0000950123-11-006645.txt : 20111021 0000950123-11-006645.hdr.sgml : 20111021 20110128160649 ACCESSION NUMBER: 0000950123-11-006645 CONFORMED SUBMISSION TYPE: N-1A/A PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20110128 DATE AS OF CHANGE: 20110131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: del Rey Global Investors Funds CENTRAL INDEX KEY: 0001494725 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1210 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-167999 FILM NUMBER: 11555951 BUSINESS ADDRESS: STREET 1: 6701 CENTER DRIVE WEST STREET 2: SUITE 655 CITY: LOS ANGELES STATE: CA ZIP: 90045 BUSINESS PHONE: 310-649-1230 MAIL ADDRESS: STREET 1: 6701 CENTER DRIVE WEST STREET 2: SUITE 655 CITY: LOS ANGELES STATE: CA ZIP: 90045 FILER: COMPANY DATA: COMPANY CONFORMED NAME: del Rey Global Investors Funds CENTRAL INDEX KEY: 0001494725 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1210 FILING VALUES: FORM TYPE: N-1A/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-22434 FILM NUMBER: 11555952 BUSINESS ADDRESS: STREET 1: 6701 CENTER DRIVE WEST STREET 2: SUITE 655 CITY: LOS ANGELES STATE: CA ZIP: 90045 BUSINESS PHONE: 310-649-1230 MAIL ADDRESS: STREET 1: 6701 CENTER DRIVE WEST STREET 2: SUITE 655 CITY: LOS ANGELES STATE: CA ZIP: 90045 0001494725 S000030079 del Rey Monarch Fund C000092358 Institutional Shares C000099186 Class A Shares N-1A/A 1 x89252nv1aza.htm N-1A/A nv1aza
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As filed with the Securities and Exchange Commission on January 28, 2011
Securities Act File No. 333-167999
Investment Company Act File No. 811-22432
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-1A
         
 
  REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
  þ
 
       
 
  Pre-Effective Amendment No. 3   þ
 
       
 
  Post-Effective Amendment No.   o
 
       
 
  and/or    
 
       
 
  REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
  þ
 
       
 
  Amendment No.   o
(Check appropriate box or boxes)
 
del Rey Global Investors Funds
(Exact Name of Registrant as Specified in Charter)
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
(Address of Principal Executive Offices)
Registrant’s Telephone Number, including Area Code: (310) 649-1230
Gerald W. Wheeler, Esq.
Chief Operating Officer
del Rey Global Investors, LLC
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
(Name and Address of Agent for Service)
Copies to:
Counsel for the Registrant:
Barry Barbash, Esq.
Maria Gattuso, Esq.
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019
 
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY DETERMINE.
 
 

 


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del Rey Global Investors Funds
 
del Rey Monarch Fund
 
Class A and Institutional Shares
Prospectus
 
January 28, 2011
 
(DE REY LOGO)
 
A SUBSCRIPTION PERIOD FOR INSTITUTIONAL SHARES OF THE FUND WILL END ON FEBRUARY 15, 2011, UNLESS EXTENDED. CLASS A SHARES ARE NOT EXPECTED TO BE AVAILABLE FOR PURCHASE UNTIL ON OR ABOUT MARCH 1, 2011.
 
This Prospectus contains information you should know before investing, including information about risks. Please read it before you invest and keep it for future reference.
 
         
    Ticker
Class
  Symbol
 
Class A Shares
    N/A  
Institutional Shares
    N/A  
 
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation to the contrary is a criminal offense.


 

 
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    Inside Back Cover  
    Back Cover  
 EX-99.E.2
 EX-99.E.3
 EX-99.H.3
 EX-99.H.4
 EX-99.I
 EX-99.J


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Overview of the Fund
 
del Rey Monarch Fund
 
Investment Objective
 
The investment objective of the del Rey Monarch Fund (the “Fund”) is to seek long-term capital appreciation.
 
