM Fund as part of the PMFM Trust (assuming that the
Reorganization occurs).
(5) The expenses of the PMFM Fund are anticipated to be substantially the
same as the expenses of the MurphyMorris Fund.
(6) MurphyMorris has agreed to pay the expenses related to the
Reorganization.
(7) The anticipated tax-free nature of the Reorganization and the effect of
the Reorganization on certain tax losses of the funds (see "Tax Considerations"
below).
(8) The potential benefits to the shareholders of MurphyMorris in
connection with the Reorganization including, without limitation, those
discussed under "Related Party Transactions" above.
After considering the foregoing matters, the Board believes that the
Reorganization is in the best interests of MurphyMorris Fund shareholders and
that the interests of the MurphyMorris Fund shareholders will not be diluted as
a result of the Reorganization. The Board believes that shareholders will
benefit by becoming investors in the PMFM Fund, a new series of shares of the
PMFM Trust since (i) the PMFM Fund is part of a larger mutual fund family (PMFM
Trust and its group of funds) than the MurphyMorris Fund and its Trust, (ii)
that the PMFM Fund is managed by the MurphyMorris Fund portfolio management team
members (with the support of additional PMFM investment team members) and the
President of the MurphyMorris Fund, and (iii) that the PMFM Fund has the same
26
investment objective and a strategy with similarities to that of the
MurphyMorris Fund. The Board also believes that the potential for growing the
assets of the PMFM Fund through the PMFM Trust's distribution network will be
substantially greater than the potential for growing the MurphyMorris Fund as a
stand alone fund. Growing assets offers a number of potential benefits in that
it may permit a fund to negotiate lower commission rates, spread costs over a
larger asset base, and generally benefit from economies of scale that, over
time, generally lower larger funds' overall expense ratios.
In considering the Reorganization, the Board also considered that since the
MurphyMorris Fund had not become economically viable and does not seem likely to
become so in the foreseeable future without continued substantial expense
subsidies, the Reorganization presented the MurphyMorris Fund with an
alternative to liquidation by allowing the MurphyMorris Fund to become part of
the PMFM Trust. The Board also considered that liquidation would deprive
shareholders of the advisory services of MurphyMorris's management team members
and the fact that the MurphyMorris Fund's portfolio had unrealized capital gains
and loss carry forwards from prior years and that if the MurphyMorris Fund were
to liquidate, it would realize those capital gains which could result in tax
liability to shareholders and lose the ability to apply the loss carry forwards
to offset future gains.
BASED ON THE ABOVE ANALYSIS, THE BOARD, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMENDS THAT THE MURPHYMORRIS FUND'S SHAREHOLDERS APPROVE THE
REORGANIZATION OF THEIR FUND INTO THE PMFM FUND.
TAX CONSIDERATIONS
The Reorganization is intended to qualify for federal income tax purposes
as a tax-free reorganization under Section 368 of the Internal Revenue Code of
1986, as amended. Pursuant to this treatment, neither the MurphyMorris Fund nor
its shareholders, nor the PMFM Fund nor its shareholders, are expected to
recognize any gain or loss for federal income tax purposes from the transactions
contemplated by the Reorganization Agreement. As a condition to the Closing of
the Reorganization, the Funds will receive an opinion from the law firm of
Kilpatrick Stockton, L.L.P, counsel to the PMFM Trust, to the effect that the
Reorganization will qualify as a tax-free reorganization for federal income tax
purposes. That opinion will be based in part upon certain facts, assumptions and
representations made by the Funds.
On or as soon as practicable prior to the Closing Date of the
Reorganization, the MurphyMorris Fund will declare and pay a dividend or
dividends and/or other distributions which, together with all previous dividends
and distributions, will have the effect of distributing to its shareholders
substantially all of the Fund's investment company taxable income for taxable
years ending on or prior to the Reorganization (computed without regard to any
deduction for dividends paid) and all of its net capital gain, if any, realized
in taxable years ending on or prior to the Reorganization (after reduction for
any available capital loss carry forward). Such dividends will be included in
the taxable income of each of the MurphyMorris Fund shareholders.
Shareholders of the MurphyMorris Fund should consult their tax advisers
regarding the effect on them, if any, of the Reorganization in light of their
individual circumstances. Because the foregoing discussion only relates to the
federal income tax consequences of the Reorganization, shareholders also should
consult their tax advisers about state and local tax consequences, if any, of
the Reorganization.
27
EXPENSES OF THE REORGANIZATION
MurphyMorris, the MurphyMorris Fund's investment adviser, will bear all of
the costs of the Reorganization. No such costs or expenses shall be borne by
PMFM or either Fund.
ADDITIONAL INFORMATION ABOUT PMFM
PMFM is an SEC registered investment advisor founded in 1991. PMFM,
organized as a Georgia corporation, is controlled by Mr. Beasley and Mr.
Chapman. The executives and members of the advisory staff of PMFM have extensive
experience in managing investments for clients including individuals,
corporations, non-taxable entities, and other business and private accounts. As
of December 31, 2004, PMFM had approximately $760 million in assets under
management. As full compensation for the investment advisory services provided
to the PMFM Fund, PMFM receives monthly compensation based on each Fund's
average daily net assets at the annual rate of 1.25%.
PMFM's Portfolio Management Team. As noted above under "COMPARISON OF
INVESTMENT ADVISORY SERVICES AND FEES - PMFM and the PMFM Fund," PMFM's
portfolio management team for the PMFM Fund includes Mr. Beasley, Mr. Chapman,
Mr. Doherty, Mr. Ezernack and Mr. Morris. Biographical information for each team
member is described below.
Donald L. Beasley, President
Mr. Beasley is a co-founder of PMFM and has served as its President since
1993. Mr. Beasley also serves as a member of the Board of Trustees of the PMFM
Trust that oversees the management and administration of the PMFM Trust and as a
principal portfolio manager for the PMFM Trust's funds. Mr. Beasley is also a
co-founder and the Secretary of MurphyMorris. Mr. Beasley received his Bachelor
of Science degrees in Math and Physical Education from Northwestern State
University in 1965 and his Masters in Administration from Northwestern State
University in 1966. He has been in the money management business since 1988.
Timothy L. Chapman, Secretary and Treasurer
Mr. Chapman is a co-founder of PMFM and has served as its Secretary and
Treasurer since 1993. Mr. Chapman is also a co-founder of MurphyMorris and has
served as its Vice President since 1996. Mr. Chapman studied Economics at the
University of Georgia and has received the Series 6, the Series 7 and the Series
8 licenses from the National Association of Securities Dealers. Mr. Chapman has
been in the investment business since 1981.
Judson P. Doherty, Executive Vice President
Mr. Doherty is an Executive Vice President of PMFM and has served in that
capacity since joining PMFM in 2001. Prior to joining PMFM, Mr. Doherty was an
institutional investment consultant with Aon Consulting. Mr. Doherty received
his Bachelor of Arts degree in Economics from Vanderbilt University in 1991. He
has over 10 years experience in the investment consulting business, with an
emphasis on mutual fund evaluation.
28
Joseph G. Ezernack, Portfolio Manager and Director of Operations
Mr. Ezernack is a portfolio manager and Director of Operations for PMFM and
has served in that capacity since 1997. Mr. Ezernack received his Bachelor of
Science degree from Northwestern State University in 1994. He has over 7 years
experience in the money management business.
Gregory L. Morris, Portfolio Manager
Mr. Morris is a portfolio manager for the PMFM and has served in that
capacity since joining the Advisor in November 2004. Mr. Morris is also a
principal of MurphyMorris and has served as its Treasurer since 2002. Also, Mr.
Morris serves as a Trustee and President and Treasurer of MurpyMorris Trust. In
addition, Mr. Morris has served as a consultant to StockCharts.com, a web-based
market charting service, since 2002. Mr. Morris was a Captain with Delta Air
Lines from 1978 until May 2004. Mr. Morris was the CEO of MurphyMorris, Inc., a
provider of web-based market analysis tools and commentary from 1996 to 2002.
Mr. Morris received his Bachelor of Science degree in Aerospace Engineering from
the University of Texas in 1971. Mr. Morris also graduated from the U.S. Navy
Fighter Weapons School known as Top Gun. He has over 20 years experience in the
investment consulting business.
ADDITIONAL INFORMATION ABOUT THE MURPHYMORRIS FUND'S AND PMFM FUND'S
DISTRIBUTOR, ADMINISTRATOR, TRANSFER AND AGENT
As described in more detail below, the MurphyMorris Fund and the PMFM Fund
use the same principal underwriter, fund administrator and transfer agent.
Distributor. Capital Investment Group, Inc., Post Office Box 32249,
Raleigh, North Carolina 27622, serves as the principal underwriter and
distributor for the continuous offering of the shares and the facilitation of
registration of shares under state securities laws of both the PMFM Fund and the
MurphyMorris Fund. The distributor also assists in sales of each Fund's shares
pursuant to pursuant to a distribution agreement.
Administrator. The Nottingham Company, 116 South Franklin Street, Post
Office Box 69, Rocky Mount, North Carolina 27802-0069, serves as administrator
for both the PMFM Fund and the MurphyMorris Fund.
Transfer Agent. NC Shareholder Services, LLC d/b/a NC Shareholder Services,
LLC, 116 South Franklin Street, Post Office Box 4365, Rocky Mount, North
Carolina 27803-0365, serves as the transfer agent and dividend-disbursing agent
for both the PMFM Fund and the MurphyMorris Fund.
CAPITALIZATION
The following table shows the capitalization of the MurphyMorris Fund and the
PMFM Fund as of April 1, 2005 and on a pro forma basis as of that date, giving
effect to the proposed acquisition of assets at net asset value. No historical
capitalization information is provided for the PMFM Fund because it has not
commenced operations.
29
MurphyMorris Fund - PMFM Fund- Pro Forma Combined PMFM Fund
- -------------------------------- ---------------------------- ------------------- ---------------------------
MurphyMorris Fund Pro Forma
PMFM Fund Combined
PMFM Fund
- -------------------------------- ---------------------------- ------------------- ---------------------------
Net Assets $14,619,898.64 N/A N/A
- -------------------------------- ---------------------------- ------------------- ---------------------------
Net Asset Value Per Share $9.49 N/A N/A
- -------------------------------- ---------------------------- ------------------- ---------------------------
Shares Outstanding 1,540,558.339 N/A N/A
- -------------------------------- ---------------------------- ------------------- ---------------------------
OTHER BUSINESS
The Board does not intend to present any other business at the Special
Meeting. If, however, any other matters are properly brought before the Special
Meeting, the persons named in the accompanying form of proxy will vote thereon
in accordance with their judgment.