Fees and Expenses of the Fund
 
This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts if you and your family invest, or agree to invest in the future, at least $100,000 in the Fund. More information about these and other discounts is available from your financial professional and in the “Details About the Share Classes” section on page 15 of the Fund’s prospectus and in the “Information About the Fund’s Shares” section on page 42 of the Fund’s statement of additional information.
 
                 
Shareholder Fees
  Class A
  Institutional
(Fees Paid Directly from Your Investment)
  Shares   Shares
 
Maximum Sales Charge (Load) Imposed on Purchases (as percentage of offering price)
    5.00 %     None  
Maximum Deferred Sales Charge (Load) (as a percentage of offering price or redemption proceeds, whichever is lower)
    None (1)     None  
Redemption Fee (as a percentage of amount redeemed or exchanged within 60 days)
    2.00 %     2.00 %
 
                 
Annual Fund Operating Expenses
       
(Expenses that You Pay Each Year as a
  Class A
  Institutional
Percentage of the Value of Your Investment)
  Shares   Shares
 
Management Fee
    0.90 %     0.90 %
Distribution and/or Service (12b-1) Fees
    0.25 %     None  
Other Expenses(2)
    0.48 %     0.48 %
Acquired Fund Fees and Expenses(2)
    0.00 %     0.00 %
Total Annual Fund Operating Expenses
    1.63 %     1.38 %
Fee Waivers and/or Expense Reimbursements(3)
    (0.23 )%     (0.23 )%
Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements
    1.40 %     1.15 %
 
 
(1) If you invest $100,000 or more in Class A Shares, you will not pay an initial sales charge. In that case, del Rey Global Investors, LLC compensates the financial intermediary from its own resources. However, if you redeem your shares within 18 months after purchase, you may be charged a deferred sales charge of 1.00% of the lesser of the original cost of the shares being redeemed or your redemption proceeds. Such deferred sales charge may be waived in connection with certain fee-based programs.
 
(2) Based on estimated amounts for the current fiscal year.
 
(3) As described in the “Fund Management” section, del Rey Global Investors, LLC has contractually agreed to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waivers and/or Expense Reimbursements (excluding Acquired Fund Fees and Expenses and certain other Fund expenses) to 1.40% for Class A Shares and 1.15% for Institutional Shares until March 1, 2012. The Fund may have to repay some of these waivers and reimbursements to del Rey Global Investors, LLC in the following two fiscal years. The agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Fund or by a vote of a majority of the outstanding voting securities of the Fund.


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Example:
 
This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
 
                 
    1 Year   3 Years
 
Class A Shares
  $ 635     $ 967  
Institutional Shares
  $ 117     $ 414  
 
Portfolio Turnover:
 
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance.
 
Principal Investment Strategies of the Fund
 
Under normal conditions, the Fund invests primarily in equity securities of issuers located in a number of different countries outside of the United States. The Fund generally invests at least 80% of its total assets in common and preferred stock, American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”) and convertible securities. The Fund may invest up to 10% of its total assets in Rule 144A securities. The Fund may invest up to 20% of its total assets in companies located in countries with emerging securities markets when del Rey Global Investors, LLC (“del Rey Global”), the Fund’s investment manager, believes they present an attractive investment opportunity.
 
The Fund seeks to invest in intrinsically undervalued non-U.S. companies with strong and/or improving business fundamentals. The Fund seeks to invest in approximately 35-60 companies whose capitalizations are generally over $1 billion and represent strong risk/return characteristics. Generally a country’s weighting will be limited to 35% of the Fund’s total assets, measured at the time of purchase. The Fund’s investment strategy is not designed to track the performance of any specific benchmark.
 
The Fund also may invest in other investment companies, including exchange-traded funds, to the extent permitted under the Investment Company Act of 1940, as amended, and the rules, published guidance and exemptive orders under that Act.
 
In the future, the Fund expects to lend portfolio securities on a short-term or long-term basis, in an amount up to 331/3% of its total assets, but the Fund does not currently do so.
 
The Fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities are securities that the Fund may not sell within seven days at their approximate current value. Rule 144A securities, which are privately offered securities that may be traded in the institutional investor market pursuant to an exemption from the Securities Act of 1933, as amended, will be deemed to be illiquid securities unless the Fund’s Board determines otherwise.
 
Principal Risks of Investing in the Fund
 
Risk is inherent in all investing. The value of your investment in the Fund, as well as the amount of return you receive on your investment, may fluctuate significantly from day to day and over time. You may lose part or all of the money that you invested in the Fund or your investment may not perform as well as other similar investments. The following is a summary description of certain principal risks of investing in the Fund.


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Convertible Securities Risk — The Fund may invest in convertible securities, which generally are debt securities or preferred stock that may be converted into common stock. Convertible securities typically pay current income as either interest (debt security convertibles) or dividends (preferred stock). A convertible’s value usually reflects both the stream of current income payments and the market value of the underlying common stock. The value of convertible securities may fall when interest rates rise. Convertible securities with longer maturities tend to be more sensitive to changes in interests rates, usually making them more volatile than convertible securities with shorter maturities.
 
Depositary Receipts Risk — The issuers of unsponsored depositary receipts are not obligated to disclose information that is, in the United States, considered material. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted.
 
Emerging Markets Risk — Emerging markets are riskier than more developed markets because they tend to develop unevenly and may never fully develop. Investments in emerging markets may be considered speculative. Emerging markets are more likely to experience hyperinflation and currency devaluations, which adversely affect returns to U.S. investors. In addition, many emerging securities markets have far lower trading volumes and less liquidity than developed markets.
 
Equity Securities Risk — Stock markets are volatile. The price of equity securities fluctuates based on changes in a company’s financial condition and overall market and economic conditions.
 
Expense Risk — Fund expenses are subject to a variety of factors, including fluctuations in the Fund’s net assets. Accordingly, actual expenses may be greater than those indicated.
 
Foreign Investments Risk — Foreign investments often involve special risks not present in U.S. investments that can increase the chances that the Fund will lose money. These risks include:
 
  •  The Fund generally holds its foreign securities and cash in foreign banks and securities depositories, which may be recently organized or new to the foreign custody business and may be subject to only limited or no regulatory oversight.
 
  •  Changes in currency exchange rates can affect the value of the Fund’s portfolio.
 
  •  The economies of certain foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position.
 
  •  The governments of certain countries may prohibit or impose substantial restrictions on foreign investments in their capital markets or in certain industries.
 
  •  Many foreign governments do not supervise and regulate stock exchanges, brokers and the sale of securities to the same extent as does the United States and may not have laws to protect investors that are comparable to U.S. securities laws.
 
  •  Settlement and clearance procedures in certain foreign markets may result in delays in payment for or delivery of securities not typically associated with settlement and clearance of U.S. investments.
 
Investment in Other Investment Companies Risk — As with other investments, investments in other investment companies are subject to market and selection risk. In addition, if the Fund acquires shares of other investment companies, shareholders bear both their proportionate share of expenses in the Fund (including advisory fees, administration fees and custodial fees) and, indirectly, the expenses of the investment companies in which the Fund invests.
 
Investment Style Risk — Value investments have generally performed better during periods of economic recovery. Therefore, this investment style may over time go in and out of favor. At times when the investment style used by the Fund is out of favor, the Fund may underperform other international equity funds that use different investment styles.


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Liquidity Risk — Liquidity risk exists when particular investments are difficult to purchase or sell. The Fund’s investments in illiquid securities, which may include Rule 144A securities, may reduce the returns of the Fund because it may be difficult to sell the illiquid securities at an advantageous time or price. To the extent that the Fund’s principal investment strategies involve securities with substantial market and/or credit risk, the Fund will tend to have the greatest exposure to liquidity risk.
 