GENERAL INFORMATION
This Proxy Statement/Prospectus is furnished in connection with a
solicitation of proxies by the Board to be used at the Special Meeting. This
Proxy Statement/Prospectus, along with a Notice of the Special Meeting and a
proxy card, is first being mailed to shareholders of the MurphyMorris Fund on or
about April 13, 2005. Only shareholders of record as of the close of business on
April 1, 2005 ("Record Date"), will be entitled to notice of, and to vote at,
the Special Meeting. If the enclosed form of proxy card is properly executed and
returned in time to be voted at the Special Meeting, the proxies named therein
will vote the shares represented by the proxy in accordance with the
instructions marked thereon. Unmarked but properly executed proxy cards will be
voted FOR then proposed Reorganization and FOR any other matters deemed
appropriate.
A proxy may be revoked at any time on or before the Special Meeting by
written notice to the Secretary of the Trust at the address on the cover of this
Proxy Statement/Prospectus or by attending and voting at the Special Meeting.
Unless revoked, all valid and executed proxies will be voted in accordance with
the specifications thereon or, in the absence of such specifications, for
approval of the Reorganization Agreement and the Reorganization contemplated
thereby.
SOLICITATION OF VOTES
Proxies are solicited by mail. Additional solicitations may be made by
telephone, email or other personal contact by personnel of the Trust and/or its
affiliates.
QUORUM
The holders of more than 50% of the total combined net asset value of all
the shares of the MurphyMorris Fund that are outstanding and entitled to vote at
the close of business on the Record Date and are present in person or
represented by proxy will constitute a quorum for the Special Meeting.
30
VOTE REQUIRED
Approval of the Reorganization will require the affirmative vote of (i) 67
percent or more of the shares of the MurphyMorris Fund present in person or by
proxy at the Special Meeting if the holders of more than 50% of the outstanding
shares of the MurphyMorris Fund are present or represented by proxy or (ii) more
than 50% of the outstanding shares of the MurphyMorris Fund, whichever is less.
Shareholders of the MurphyMorris Fund are entitled to one vote for per each
dollar (and fractional vote for each fractional dollar) of the net asset value
of each share (including fractional shares). Fractional shares are entitled to
proportional voting rights. Abstentions or broker non-votes (if any) will be
counted as votes present for purposes of determining whether a quorum is
present. Abstentions and broker non-votes have the same effect as a vote against
the proposal.
ADJOURNMENTS
In the event that sufficient votes to approve a proposal are not received,
the persons named as proxies may propose one or more adjournments of the Special
Meeting to permit further solicitation of proxies. In determining whether to
adjourn the Special Meeting with respect to a proposal, the following factors
may be considered: the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Generally, votes cast in favor of a proposal will be voted in
favor of adjournment while votes cast against a proposal will be voted against
adjournment. The persons named as proxies will vote upon such adjournment after
consideration of the best interests of all shareholders.
RECEIPT OF SHAREHOLDER PROPOSALS
Under the proxy rules of the SEC, shareholder proposals that satisfy tests
contained in those rules may, under certain conditions, be included in proxy
materials of the Trust for a particular meeting of shareholders. One of these
conditions relates to the timely receipt by the Trust of any such proposal.
Since the Trust does not have regular annual meetings of shareholders, under
these rules, proposals submitted for inclusion in the proxy materials for a
particular meeting must be received by the Trust a reasonable time before the
solicitation of proxies for the meeting is made. The fact that receipt of a
shareholder proposal in a timely manner occurs does not ensure its inclusion in
proxy materials since there are other requirements in the proxy rules relating
to such inclusion.
RECORD DATE AND OUTSTANDING SHARES
Only shareholders of record of the MurphyMorris Fund at the close of
business on the Record Date are entitled to notice of and to vote at the Special
Meeting and at any postponement or adjournment thereof. At the close of business
on the Record Date, there were 1,540,558.339 shares of the MurphyMorris Fund
outstanding and entitled to vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Unless otherwise noted below, as of the Record Date, the current officers and
trustees of the Funds in the aggregate beneficially owned 2.21% of the shares of
the MurphyMorris Fund and less than 1% of the shares of the PMFM Fund.
31
As of the Record Date, the following persons owned of record or beneficially 5%
or more of the outstanding shares of the class identified of the MurphyMorris
Fund and the PMFM Fund, as the case may be:
PERCENTAGE
FUND/CLASS NAME AND ADDRESS OF OWNER OF OWNERSHIP
MurphyMorris ETF Fund National Financial Services LLC* 94.09%*
For The Exclusive Benefit Of Our Customers
Attn: Mutual Fund Department, 5th Floor
200 Liberty Str One World Financial Center
New York, New York 10281
PMFM Core Advantage
Portfolio Trust
NA N/A
* Persons or entities owning 25% or more of the outstanding shares of a fund may
be presumed to "control" (as such term is defined in the 1940 Act) the fund.
FINANCIAL STATEMENTS AND EXPERTS
The financial statements of the MurphyMorris Fund contained in the
MurphyMorris Fund's annual report to shareholders for the fiscal year ended May
31, 2004, which is included in the MurphyMorris Fund's Statement of Addition of
Information and incorporated by reference herein, have been included and
incorporated herein in reliance on the report of Deloitte & Touche, independent
registered public accounting firm for the MurphyMorris Fund.
No financial information of the PMFM Fund is included or incorporated by
reference herein as it has not yet begun operations. The PMFM Fund will begin
operations on the Closing Date and its future financial statements are expected
to be audited and reported on by Deloitte & Touche LLP, which is the independent
registered public accounting firm for each of the other PMFM mutual funds.
LEGAL MATTERS
Certain legal matters for the MurphyMorris Fund and the PMFM Fund will be passed
upon by Kilpatrick Stockton LLP, which firm will also render an opinion as to
certain Federal income tax consequences of the Reorganization.
INFORMATION ABOUT THE FUNDS
Each Fund is subject to the informational requirements of the Securities
Exchange Act of 1934 and certain other federal securities statutes, and files
reports and other information with the SEC. Proxy materials, reports and other
information filed by the Funds can be inspected and copied at the Public
Reference Facilities maintained by the SEC at 450 Fifth Street, NW, Washington,
DC 20549. The SEC maintains an Internet World Wide Web site (at
http://www.sec.gov) that contains other information about the Funds.
32
EXHIBIT A
THE PMFM FUND
AND
THE MURPHYMORRIS FUND
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Plan") is made as of this
11th day of April 2005, by and between MurphyMorris Investment Trust (the
"Trust"), a Delaware business trust, for itself and on behalf of its series
listed in the Target Fund column below ("Target Fund"), and PMFM Investment
Trust, a Delaware business trust ("PMFM Investment Trust"), for itself and on
behalf of its series listed in the Acquiring Fund column below ("Acquiring
Fund").
- ------------------------------------------- -----------------------------------
Acquiring Fund Target Fund
- ------------------------------------------- -----------------------------------
PMFM Core Advantage Portfolio Trust MurphyMorris ETF Fund
- ------------------------------------------- -----------------------------------
WHEREAS, the Trust and PMFM Investment Trust are open-end management
investment companies registered with the Securities and Exchange Commission (the
"SEC") under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the Acquiring Fund acquire all of the
assets and assume all of the liabilities of the Target Fund in exchange for
shares of equal value of the Acquiring Fund and the distribution of the shares
of the Acquiring Fund to the shareholders of the Target Fund in connection with
the dissolution and liquidation of the Target Fund (the "Reorganization" );
WHEREAS, the parties intend that all agreements, representations, actions
and obligations described herein made or undertaken by the Acquiring Fund or the
Target Fund are made and shall be taken or undertaken by the Trust on behalf of
the Target Fund or by PMFM Investment Trust on behalf of the Acquiring Fund, as
appropriate. Similarly, the parties intend, if context requires, that all
agreements, representations, actions and obligations described herein made or
undertaken by the Trust or PMFM Investment Trust are made and shall be taken by
the Trust on behalf of the Target Fund or PMFM Investment Trust on behalf of the
Acquiring Fund, as appropriate; and
WHEREAS, the parties intend that the Reorganization qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the Acquiring Fund and the
Target Fund each be a "party to a reorganization," within the meaning of Section
368(b) of the Code, with respect to the Reorganization.
NOW, THEREFORE, in accordance with the mutual promises and in consideration
of the covenants and agreements described herein, the parties agree as follows:
1. Definitions. The following terms shall have the following meanings:
A-1
1. 1933 Act The Securities Act of 1933, as amended.
--------
1934 Act The Securities Exchange Act of 1934, as amended.
--------
Assets All property and assets of any kind and all interests,
------ rights, privileges and powers of or attributable to the
Target Fund whether or not determinable at the Effective
Time (as defined below) and wherever located. Assets include
all cash, cash equivalents, securities, claims (whether
absolute or contingent, Known (as defined below) or unknown,
accrued or unaccrued or conditional or unmatured), contract
rights and receivables (including dividend and interest
receivables) owned by or attributed to the Target Fund and
any deferred or prepaid expense shown as an asset on the
Target Fund's books.
Business Day Each weekday that the New York Stock Exchange is open or,
------------ under unusual circumstances, as deemed by the Trust's
officers.
Assets List A list of securities and other Assets and Known Liabilities
----------- (as defined below) of or attributable to the Target Fund as
of the date provided to the Trust.
Closing Date [t/b/d], or such other date as the parties may agree to in
------------- writing.
Effective Time 9:00 a.m. Eastern time on the Closing Date, or such other
-------------- time as the parties may agree to in writing.
Fund The Acquiring Fund or the Target Fund as the context may
---- require.
Know, Known
or Knowledge Known after reasonable inquiry.
------------
Liabilities All liabilities of, allocated or attributable to the Target
----------- Fund, whether Known or unknown, accrued or unaccrued,
absolute or contingent or conditional or unmatured.
N-14 Registration
Statement PMFM Investment Trust's Registration Statement on Form N-14
--------- under the 1940 Act that will register the shares of the
Acquiring Fund to be issued in the Reorganization and will
include the proxy materials necessary for shareholders of
the Target Fund to approve the Reorganization.
A-2
Material
Agreements The agreements set forth in Schedule A.
----------
Net Value
of Assets Value of Assets, determined in accordance with Section
--------- 3(d), net of Liabilities.
Reorganization
Documents Such bills of sale, assignments, assumptions, and other
--------- instruments as desirable for the Target Fund to transfer to
the Acquiring Fund all right and title to and interest in
the Assets and for the Acquiring Fund to assume the
Liabilities.
Schedule A Schedule A to this Plan.
----------
Schedule B Schedule B to this Plan.
----------
Target
Financial
Statements The audited financial statements of the Target Fund for its
---------- most recently completed fiscal period and, if applicable,
the unaudited financial statements of the Target Fund for
its most recently completed semi-annual period.
Valuation
Time The time on the Closing Date, the Business Day immediately
---- preceding the Closing Date if the Closing Date is not a
Business Day, or such other date as the parties may agree to
in writing, that PMFM Investment Trust determines the Net
Value of Assets of the Acquiring Fund and the Trust
determines the Net Value of Assets of or attributable to the
Target Fund. Unless otherwise agreed to in writing, the
Valuation Time shall be at the time of day then set forth in
the Acquiring Fund's and Target Fund's Registration
Statement on Form N-1A as the time of day at which net asset
value is calculated.
2. Regulatory Filings and Shareholder Action.
A-3
(a) PMFM Investment Trust shall promptly file the N-14 Registration
Statement with the SEC. The Trust and the Target Fund shall promptly
prepare and file any other appropriate regulatory filings, including,
without limitation, filings with federal, state or foreign securities
regulatory authorities.
(b) As soon as practicable after the effective date of the N-14
Registration Statement, the Trust shall hold a meeting of the Target
Fund's shareholders to consider and approve this Plan and such other
matters as the Trust's Board of Trustees may determine.
3. Transfer of Assets and Related Transactions. The Trust and PMFM
Investment Trust shall take the following steps with respect to the
Reorganization:
(a) At the Effective Time, the Trust shall sell, assign, transfer, deliver
and convey all of the Assets to the Acquiring Fund, subject to all of
the Liabilities. PMFM Investment Trust shall then accept the Assets
and assume the Liabilities such that at and after the Effective Time
(i) all of the Assets shall become and be the assets of the Acquiring
Fund and (ii) all of the Liabilities shall attach to the Acquiring
Fund, enforceable against the Acquiring Fund to the same extent as if
initially incurred by the Acquiring Fund.
(b) The Target Fund shall sell, assign, transfer, deliver and convey the
Assets to the Acquiring Fund at the Effective Time on the following
bases:
(1) In exchange for the transfer of the Assets, PMFM Investment Trust
shall simultaneously issue and deliver to the Target Fund full
and fractional shares of beneficial interest of the Acquiring
Fund. PMFM Investment Trust shall determine the number of shares
of the Acquiring Fund to be issued by dividing the Net Value of
Assets of the Target Fund by the net asset value of one Acquiring
Fund share, which shall be the net asset value per share of one
share of the Target Fund at the end of business on the Closing
Date, as selected by PMFM Investment Trust in its sole
discretion.
(2) Based on the calculation of the number of shares of the Acquiring
Fund to issue under Paragraph (b)(1) above, PMFM Investment Trust
shall issue to the Target Fund shares of beneficial interest of
the Acquiring Fund with an aggregate net asset value equal to the
Net Value of Assets of the Target Fund.
(3) The parties shall determine, as of the Valuation Time, the Net
Asset Value of the Acquiring Fund shares to be delivered and the
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Net Asset Value of the Assets to be conveyed, substantially in
accordance with the Trust's current valuation procedures.
(4) The Trust shall transfer the Assets with good and marketable
title to PMFM Investment Trust's custodian for the account of the
Acquiring Fund. The Trust shall transfer all of the Target Fund's
cash in the form of immediately available funds payable to the
order of PMFM Investment Trust's custodian for the account of the
Acquiring Fund. The Trust shall transfer any of the Assets that
were not transferred to PMFM Investment Trust's custodian at the
Effective Time to PMFM Investment Trust's custodian at the
earliest practicable date thereafter.
(c) The steps set forth in Section 3(b), together with all other related
acts necessary to consummate the Reorganization, shall occur at the
Trust's principal office on the Closing Date, or at such other place
as the parties may agree on. All steps and acts shall be deemed to
take place simultaneously at the Effective Time.
(d) Promptly after the Closing Date (and in any event within 10 days), the
Trust will deliver to PMFM Investment Trust the Statement of Assets
and Liabilities of the Target Fund as of the Closing.
4. Dissolution and Liquidation of the Target Fund, Registration of Shares
and Access to Records. The Trust and PMFM Investment Trust also shall
take the following steps in connection with the Reorganization:
(a) At or as soon as reasonably practical after the Effective Time, the
Target Fund shall dissolve and liquidate by transferring to
shareholders of record full and fractional shares of beneficial
interest of the Acquiring Fund equal in value to the shares of the
Target Fund held by the shareholder. Each Target Fund shareholder also
shall have the right to receive any unpaid dividends or other
distributions that the Target Fund declared with respect to the
shareholder's Target Fund shares at or before the Effective Time. The
Target Fund shall declare dividends and make any applicable
distributions prior to the Closing Date. PMFM Investment Trust shall
record on its books the ownership by the shareholders of the Acquiring
Fund shares; the Target Fund shall simultaneously redeem and cancel on
its books all of its issued and outstanding shares. The Trust shall
then wind up the affairs of the Target Fund and take all steps as are
necessary and proper to terminate the Target Fund as soon as is
reasonably possible (but in no event more than six months) after the
Effective Time and in accordance with all applicable laws and
regulations.
(b) If a Target Fund shareholder requests a change in the registration of
the shareholder's Acquiring Fund shares to a person other than the
shareholder, the Acquiring Fund shall require the shareholder to (i)
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furnish the Acquiring Fund with an instrument of transfer properly
endorsed, accompanied by any required signature guarantees and
otherwise in proper form for transfer and such other information as
the Acquiring Fund may need to comply with applicable laws and
regulations, including without limitation anti-money laundering laws;
(ii) if any of the shares is outstanding in certificate form, deliver
to the Acquiring Fund the certificate representing such shares; and
(iii) pay to the Acquiring Fund any transfer or other taxes required
by reason of such registration or establish to the reasonable
satisfaction of the Acquiring Fund that such tax has been paid or does
not apply.
(c) At and after the Closing Date, the Trust shall provide PMFM Investment
Trust and its transfer agent with immediate access to: (i) all records
containing the names, addresses and taxpayer identification numbers of
all of the Target Fund shareholders and the number and percentage
ownership of the outstanding shares of the Target Fund owned by each
shareholder as of the Effective Time and (ii) all original
documentation (including all applicable Internal Revenue Service
forms, certificates, certifications and correspondence) relating to
the Target Fund shareholders' taxpayer identification numbers and
their liability for or exemption from back-up withholding. The Trust
shall preserve and maintain, or shall direct its service providers to
preserve and maintain, its records as required by Section 31 of and
Rules 31a-1 and 31a-2 under the 1940 Act.
5. Certain Representations, Warranties and Agreements of the Trust. The
Trust, on behalf of itself and, as appropriate, the Target Fund,
represents and warrants to, and agrees with, PMFM Investment Trust as
follows:
(a) The Trust is a statutory trust, validly existing and in good standing
under the laws of the State of Delaware. The Board of Trustees of the
Trust has duly established and designated the Target Fund as a series
of the Trust. The Trust is registered with the SEC as an open-end
management investment company under the 1940 Act, and such
registration is in full force and effect.
(b) The Trust has the power and all necessary federal, state and local
qualifications and authorizations to own all of its properties and
Assets, to carry on its business as now being conducted and described
in its currently effective Registration Statement on Form N-1A, to
enter into this Plan and to consummate the transactions contemplated
herein.
(c) The Board of Trustees of the Trust has duly authorized the execution
and delivery of this Plan and the transactions contemplated herein.
Duly authorized officers of the Trust have executed and delivered this
Plan. Assuming due execution and delivery of this Plan by PMFM
Investment Trust, this Plan represents a valid and binding contract,
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enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, arrangement, moratorium, and
other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The execution and
delivery of this Plan does not, and, subject to the approval of
shareholders referenced in Section 2(c), the consummation of the
transactions contemplated by this Plan will not, violate the Trust's
Trust Instrument, By-Laws or any Material Agreement. Except for the
approval of Target Fund shareholders, the Trust does not need to take
any other action to authorize its officers to effectuate this Plan and
the transactions contemplated herein.
(d) To the best of its knowledge and belief, the Target Fund is a "fund"
(as defined in Section 851(g)(2) of the Code); it has qualified for
treatment as a regulated investment company ("RIC") under Part I of
Subchapter M of Subtitle A, Chapter 1, of the Code, for each taxable
year since the commencement of its operations and qualifies and shall
continue to qualify for treatment as a RIC during its current taxable
year, which includes the Effective Time; it will invest its assets at
all times and through the Effective Time in a manner that ensures
compliance with the foregoing; and it has no earnings and profits
accumulated in any taxable year in which the provisions of such
Subchapter M did not apply to it.
(e) The materials included within the N-14 Registration Statement when
filed with the SEC, when Part A of the N-14 Registration Statement is
distributed to shareholders, at the time of the Target Fund
shareholder meeting and at the Effective Time, insofar as they relate
to the Trust and the Target Fund (i) shall, to the best of its
knowledge and belief, comply in all material respects with the
applicable provisions of the 1933 Act and the 1940 Act, the rules and
regulations thereunder and state securities laws, and (ii) shall not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein not misleading.
(f) The Trust has duly authorized and validly issued all of its issued and
outstanding shares of the Target Fund and all of the shares are
validly outstanding, fully paid and non-assessable, and are offered
for sale and sold in conformity with the registration requirements of
all applicable federal and state securities laws. There are no
outstanding options, warrants or other rights to subscribe for or
purchase Target Fund shares, nor are there any securities convertible
into Target Fund shares.
(g) The Trust shall operate the business of the Target Fund in the
ordinary course between the date hereof and the Effective Time, it
being agreed that such ordinary course of business will include the
declaration and payment of customary dividends and other distributions
and any other distributions deemed advisable in anticipation of the
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Reorganization (including distributions pursuant to Section 3(a)(2)
hereof). From the date it commenced operations through the Effective
Time, the Target Fund shall conduct its "historic business" (within
the meaning of Section 1.368-1(d)(2) of the Regulations).
(h) At the Effective Time, the Target Fund will have good and marketable
title to the Assets and full right, power and authority to sell,
assign, transfer, deliver and convey the Assets.
(i) To the best of its knowledge and belief, the Target Financial
Statements, copies of which have been previously delivered to the
Trust, fairly present the financial position of the Target Fund as of
its most recent fiscal year-end and the results of its operations and
changes in its net assets for the periods indicated. The Target
Financial Statements are in accordance with generally accepted
accounting principles consistently applied.
(j) To the Knowledge of the Trust, the Target Fund has no liabilities,
whether or not determined or determinable, other than the Liabilities
disclosed or provided for in the Target Financial Statements or
Liabilities incurred in the ordinary course of business subsequent to
the date of the Target Financial Statements, and Liabilities set forth
in the Assets List.
(k) Other than the claims, actions, suits, investigations or proceedings
set forth on Schedule B, the Trust does not Know of any claims,
actions, suits, investigations or proceedings of any type pending or
threatened against it or the Assets or its businesses. The Trust does
not Know of any facts that it currently has reason to believe are
likely to form the basis for the institution of any such claim,
action, suit, investigation or proceeding against the Target Fund,
except as disclosed on Schedule B. For purposes of this provision,
investment underperformance or negative investment performance shall
not be deemed to constitute such facts, provided all required
performance disclosures have been made. Other than the orders, decrees
or judgments set forth on Schedule B, the Target Fund is not a party
to or subject to the provisions of any order, decree or judgment of
any court or governmental body that adversely affects, or is
reasonably likely to adversely affect, its financial condition,
results of operations, business, properties or the Assets or its
ability to consummate the transactions contemplated by the Plan.
(l) Except for contracts, agreements, franchises, licenses or permits
entered into or granted in the ordinary course of its business or
listed in Schedule A, in each case under which no known material
default exists, the Trust is not a party to or subject to any material
contract, debt instrument, employee benefit plan, lease, franchise,
license or permit of any kind or nature whatsoever on behalf of the
Target Fund.
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(m) The Trust has filed the federal income tax returns of the Target Fund,
copies of which have been previously delivered to PMFM Investment
Trust, for all taxable years to and including the Target Fund's most
recently completed taxable year, and has paid all taxes payable
pursuant to such returns. No such return is currently under audit and
no assessment has been asserted with respect to such returns.
(n) Since the date of the Target Financial Statements, there has been no
material adverse change in the financial condition, results of
operations, business, properties or assets of the Target Fund. For all
purposes under this Plan, investment underperformance, negative
investment performance and/or investor redemptions shall not be
considered material adverse changes, provided all required performance
disclosures have been made. The Target Fund incurred the Liabilities
in the ordinary course of its business.
(o) Between the date of inception of the Target Fund and the Effective
Time, (a) neither the Target Fund nor any person "related" (within the
meaning of section 1.368-1(e)(3) of the Regulations) to it will have
acquired Target Fund shares, either directly or through any
transaction, agreement, or arrangement with any other person, with
consideration other than Acquiring Fund shares or Target Fund shares,
except for shares redeemed in the ordinary course of the Target Fund's
business as a series of an open-end investment company as required by
section 22(e) of the 1940 Act, and (b) no distributions will have been
made with respect to Target Fund shares, other than normal, regular
dividend distributions made pursuant to the Target Fund's historic
dividend-paying practice and other distributions that qualify for the
deduction for dividends paid (within the meaning of section 561 of the
Code) referred to in sections 852(a)(1) and 4982(c)(1)(A) of the Code.
(p) Not more than 25% of the value of the Target Fund's total assets
(excluding cash, cash items, U.S. government securities, and
securities of other regulated investment companies) is invested in the
stock and securities of any one issuer, and not more than 50% of the
value of such assets is invested in the stock and securities of five
or fewer issuers.
6. Certain Representations, Warranties and Agreements of PMFM Investment
Trust. PMFM Investment Trust, on behalf of itself and, as appropriate,
the Acquiring Fund, represents and warrants to, and agrees with the
Trust as follows:
(a) PMFM Investment Trust is organized as a business trust duly created,
validly existing and in good standing under the laws of the state of
Delaware. The Board of Trustees of PMFM Investment Trust has duly
established and designated the Acquiring Fund as a series of PMFM
Investment Trust. PMFM Investment Trust is registered with the SEC as
an open-end management investment company under the 1940 Act, and such
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registration is in full force and effect. PMFM Investment Trust's
Registration Statement relating to the Acquiring Fund will be
effective with the SEC prior to the effectiveness of the N-14
Registration Statement.
(b) PMFM Investment Trust has the power and all necessary federal, state
and local qualifications and authorizations to own all of its
properties and assets, to carry on its business as now being conducted
and described in its currently effective Registration Statement on
Form N-1A, to enter into this Plan and to consummate the transactions
contemplated herein.
(c) The Board of Trustees of PMFM Investment Trust has duly authorized the
execution and delivery of this Plan and the transactions contemplated
herein. Duly authorized officers of PMFM Investment Trust have
executed and delivered this Plan. Assuming due execution and delivery
of this Plan by the Trust, this Plan represents a valid and binding
contract, enforceable in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles. The
execution and delivery of this Plan does not, and the consummation of
the transactions contemplated by this Plan will not, violate PMFM
Investment Trust's Agreement and Declaration of Trust, By-Laws or any
Material Agreement. PMFM Investment Trust does not need to take any
other action to authorize its officers to effectuate the Plan and the
transactions contemplated herein.
(d) The Acquiring Fund is a "fund" (as defined in Section 851(g)(2) of the
Code); it shall qualify for treatment as a RIC under Part I of
Subchapter M of Subtitle A, Chapter 1, of the Code, for its current
taxable year, which includes the Effective Time; it will invest its
assets at all times and through the Effective Time in a manner that
ensures compliance with the foregoing; and it has no earnings and
profits accumulated in any taxable year in which the provisions of
such Subchapter M did not apply to it.
(e) The materials included within the N-14 Registration Statement when
filed with the SEC, when Part A of the N-14 Registration Statement is
distributed to shareholders, at the time of the Target Fund
shareholder meeting and at the Effective Time of the Reorganization,
insofar as they relate to PMFM Investment Trust and the Acquiring Fund
(i) shall comply in all material respects with the applicable
provisions of the 1933 Act and the 1940 Act, the rules and regulations
thereunder and state securities laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein not misleading.
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(f) There shall be no issued and outstanding shares of the Acquiring Fund
prior to the Closing Date other than shares issued to PMFM Investment
Trust, PMFM Inc., or its affiliates in order to approve certain
Acquiring Fund start-up matters. When issued and delivered, the
Acquiring Fund shares shall be duly and validly issued, fully paid and
non-assessable, and no shareholder of the Acquiring Fund shall have
any preemptive right of subscription or purchase in respect of them.
There are no outstanding options, warrants or other rights to
subscribe for or purchase Acquiring Fund shares, nor are there any
securities convertible into Acquiring Fund shares.
(g) PMFM Investment Trust will not commence the operations of the
Acquiring Fund (other than the issuance of initial shares and the
approval of certain start-up matters) prior to the Effective Time.
(h) PMFM Investment Trust does not Know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened
against the Acquiring Fund or its assets or businesses. There are no
facts that PMFM Investment Trust currently has reason to believe are
likely to form the basis for the institution of any such claim,
action, suit, investigation or proceeding against the Acquiring Fund.
The Acquiring Fund is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body that
adversely affects, or is reasonably likely to adversely affect, its
financial condition, results of operations, business, properties or
assets or its ability to consummate the transactions contemplated
herein.
(i) Except for contracts, agreements, franchises, licenses or permits
entered into or granted in the ordinary course of its business, in
each case under which no known material default exists, PMFM
Investment Trust is not a party to or subject to any material
contract, debt instrument, employee benefit plan, lease, franchise,
license or permit of any kind or nature whatsoever on behalf of the
Acquiring Fund.
(j) No consideration other than Acquiring Fund shares (and the Acquiring
Fund's assumption of the Liabilities) will be issued in exchange for
the Assets in the Reorganization.
(k) The Acquiring Fund has no plan or intention to issue additional
Acquiring Fund shares following the Reorganization except for shares
issued in the ordinary course of its business as a series of an
open-end investment company; nor does the Acquiring Fund, or any
person "related" (within the meaning of section 1.368-1(e)(3) of the
Regulations) to it, have any plan or intention to acquire -- during
the five-year period beginning at the Effective Time, either directly
or through any transaction, agreement, or arrangement with any other
A-11
person, any Acquiring Fund shares issued to the Target Fund's
shareholders pursuant to the Reorganization, except for redemptions in
the ordinary course of such business as required by section 22(e) of
the 1940 Act.
(l) Following the Reorganization, the Acquiring Fund (a) will continue the
Target Fund's "historic business" (within the meaning of section
1.368-1(d)(2) of the Regulations) or (b) will use a significant
portion of the Target Fund's "historic business assets" (within the
meaning of section 1.368-1(d)(3) of the Regulations) in a business; in
addition, the Acquiring Fund (c) has no plan or intention to sell or
otherwise dispose of any of the Assets, except for dispositions made
in the ordinary course of that business and dispositions necessary to
maintain its status as a RIC and (d) expects to retain substantially
all the Assets in the same form as it receives them in the
Reorganization, unless and until subsequent investment circumstances
suggest the desirability of change or it becomes necessary to make
dispositions thereof to maintain such status.
(m) There is no plan or intention for the Acquiring Fund to be dissolved
or merged into another business trust or a corporation or any "fund"
thereof (as defined in section 851(g)(2) of the Code) following the
Reorganization.
(n) Immediately after the Reorganization, (a) not more than 25% of the
value of the Acquiring Fund's total assets (excluding cash, cash
items, U.S. government securities, and securities of other regulated
investment companies) will be invested in the stock and securities of
any one issuer and (b) not more than 50% of the value of such assets
will be invested in the stock and securities of five or fewer issuers.
(o) The Acquiring Fund does not directly or indirectly own, nor at the
Effective Time will it directly or indirectly own, nor has it directly
or indirectly owned at any time during the past five years, any shares
of the Target Fund.
(p) During the five-year period ending at the Effective Time, neither the
Acquiring Fund nor any person "related" (within the meaning of section
1.368-1(e)(3) of the Regulations) to it will have acquired Target Fund
shares with consideration other than Acquiring Fund shares.
(q) PMFM Investment Trust has made all state filings to register the
Acquiring Fund in each jurisdiction that the Target Fund is currently
registered and all necessary steps have been taken under all relevant
jurisdictions' securities laws to consummate the Reorganization.
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(r) The fair market value of the Acquiring Fund shares each Target Fund
shareholder receives will be equal to the fair market value of the
Target Fund shares it surrenders in exchange therefor.
(s) A majority of the trustees of the PMFM Investment Trust are not
"interested persons" of the Acquiring Fund and those trustees are
responsible for the nomination and selection of any other
disinterested trustees; and
(t) To its knowledge, no circumstances arising from the Reorganization
might result in an "unfair burden" (as that term is defined in Section
15(f) of the 1940 Act) being imposed on the Acquiring Fund.
6A. Additional Representations, Warranties and Agreements of the Trust and
PMFM Investment Trust. The Trust, on behalf of itself and, as
appropriate, the Target Fund, represents and warrants to, and agrees
with, PMFM Investment Trust, and PMFM Investment Trust, on behalf of
itself and, as appropriate, the Acquiring Fund, represents and
warrants to, and agrees with, the Trust, as follows:
(a) The respective management of the Trust and PMFM Investment Trust (a)
is unaware, without making independent inquiry, of any plan or
intention of the Target Fund's shareholders to redeem, sell or
otherwise dispose of (i) any portion of their Target Fund shares
before the Reorganization to any person "related" (within the meaning
of section 1.368-1(e)(3) of the Regulations) to either the Acquiring
Fund or the Target Fund or (ii) any portion of the Acquiring Fund
shares they receive in the Reorganization to any person "related"
(within such meaning) to the Acquiring Fund, (b) does not anticipate
dispositions of those Acquiring Fund shares at the time of or soon
after the Reorganization to exceed the usual rate and frequency of
dispositions of shares of the Target Fund as a series of an open-end
investment company, (c) expects that the percentage of Target Fund
shareholder interests, if any, that will be disposed of as a result of
or at the time of the Reorganization will be de minimis, and (d) does
not anticipate that there will be extraordinary redemptions of Target
Fund shares immediately following the Reorganization.
(b) There is no intercompany indebtedness between the Acquiring Fund and
the Target Fund that was issued or acquired, or will be settled, at a
discount.
(c) None of the compensation received by any Target Fund shareholder who
is an employee of or service provider to the Target Fund will be
separate consideration for, or allocable to, any of the Target Fund
shares that shareholder held; none of the Acquiring Fund shares any
such shareholder receives will be separate consideration for, or
allocable to, any employment agreement, investment advisory agreement
A-13
or other service agreement; and the consideration paid to any such
shareholder will be for services actually rendered and will be
commensurate with amounts paid to third parties bargaining at
arm's-length for similar services.
(d) The aggregate value of the acquisitions, redemptions and distributions
limited by Sections 5(p), 6(k) and 6(p) will not exceed 50% of the
value (without giving effect to such acquisitions, redemptions, and
distributions) of the proprietary interest in the Target Fund at the
Effective Time.
(e) The shareholders of the Target Fund will receive no consideration
pursuant to the Reorganization other than Acquiring Fund shares.
7. Conditions to the Trust's Obligations. The obligations of the Trust
set forth herein shall be subject to the following conditions
precedent:
(a) PMFM Investment Trust shall have duly executed and delivered its
applicable Reorganization Documents to the Trust.
(b) The Target Fund's shareholders shall have approved this Plan in the
manner required by the Trust's Trust Instrument, Bylaws, and
applicable law. If the Target Fund shareholders fail to approve this
Plan, that failure shall release the Trust of its obligations under
this Plan.
(c) PMFM Investment Trust shall have delivered to the Trust a certificate
dated as of the Closing Date and executed in its name by the Secretary
or Assistant Secretary of PMFM Investment Trust, in a form reasonably
satisfactory to the Trust, stating that the representations and
warranties of PMFM Investment Trust in this Plan are true and correct
in all material respects at and as of the Effective Time.
(d) The Trust shall have received an opinion of Kilpatrick Stockton, LLP,
as counsel to PMFM Investment Trust, in form and substance reasonably
satisfactory to the Trust and dated as of the Closing Date,
substantially to the effect that:
(1) PMFM Investment Trust is a business trust duly created, validly
existing and in good standing under the laws of the state of
Delaware and is an open-end, management investment company
registered under the 1940 Act;
(2) The Plan has been duly authorized, executed and delivered by PMFM
Investment Trust, and assuming due authorization, execution, and
delivery of this Plan by the Trust on behalf of the Target Fund,
represents a legal, valid and binding contract, enforceable in
accordance with its terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and transfer and
similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and further subject to
the application of equitable principles in any proceeding,
A-14
whether at law or in equity or with respect to the enforcement of
provisions of the Plan, and the effect of judicial decisions
which have held that certain provisions are unenforceable when
their enforcement would violate an implied covenant of good faith
and fair dealing or would be commercially unreasonable or when
default under the Plan is not material;
(3) The shares of the Acquiring Fund to be delivered as provided for
by this Plan are duly authorized and upon delivery will be
validly issued, fully paid and non-assessable by PMFM Investment
Trust;
(4) The execution and delivery of this Plan did not, and the
consummation of the Reorganization will not, violate PMFM
Investment Trust's Agreement and Declaration of Trust or By-Laws
or any Material Agreement to which PMFM Investment Trust is a
party or by which it is bound; and
(5) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by PMFM Investment Trust of the
Reorganization or for the execution and delivery of the Acquiring
Fund's Reorganization Documents, except those that have been
obtained under the 1933 Act, the 1940 Act and the rules and
regulations under those Acts or that may be required under state
securities laws or subsequent to the Effective Time or when the
failure to obtain the consent, approval, authorization or order
would not have a material adverse effect on the operation of the
Acquiring Fund.
In rendering such opinion, such counsel may (i) rely on the
opinion of other counsel to the extent set forth in such opinion,
(ii) make assumptions regarding the authenticity, genuineness
and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to
applicable federal and state law, (iv) define the word
"Knowledge" and related terms to mean the Knowledge of attorneys
then with such firm who have devoted substantive attention to
matters directly related to this Plan and (v) rely on
certificates of officers or trustees of PMFM Investment Trust.
(e) The Trust shall have received an opinion of Kilpatrick Stockton LLP
with respect to the tax matters specified in Section 8(e) addressed to
the Trust and PMFM Investment Trust in form and substance reasonably
satisfactory to them, and dated as of the Closing Date (the "Tax
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Opinion"). In rendering the Tax Opinion, such counsel may rely as to
factual matters, exclusively and without independent verification, on
the representations and warranties made in this Plan, which such
counsel may treat as representations and warrantees made to it, and in
separate letters addressed to such counsel and certificates delivered
pursuant to this Plan. The Tax Opinion shall comprise substantively
the information listed under Section 8(e)(1)-(7) based on the facts
and assumptions stated therein and conditioned on consummation of the
Reorganization in accordance with this Plan, for federal income tax
purposes.
(f) The N-14 Registration Statement shall have become effective under the
1933 Act as to the Acquiring Fund's shares, and the SEC shall not have
instituted or, to the Knowledge of the Trust, contemplated
instituting, any stop order suspending the effectiveness of the N-14
Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection
with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the Reorganization under Section 25(c) of the
1940 Act.
(i) PMFM Investment Trust shall have performed and complied in all
material respects with each of its agreements and covenants required
by this Plan to be performed or complied with by it prior to or at the
Valuation Time and Effective Time.
(j) The Trust shall have received from PMFM Investment Trust a duly
executed instrument whereby the Acquiring Fund assumes all of the
Liabilities of or attributable to the Target Fund.
(k) Neither party shall have terminated this Plan pursuant to Section 10
of this Plan.
(l) The Trust shall have received a certificate from:
(1) MurphyMorris Money Management Co., investment advisor for the
Target Fund ("MurphyMorris"), stating that it will pay all of the
fees and expenses incurred by the Trust, the Target Fund, the
PMFM Investment Trust and the Acquiring Fund in connection with
the Reorganization, including all legal fees and expenses in
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connection with (i) preparing, filing and processing of the Form
N-14 Registration Statement in connection with this Plan; (ii)
obtaining opinion letters in connection with this Plan, (iii)
printing and mailing the proxy statement to shareholders of the
Target Fund; and (iv) the closing of the Reorganization
(collectively the "Reorganization Expenses"); and
(2) PMFM, Inc., investment advisor for the Acquiring Fund, stating
that it will pay expenses incurred by PMFM Investment Trust and
the Acquiring Fund in connection with the Reorganization other
than the Reorganization Expenses (if any).
(m) The parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma financial
information of the Acquiring Fund and the Target Fund contained in the
N-14 Registration Statement.
8. Conditions to PMFM Investment Trust's Obligations. The obligations of
PMFM Investment Trust set forth herein shall be subject to the
following conditions precedent:
(a) The Trust shall have duly executed and delivered its applicable
Reorganization Documents to PMFM Investment Trust.
(b) The Target Fund's shareholders shall have approved this Plan in the
manner required by the Trust's Trust Instrument, Bylaws and applicable
law. If the Target Fund shareholders fail to approve this Plan, that
failure shall release PMFM Investment Trust's obligations with respect
to the Acquiring Fund under this Plan.
(c) The Trust shall have delivered to PMFM Investment Trust a certificate
dated as of the Closing Date and executed in its name by the Trust's
Secretary or Assistant Secretary, in a form reasonably satisfactory to
PMFM Investment Trust, stating that the representations and warranties
of the Trust in this Plan are true and correct in all material
respects at and as of the Effective Time.
(d) PMFM Investment Trust shall have received an opinion of Kilpatrick
Stockton LLP, as counsel to the Trust, in form and substance
reasonably satisfactory to PMFM Investment Trust and dated as of the
Closing Date, substantially to the effect that:
(1) The Trust is a Delaware business trust duly organized, validly
existing and in good standing under the laws of the State of
A-17
Delaware and is an open-end, management investment company
registered under the 1940 Act;
(2) The Plan has been duly authorized, executed and delivered by the
Trust and, assuming due authorization, execution and delivery of
this Plan by PMFM Investment Trust on behalf of the Acquiring
Fund, represents a legal, valid and binding contract, enforceable
in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and
transfer and similar laws relating to or affecting creditors'
rights generally and court decisions with respect thereto, and
further subject to the application of equitable principles in any
proceeding, whether at law or in equity or with respect to the
enforcement of provisions of the Plan, and the effect of judicial
decisions which have held that certain provisions are
unenforceable when their enforcement would violate an implied
covenant of good faith and fair dealing or would be commercially
unreasonable or when default under the Plan is not material;
(3) The execution and delivery of this Plan did not, and the
consummation of the Reorganization will not, violate the Trust
Instrument or By-Laws of the Trust or any Material Agreement to
which the Trust is a party or by which it is bound; and
(4) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by the Trust of the Reorganization
or the execution and delivery of the Target Fund's Reorganization
Documents, except those that have been obtained under the 1933
Act, the 1940 Act and the rules and regulations under those Acts
or that may be required under state securities laws or subsequent
to the Effective Time or when the failure to obtain the consent,
approval, authorization or order would not have a material
adverse effect on the operation of the Target Fund.
In rendering such opinion, such counsel may (i) rely on the
opinion of other counsel to the extent set forth in such opinion,
(ii) make assumptions regarding the authenticity, genuineness
and/or conformity of documents and copies thereof without
independent verification thereof, (iii) limit such opinion to
applicable federal and state law, (iv) define the word
"Knowledge" and related terms to mean the Knowledge of attorneys
then with such firm who have devoted substantive attention to
matters directly related to this Plan and (v) rely on
certificates of officers or trustees of the Trust.
A-18
(e) PMFM Investment Trust shall have received the Tax Opinion of
Kilpatrick Stockton LLP addressed to the Trust and PMFM Investment
Trust in form and substance reasonably satisfactory to them dated as
of the Closing Date, as to the federal income tax consequences
mentioned below. In rendering the Tax Opinion, such counsel may rely
as to factual matters, exclusively and without independent
verification, on the representations and warranties made in this Plan,
which such counsel may treat as representations and warranties made to
it, and in separate letters addressed to such counsel and certificates
delivered pursuant to this Plan. The Tax Opinion shall be
substantially to the effect that, based on the facts and assumptions
stated therein and conditioned on consummation of the Reorganization
in accordance with this Plan, for federal income tax purposes:
(1) The Reorganization will qualify as a "reorganization" (as defined
in Code Section 368(a)), and the Acquiring Fund and the Target
Fund each will be a "party to a reorganization" (within the
meaning of Code Section 368(b)).
(2) The Target Fund shareholders will recognize no gain or loss on
their receipt of Acquiring Fund shares in exchange for their
Target Fund shares pursuant to the Reorganization.
(3) The Target Fund will recognize no gain or loss on the transfer of
all of the Assets to the Acquiring Fund solely in exchange for
Acquiring Fund shares and the assumption by the Acquiring Fund of
the Liabilities pursuant to the Reorganization or on its
distribution of those shares to its shareholders pursuant to its
liquidation in exchange for their Target Fund shares.
(4) The Acquiring Fund will recognize no gain or loss on its
acquisition of all of the Assets solely in exchange for the
Acquiring Fund shares and its assumption of the Liabilities.
(5) The aggregate tax basis in the Acquiring Fund shares received by
each Target Fund shareholder pursuant to the Reorganization will
equal the aggregate tax basis of the Target Fund shares
surrendered in exchange therefore, and the shareholder's holding
period for those Acquiring Fund shares will include the period
that the shareholder held the Target Fund shares exchanged
therefore, provided that the shareholder held such Target Fund
shares as a capital asset at the Effective Time.
(6) The Acquiring Fund's basis in the Assets will equal the Target
Fund's basis in the Assets immediately before the Reorganization,
A-19
and the Acquiring Fund's holding period for the Assets will
include the period during which the Target Fund held the Assets.
(7) The Acquiring Fund will succeed to and take into account the
items of the Target Fund described in Code Section 381(c),
including the earnings and profits, or deficit in earnings and
profits, of the Target Fund as of the Effective Time. The
Acquiring Fund will take these items into account subject to the
conditions and limitations specified in Code Sections 381, 382,
383 and 384 and applicable regulations thereunder.
(f) The N-14 Registration Statement shall have become effective under the
1933 Act as to the Acquiring Fund's shares, and the SEC shall not have
instituted or, to the Knowledge of PMFM Investment Trust, contemplated
instituting, any stop order suspending the effectiveness of the N-14
Registration Statement.
(g) No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit or obtain damages or other relief in connection
with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to
enjoin consummation of the Reorganization under Section 25(c) of the
1940 Act.
(i) The Trust shall have performed and complied in all material respects
with each of its agreements and covenants required by this Plan to be
performed or complied with by it prior to or at the Valuation Time and
Effective Time.
(j) Neither party shall have terminated this Plan pursuant to Section 10
of this Plan.
(k) PMFM Investment Trust shall have received a certificate from:
(1) MurphyMorris stating that it will pay the Reoganization Expenses;
and
(2) PMFM, stating that it will pay the expenses incurred by PMFM
Investment Trust and the Acquiring Fund in connection with the
Reorganization other than the Reorganization Expenses.
(l) The parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma financial
A-19
information of the Acquiring Fund and the Target Fund contained in the
N-14 Registration Statement.
9. Survival of Representations and Warranties. The representations and
warranties of the parties hereto shall survive the completion of the
transactions contemplated herein.
10. Termination of Plan. A majority of a party's Board of Trustees may
terminate this Plan, by giving notice to the other party at any time
before the Effective Time if: (i) the party's conditions precedent set
forth in Sections 7 or 8, as appropriate, are not satisfied or (ii)
the Board of Trustees determines that the consummation of the
Reorganization is not in the best interests of shareholders.
11. Governing Law. This Plan and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the laws
of the State of Georgia, except to the extent preempted by federal
law, without regard to conflicts of law principles.
12. Brokerage Fees. Each party represents and warrants that there are no
brokers or finders entitled to receive any payments from the Trust,
PMFM Investment Trust, the Target Fund or the Acquiring Fund in
connection with the transactions provided for in this Plan.
13. Amendments. The parties may, by agreement in writing authorized by
their respective Boards of Trustees, amend this Plan at any time
before or after the Target Fund's shareholders approve this Plan.
However, after the Target Fund shareholders approve this Plan, the
parties may not amend this Plan in a manner that materially alters the
obligations of either party with respect to the Reorganization. The
parties shall not deem this Section to preclude them from changing the
Closing Date or the Effective Time by mutual agreement.
14. Waivers. At any time prior to the Closing Date, either party may by
written instrument signed by it (i) waive the effect of any
inaccuracies in the representations and warranties made to it
contained herein and (ii) waive compliance with any of the agreements,
covenants or conditions made for its benefit contained herein. The
parties agree that any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or
future inaccuracy or lack of compliance.
15. Cooperation and Further Assurances. Each party will cooperate with the
other in fulfilling its obligations under this Plan and will provide
such information and documentation as is reasonably requested by the
other in carrying out this Plan's terms. Each party will provide such
A-21
further assurances concerning the performance of obligations under
this Plan and the consummation of the Reorganization as the other
shall deem necessary, advisable or appropriate.
16. Updating of N-14 Registration Statement. If at any time prior to the
Effective Date, a party becomes aware of any material information that
is not reflected in the N-14 Registration Statement, the party
discovering the information shall promptly notify the other party and
the parties shall cooperate in promptly preparing, filing and clearing
with the SEC, and, if appropriate, distributing to shareholders
appropriate disclosure with respect to the information.
17. Limitation on Liabilities. The obligations of the Trust, the Target
Fund, PMFM Investment Trust, and the Acquiring Fund shall not bind any
of the Trustees, shareholders, nominees, officers, agents, or
employees of the Trust or PMFM Investment Trust personally, but shall
bind only the assets and property of the Target Fund and the Acquiring
Fund, respectively. The execution and delivery of this Plan by the
parties' officers shall not be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but
shall bind only the Assets and the property of the Target Fund or
Acquiring Fund, as appropriate.
18. Notices. Any notice, report, statement, certificate or demand required
or permitted by any provision of this Plan shall be in writing and
shall be given by prepaid telegraph, telecopy, certified mail or
overnight express courier to:
For the Trust:
Jack E. Brinson, Chairman
MurphyMorris Investment Trust
1105 Panola Street
Tarboro, NC 27886
With copies to:
MurphyMorris Investment Trust
C/O The Nottingham Company
P.O. Drawer 69
116 S. Franklin Street
Rocky Mount, NC 27802
Beth R. MacDonald, Esq. (counsel for independent
trustees)
Alston & Bird LLP
Bank of America Plaza
101 South Tryon Street, Suite 4000
Charlotte, NC 28280
A-22
For PMFM Investment Trust:
Donald L. Beasley, Chairman
PMFM Investment Trust
1551 Jennings Mill Road
Suite 2400A
Bogart, GA 30622
With copies to:
PMFM Investment Trust
C/O The Nottingham Company
P.O. Drawer 69
116 S. Franklin Street
Rocky Mount, NC 27802
Jeffrey T. Skinner, Esq.
Kilpatrick Stockton LLP
3737 Glenwood Avenue
Suite 400
Raleigh, North Carolina 27612
19. Indemnification. (a) The Trust will indemnify and hold harmless, out
of the assets of the Target Fund but no other assets, the PMFM Trust,
its trustees and its officers (for purposes of this subparagraph, the
"Indemnified Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or reasonably
incurred by any one or more of the Indemnified Parties in connection
with, arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the Indemnified Parties may be
involved or with which any one or more of the Indemnified Parties may
be threatened by reason of any untrue statement or alleged untrue
statement of a material fact relating to the Trust contained in the
N-14 Registration Statement, or any amendment or supplement thereto,
or arising out of, or based upon, the omission or alleged omission to
state in any of the foregoing a material fact relating to the Trust
required to be stated therein or necessary to make the statements
relating to the Trust therein not misleading, including, without
limitation, any amounts paid by any one or more of the Indemnified
Parties in a reasonable compromise or settlement of any such claim,
action, suit or proceeding, or threatened claim, action, suit or
proceeding made with the consent of the Trust. The Indemnified Parties
will notify the Trust in writing within ten days after the receipt by
any one or more of the Indemnified Parties of any notice of legal
A-23
process or any suit brought against or claim made against such
Indemnified Party as to any matters covered by this Section 19(a). The
Trust shall be entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding covered by this
Section 19(a), or, if it so elects, to assume at its expense by
counsel satisfactory to the Indemnified Parties the defense of any
such claim, action, suit or proceeding, and, if the Trust elects to
assume such defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action, suit or
proceeding at their expense. The Trust's obligation under this Section
19(a) to indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that the Trust will pay in the
first instance any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 19(a) without the
necessity of the Indemnified Parties' first paying the same.
(b) The PMFM Investment Trust will indemnify and hold harmless, out of
the assets of the Acquiring Fund but no other assets, the Trust, its
trustees and its officers (for purposes of this subparagraph, the
"Indemnified Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or reasonably
incurred by any one or more of the Indemnified Parties in connection
with, arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the Indemnified Parties may be
involved or with which any one or more of the Indemnified Parties may
be threatened by reason of any untrue statement or alleged untrue
statement of a material fact relating to the PMFM Investment Trust
contained in the N-14 Registration Statement, or any amendment or
supplement thereto, or arising out of, or based upon, the omission or
alleged omission to state in any of the foregoing a material fact
relating to the PMFM Investment Trust required to be stated therein or
necessary to make the statements relating to the PMFM Investment Trust
therein not misleading, including without limitation, any amounts paid
by any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding made with
the consent of the PMFM Investment Trust. The Indemnified Parties will
notify the PMFM Investment Trust in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any notice of
legal process or any suit brought against or claim made against such
Indemnified Party as to any matters covered by this Section 19(b). The
PMFM Investment Trust shall be entitled to participate at its own
expense in the defense of any claim, action, suit or proceeding
covered by this Section 19(b), or, if it so elects, to assume at its
expense by counsel satisfactory to the Indemnified Parties the defense
A-24
of any such claim, action, suit or proceeding, and, if the PMFM
Investment Trust elects to assume such defense, the Indemnified
Parties shall be entitled to participate in the defense of any such
claim, action, suit or proceeding at their own expense. The PMFM
Investment Trust's obligation under this Section 19(b) to indemnify
and hold harmless the Indemnified Parties shall constitute a guarantee
of payment so that the PMFM Investment Trust will pay in the first
instance any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 19(b) without the
necessity of the Indemnified Parties' first paying the same.
20. General. This Plan supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement
of the terms of the agreement between the parties and may not be
changed or terminated orally. The parties may execute this Plan in
counterparts, which shall be considered one and the same agreement,
and shall become effective when the counterparts have been executed by
and delivered to both parties. The headings contained in this Plan are
for reference only and shall not affect in any way the meaning or
interpretation of this Plan. Nothing in this Plan, expressed or
implied, confers upon any other person any rights or remedies under or
by reason of this Plan. This Plan shall bind and inure to the benefit
of the parties hereto and their respective successors and assigns, but
neither party may assign or transfer any right or obligation under
this Plan without the written consent of the other party.
A-25
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers designated below to execute this Plan as of the date first written
above.
MurphyMorris Investment Trust
ATTEST:
By:
______________________________ ___________________________
Name: Julian G. Winters Name: Gregory L. Morris
Title: Secretary Title: President
PMFM Investment Trust for itself
and on behalf of PMFM
Core Advantage Portfolio Trust
ATTEST:
By:
______________________________ ___________________________
Name: Julian G. Winters Name: Timothy A. Chapman
Title: Secretary Title: President
PART B
======
RELATING TO THE ACQUISITION OF THE ASSETS OF
THE MURPHYMORRIS ETF FUND OF
THE MURPHYMORRIS INVESTMENT TRUST
1551 JENNINGS MILL ROAD - SUITE 2400A
BOGART, GA 30622
BY AND IN EXCHANGE FOR SHARES OF THE
THE PMFM CORE ADVANTAGE PORTFOLIO TRUST OF
THE PMFM INVESTMENT TRUST
551 JENNINGS MILL ROAD - SUITE 2400A
BOGART, GA 30622
________________________________________________
STATEMENT OF ADDITIONAL INFORMATION
April 12, 2005
________________________________________________
This Statement of Additional Information is available to the shareholders
of the MurphyMorris ETF Fund ("MurphyMorris Fund") in connection with a proposed
transaction whereby all of the assets and liabilities of the MurphyMorris Fund
will be transferred to the PMFM Core Advantage Portfolio Trust ("PMFM Fund") in
exchange for shares of beneficial interest of the PMFM Fund.
This Statement of Additional Information consists of this cover page and
the following documents, each of which was filed electronically with the
Securities and Exchange Commission and is incorporated by reference herein:
1. The Statement of Additional Information for the PMFM Fund dated March
10, 2005;
2. The Statement of Additional Information for the MurphyMorris Fund dated
September 28, 2004; and
3. The Financial Statements of the MurphyMorris Fund as included in the
Fund's Annual Report filed for the period ended May 31, 2004; and the
Financial Statements of the MurphyMorris Fund as included in the
Semi-Annual Report filed for the period ended November 30, 2004.
This Statement of Additional Information is not a prospectus. A Proxy
Statement/Prospectus dated April 12, 2005 relating to the reorganization of the
MurphyMorris Fund may be obtained, without charge, by writing to The PMFM Fund,
PMFM Trust, c/o NC Shareholder Services, 116 South Franklin Street, Post Office
Box 4365, Rocky Mount, North Carolina 27803-0365 or by calling toll-free
1-866-383-7636. This Statement of Additional Information should be read in
conjunction with the Proxy Statement/Prospectus.
B-1
ADDITIONAL INFORMATION REGARDING MURPHYMORRIS PORTFOLIO MANAGEMENT TEAM
MurphyMorris Money Management Co. ("MurphyMorris") is the investment adviser to
the MurphyMorris Fund. Mr. Beasley and Mr. Chapman are the members of the
portfolio management team for the MurphyMorris Fund. As explained in the
Prospectus, Mr. Beasley and Mr. Chapman are also co-founders and controlling
shareholders of PMFM, Inc. (investment adviser to the PMFM Fund) and members of
the PMFM portfolio management team.
Other Accounts Managed. MurphyMorris does not have any client accounts other
than the MurphyMorris Fund account. However, Mr. Beasley and Mr. Chapman manage
other accounts as part of PMFM as members of the portfolio management teams for
other PMFM mutual funds, including the PMFM Managed Portfolio Trust, the PMFM
Tactical Preservation Trust, the PMFM Tactical Opportunities Portfolio Trust and
the PMFM Fund. In addition, Mr. Beasley and Mr. Chapman are members of the PMFM
portfolio management team for separate account clients of PMFM (approximately
416 accounts as of March 31, 2005). PMFM does not receive performance-based fees
with respect to any of these funds or accounts.
Potential Conflicts of Interest. Actual or apparent conflicts of interest may
arise when a portfolio manager has day-to-day management responsibilities with
respect to more than one fund or other account (each an "Account"):
o In general, Accounts managed by MurphyMorris and PMFM focus on a set
of distinct investment disciplines, so that the Accounts in the same
discipline are managed in substantially the same manner and may hold
many of the same securities at the same time. Nevertheless, the
management of multiple Accounts may give rise to potential conflicts
of interest for Mr. Beasley and Mr. Chapman to the extent the Accounts
are in different disciplines or have different objectives, strategies,
benchmarks, time horizons, tax considerations, fees or client
restrictions. Mr. Beasley and Mr. Chapman seek to allocate their time
and investment ideas across the different Accounts they manage for
MurphyMorris and PMFM, but there can be no guarantee that the
MurphyMorris Fund will not be disadvantaged from time to time.
o Because Accounts have different investment disciplines, objectives,
strategies, benchmarks, time horizons, tax considerations, fees or
client restrictions, there may be times when different Accounts hold
different securities. These conditions may give rise to potential
conflicts of interest to the extent the MurphyMorris or PMFM portfolio
management teams direct transactions for one Account that may
adversely impact the value of securities held by another Account.
Securities selected for Accounts other than the MurphyMorris Fund may
outperform the securities selected for the MurphyMorris Fund from time
to time.
o With respect to securities transactions for the MurphyMorris Fund, Mr.
Beasley and Mr. Chapman will determine the broker that executes or
will execute each order, which determinations shall be made consistent
with the duty to seek best execution of the transaction. MurphyMorris
has adopted a policy that permits the aggregation of trades (each a
"bunched trade") in the same security for the same Accounts on the
same day. In a bunched trade, each Account receives the same price,
but different commission rates may apply to different Accounts owing
either to the size of an Account's position, the minimum ticket
charges applied by the broker, or both.
B-2
o The MurphyMorris Fund and MurphyMorris have each adopted a code of
ethics that, among other things, permits personal trading by employees
(including MurphyMorris portfolio managers) under conditions where it
has been determined that such trades would not adversely impact client
accounts. Nevertheless, the management of personal accounts may give
rise to potential conflicts of interest, and there is no assurance
that these codes of ethics will adequately address such conflicts.
o In general, MurphyMorris does not invest Accounts in securities that
would constitute limited investment opportunities. However, to the
extent that MurphyMorris recommends a limited investment opportunity
for multiple Accounts, MurphyMorris seeks to work with PMFM to
allocate such limited opportunities pro rata among Accounts based on
account size, available cash or any other method determined to be fair
by the PMFM and MurphyMorris portfolio management teams.
Compensation. Neither Mr. Beasley nor Mr. Chapman is paid a base salary by
MurphyMorris (although each receives a base salary from PMFM, and eligible to
participate in PMFM's retirement plan arrangements). Each of Mr. Beasley and Mr.
Chapman is a co-founder and one-third owner of MurphyMorris, and is entitled to
profits related to his share of ownership. Since profits are expected to
increase as assets increase, each of Mr. Beasley and Mr. Chapman is expected to
receive increased profits as a shareholder as assets of the MurphyMorris Fund
increase.
Ownership of Securities. Neither Mr. Beasley nor Mr. Chapman beneficially own
shares of the MurphyMorris Fund.
Information about the PMFM Fund's Portfolio Management Team. The Statement of
Additional Information for the PMFM Fund (incorporated herein by reference)
provides additional information about the PMFM Fund's Portfolio Management Team
and their compensation, other managed accounts and ownership of securities in
the PMFM Fund.
B-3
FINANCIAL STATEMENTS
Financial Statements of the PMFM Fund are not included herein because the Fund
has not yet commenced operations. However, as described in the Prospectus, it is
contemplated that the MurphyMorris Fund will be reorganized and merged with and
into the PMFM Fund, on which date the historical financial statements and
performance of the MurphyMorris Fund will be assumed by the PMFM Fund.
Accordingly, the MurphyMorris Fund's Annual Report to shareholders dated May 31,
2004 and Semi-Annual Report to shareholders dated November 30, 2004 are also
incorporated by reference into this SAI. In addition, pro forma financial
information is not required because the PMFM Fund has not conducted any business
other than matters incident to its organization and will not commence operations
until completion of the Reorganization.
B-4
THE MURPHYMORRIS INVESTMENT TRUST
MURPHYMORRIS ETF FUND
SPECIAL MEETING OF SHAREHOLDERS
SCHEDULED TO BE HELD ON
May 13, 2005
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES of The MurphyMorris Investment
Trust ("Trust"), on behalf of the MurphyMorris ETF Fund ("Fund"), for use at the
special meeting of shareholders ("Special Meeting") to be held at the offices of
the Trust's transfer agent, North Carolina Shareholder Services, LLC, 116 South
Franklin Street, Rocky Mount, North Carolina 27804 on May 13, 2005 at 4:00 p.m.,
Eastern Time. The undersigned hereby appoints Tracey L. Hendricks and Julian G.
Winters, each of them with full power of substitution, as proxies of the
undersigned to vote at the above stated Special Meeting and at all adjournments
thereof, all shares of beneficial interest of the Fund that are held of record
by the undersigned on the record date for the Special Meeting, upon the proposal
indicated below:
IF THIS PROXY CARD IS RETURNED, AND NO CHOICE IS INDICATED, THIS PROXY WILL BE
VOTED AFFIRMATIVELY ON THE MATTER PRESENTED. THE BOARD OF TRUSTEES RECOMMENDS
THAT YOU VOTE "FOR" THE FOLLOWING PROPOSAL.
FOR AGAINST ABSTAIN
1. To approve an Agreement and Plan of Reorganization providing [ ] [ ] [ ]
for the acquisition of all of the assets of the MurphyMorris ETF Fund by
the PMFM Core Advantage Portfolio Trust in exchange for shares of
beneficial interest of the PMFM Core Advantage Portfolio Trust, as more
fully described in the Prospectus/Proxy Statement dated April 12, 2005,
together with each and every transaction contemplated thereby.
2. To transact such other business as may properly come before the meeting, or
any adjournments thereof.
Please sign exactly as your name appears on this card. When an account is held
by joint tenants, all should sign. When signing as executor, administrator,
trustee or guardian, please give title. If a corporation or partnership,
indicate the entity's name and sign as an authorized person.
x x
- ---------------------------- ---------------------------
Signature (Date) Signature (Date)
(Please sign within the box) (Please sign within the box)
B-5
THE PMFM FUNDS
PART C
======
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article VII of the Registrant's Amended Declaration of Trust states as follows:
Under Delaware statutes, Section 3817 of the Treatment of Delaware
Statutory Trusts empowers Delaware business trusts to indemnify and hold
harmless any trustee or beneficial owner or other person from and against any
and all claims and demands whatsoever, subject to such standards and
restrictions as may be set forth in the governing instrument of the statutory
trust. The Registrant's Trust Instrument contains the following provisions:
Article VII. Section 2. Indemnification and Limitation of Liability. The
Trustees shall not be responsible or liable in any event for any neglect or
wrong-doing of any officer, agent, employee, Manager or Principal Underwriter of
the Trust, nor shall any Trustee be responsible for the act or omission of any
other Trustee, and, as provided in Section 3 of this Article VII, the Trust out
of its assets shall indemnify and hold harmless each and every Trustee and
officer of the Trust from and against any and all claims, demands, costs,
losses, expenses, and damages whatsoever arising out of or related to such
Trustee's performance of his or her duties as a Trustee or officer of the Trust;
provided that nothing herein contained shall indemnify, hold harmless or protect
any Trustee or officer from or against any liability to the Trust or any
Shareholder to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on behalf of
the Trust or the Trustees or any of them in connection with the Trust shall be
conclusively deemed to have been issued, executed or done only in or with
respect to their or his or her capacity as Trustees or Trustee, and such
Trustees or Trustee shall not be personally liable thereon.
Article VII. Section 3. Indemnification.
(a) Subject to the exceptions and limitations contained in Subsection
(b) below:
(i) every person who is, or has been, a Trustee or an officer,
employee or agent of the Trust (including any individual who serves at
its request as director, officer, partner, trustee or the like of
another organization in which it has any interest as a shareholder,
creditor or otherwise) ("Covered Person") shall be indemnified by the
Trust or the appropriate Series to the fullest extent permitted by law
against liability and against all expenses reasonably incurred or paid
by him in connection with any claim, action, suit or proceeding in
which he becomes involved as a party or otherwise by virtue of his
being or having been a Covered Person and against amounts paid or
incurred by him in the settlement thereof; and
(ii) as used herein, the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or threatened,
and the words "liability" and "expenses" shall include, without
limitation, attorney's fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) who shall have been adjudicated by a court or body before
which the proceeding was brought (A) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office, or (B) not to have acted in good faith in the
reasonable belief that his action was in the best interest of the
Trust; or
(ii) in the event the matter is not adjudicated by a court or
other appropriate body, unless there has been a determination that
such Covered Person did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office: by at least a majority of those Trustees who
are neither Interested Persons of the Trust nor are parties to the
matter based upon a review of readily available facts (as opposed to a
full trial-type inquiry), or by written opinion of independent legal
counsel based upon a review of readily available facts (as opposed to
a full trial-type inquiry).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
be exclusive of or affect any other rights to which any Covered Person may
now or hereafter be entitled, and shall inure to the benefit of the heirs,
executors and administrators of a Covered Person.
(d) To the maximum extent permitted by applicable law, expenses
incurred in defending any proceeding may be advanced by the Trust before
the disposition of the proceeding upon receipt of an undertaking by or on
behalf of such Covered Person that such amount will be paid over by him to
the Trust or applicable Series if it is ultimately determined that he is
not entitled to indemnification under this Section; provided, however, that
either a majority of the Trustees who are neither Interested Persons of the
Trust nor parties to the matter, or independent legal counsel in a written
opinion, shall have determined, based upon a review of readily available
facts (as opposed to a full trial-type inquiry) that there is reason to
believe that such Covered Person will not be disqualified from
indemnification under this Section.
(e) Any repeal or modification of this Article VII by the
Shareholders, or adoption or modification of any other provision of the
Declaration or By-laws inconsistent with this Article, shall be prospective
only, to the extent that such repeal, or modification would, if applied
retrospectively, adversely affect any limitation on the liability of any
Covered Person or indemnification available to any Covered Person with
respect to any act or omission which occurred prior to such repeal,
modification or adoption.
In addition, the Registrant has entered into an Investment Advisory
Agreements with its Advisor and Distribution Agreements with its Distributor.
These agreements provide indemnification for those entities and their
affiliates. The Advisor's and Distributor's personnel may serve as trustees and
officers of the Trust.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended ("Act"), may be permitted to trustees, officers and
controlling persons of the Registrant by the Registrant pursuant to the Trust
Instrument or otherwise, the Registrant is aware that that the Securities and
Exchange Commission has expressed its opinion that indemnification for
liabilities under the 1933 Act is against public policy as expressed in the 1933
Act, so indemnification for 1933 Act liabilities may be unenforceable.
ITEM 16. EXHIBITS
(1) Amended and Restated Agreement and Declaration of Trust ("Trust
Instrument") for the PMFM Investment Trust ("Registrant").^2
(2) By-Laws of Registrant.^1
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization.^9
(5) Not Applicable.
(6) (a) Investment Advisory Agreement between the Registrant and PMFM, Inc.
("Advisor"), as advisor for the PMFM Managed Portfolio Trust (formerly
known as the PMFM ETF Portfolio Trust).^2
(b) Investment Advisory Agreement between the Registrant and the Advisor,
as advisor for the PMFM Tactical Preservation Portfolio Trust
(formerly known as the PMFM Moderate Portfolio Trust).^3
(c) Investment Advisory Agreement between the Registrant and the Advisor,
as advisor for the PMFM Tactical Opportunities Portfolio Trust.^7
(d) Investment Advisory Agreement between the Registrant and the Advisor,
as advisor for the PMFM Core Advantage Portfolio Trust.
(7) (a) Distribution Agreement between the Registrant and Capital Investment
Group,Inc.("Distributor"),as distributor for the PMFM Managed Portfolio
Trust (formerly known as the PMFM ETF Portfolio Trust).^2
(b) Distribution Agreement between the Registrant and the Distributor, as
distributor for the PMFM Tactical Preservation Portfolio Trust
(formerly known as the PMFM Moderate Portfolio Trust).^3
(c) Distribution Agreement between the Registrant and the Distributor, as
distributor for the PMFM Tactical Opportunities Portfolio Trust.^7
(d) Distribution Agreement between the Registrant and the Distributor, as
distributor for the PMFM Core Advantage Portfolio Trust.
(8) Not Applicable.
(9) (a) Master Custodian Agreement between The Nottingham Management Company
and Wachovia Bank, N.A.(successor by merger to First Union National
Bank).^2
(b) First Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^2
(c) Second Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^2
(d) Third Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^2
(e) Fourth Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^2
(f) Fifth Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^3
(g) Sixth Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^5
(h) Seventh Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).^6
(i) Eighth Addendum to the Master Custodian Agreement between The
Nottingham Management Company and Wachovia Bank, N.A. (successor by
merger to First Union National Bank).
(j) Individual Custodian Agreement between the Registrant and Wachovia
Bank, N.A. ("Custodian"), as custodian for the Registrant.^2
(10) (a) Distribution Plan under Rule 12b-1 for the PMFM Managed Portfolio
Trust (formerly known as the PMFM ETF Portfolio Trust).^2
(b) Amended and Restated Distribution Plan under Rule 12b-1 for PMFM
Managed Portfolio Trust (formerly known as the PMFM ETF Portfolio
Trust).^6
(c) Distribution Plan under Rule 12b-1 for the PMFM Moderate Portfolio
Trust.^3
(d) Amended and Restated Plan under Rule 12b-1 for the PMFM Moderate
Portfolio Trust.^6
(e) Plan under Rule 12b-1 for the PMFM Tactical Opportunities Portfolio
Trust.^7
(f) Plan under Rule 12b-1 for the PMFM Core Advantage Portfolio Trust.^8
(g) Rule 18f-3 Multi-Class Plan.^3
(h) Amended and Restated Rule 18f-3 Multi-Class Plan.^6
(11) Form of opinion of Kilpatrick Stockton LLP regarding legality of issuance
of shares.
(12) Form of opinion of Kilpatrick Stockton LLP regarding certain tax matters.
(13) Not Applicable.
(14) Consent of Independent Registered Public Accounting Firm.
(15) Not Applicable.
(16) Powers of Attorney.^2
(17) Not Applicable.
- -----------------------------
1 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A filed March 10, 2003 (File No. 333-103714).
2 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A Pre-Effective Amendment No. 1 filed June 27,
2003 (File No. 333-103714).
3 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A Post-Effective Amendment No. 1 filed December
11, 2003 (File No. 333-103714).
4 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A Post-Effective Amendment No. 2 filed March 2,
2004 (File No. 333-103714).
5 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A Post-Effective Amendment No. 3 filed April1,
2004 (File No. 333-103714). 6 Incorporated herein by reference to
Registrant's Registration Statement on Form N-1A Post-Effective
Amendment No. 4 filed July 20, 2004 (File No. 333-103714).
7 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A Post-Effective Amendment No. 5 filed September
27, 2004 (File No. 333-103714).
8 Incorporated herein by reference to Registrant's Registration
Statement on Form N-1A Post-Effective Amendment No. 6 filed December
22, 2004(File No. 333-103714).
9 Filed herewith as Exhibit A to the Proxy Statement/Prospectus.
ITEM 17. UNDERTAKINGS.
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a part of this
registration statement by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act of 1933, as amended, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the registration
statement and will not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file in a Post-Effective Amendment to
this Registration Statement a final tax opinion upon the closing of the
transaction.
SIGNATURES
As required by the Securities Act of 1933, as amended, this Registration
Statement has been signed on behalf of Registrant in the City of Rocky Mount,
and State of North Carolina on this 12th day of April 2005.
PMFM INVESTMENT TRUST
/s/ Julian G. Winters, Secretary
________________________________
Julian G. Winters, Secretary
As required by the Securities Act of 1933, this Registration Statement has been
signed below by the following persons in the capacities and on the dates
indicated.
* April 12, 2005
___________________________________ ______________
James M. Baker, Trustee Date
* April 12, 2005
___________________________________ ______________
Donald L. Beasley, Trustee, Chairman and Treasurer Date
* April 12, 2005
___________________________________ ______________
Timothy A. Chapman, President Date
* April 12, 2005
___________________________________ ______________
Norman A. McLean, Trustee Date
/s/ Tracey L. Hendricks April 12, 2005
___________________________________ ______________
Tracey L. Hendricks, Assistant Secretary and Assistant Treasurer Date
* By: /s/ Julian G. Winters April 12, 2005
___________________________________ ______________
Julian G. Winters, Attorney-in-Fact and Secretary Date
INDEX OF EXHIBITS
(6)(d) Investment Advisory Agreement between the Registrant and the Advisor, as
advisor for the PMFM Core Advantage Portfolio Trust.
(7)(d) Distribution Agreement between the Registrant and the Distributor, as
distributor for the PMFM Core Advantage Portfolio Trust.
(9)(i) Eighth Addendum to the Master Custodian Agreement between The Nottingham
Management Company and Wachovia Bank, N.A. (successor by merger to First Union
National Bank).
(11) Form of Opinion of Kilpatrick Stockton LLP regarding legality of issuance
of shares.
(12) Form of Opinion of Kilpatrick Stockton LLP regarding certain tax matters.
(14) Consent of Independent Registered Public Accounting Firm.