Market Risk — Market risk is the risk that the value of one or more investments in which the Fund invests may go down in value.
 
Rule 144A Securities Risk — The market for Rule 144A securities typically is less active than the market for public securities. Rule 144A securities carry the risk that the trading market may not continue.
 
Securities Lending Risk — Securities lending involves the risk that the borrower may fail to return the securities in a timely manner or at all. As a result, the Fund may lose money and there may be a delay in recovering the loaned securities. The Fund could also lose money if it does not recover the securities and/or the value of the collateral falls, including the value of investments made with cash collateral. These events could trigger adverse tax consequences for the Fund. The Fund does not currently lend its securities, but expects to do so in the future.
 
Selection Risk — Selection risk is the risk that the securities selected by the Fund’s investment manager may underperform the market or other securities selected by other funds.
 
Small and Mid-Cap Capitalization Companies Risk — Companies with small- or mid-size market capitalizations will normally have more limited product lines, markets and financial resources and will be dependent upon a more limited management group than larger capitalized companies. In addition, it is more difficult to get information on relatively smaller companies, which tend to be less well known, have shorter operating histories, do not have significant ownership by large investors and are followed by relatively few securities analysts.
 
Performance Information
 
Because the Fund is expected to commence operations on February 16, 2011, there is no historical performance information shown. Performance will be presented after the Fund has been in operation for one full calendar year.
 
Investment Manager
 
The Fund’s investment manager is del Rey Global Investors, LLC.
 
Portfolio Manager
 
Paul Hechmer, the Chief Investment Officer of del Rey Global, has been the portfolio manager of the Fund since its inception in 2011.
 
Purchase and Sale of Fund Shares
 
You may purchase or redeem shares of the Fund each day the New York Stock Exchange (“NYSE”) is open. To purchase or sell shares you should contact your financial intermediary or financial professional, or, if you hold your shares through the Fund, you should contact the Fund by phone at 1-866-876-9946 or by mail


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(PO Box 4766, Chicago, IL 60680-4766). The Fund’s initial and subsequent investment minimums generally are as follows, although the Fund may reduce or waive the minimums in certain cases:
 
         
   
Class A Shares
 
Institutional Shares
 
Minimum Initial Investment
  $2,000 for all accounts except:   $100,000 for institutions and individuals.
    $50 through systematic investment plan accounts.    
Minimum Additional
       
Investment
  $50 for all accounts except certain retirement plans may have a lower minimum.   No subsequent minimum
 
Tax Information
 
The Fund’s dividends and distributions may be subject to federal income taxes and may be taxed as ordinary income or capital gains, unless you are a tax-exempt investor or are investing through a retirement plan, in which case you may be subject to federal income tax upon withdrawal from such tax deferred arrangements.
 
Payments to Broker/Dealers and Other Financial Intermediaries
 
If you purchase shares of the Fund through a broker-dealer or other financial intermediary, the Fund and Foreside Fund Services, LLC, the Fund’s distributor, or the Fund’s affiliates may pay the intermediary for the sale of Fund shares and other services. These payments may create a conflict of interest by influencing the broker-dealer or other financial intermediary and your individual financial professional to recommend the Fund over another investment. Ask your individual financial professional or visit your financial intermediary’s website for more information.
 
More Information About the Fund
 
Included in this prospectus are sections that tell you more about the del Rey Monarch Fund (the “Fund”), buying and selling shares, management information, shareholder features and your rights as a shareholder.
 
Types of Investments the Fund Makes
 
Investment Objective
 
The investment objective of the Fund is to seek long-term capital appreciation. The Fund’s investment objective is not fundamental and may be changed without a shareholder vote.
 
Investment Process
 
del Rey Global Investors, LLC (“del Rey Global”) adheres to disciplined, value-driven investment strategies whose aim is to achieve the Fund’s investment objective. The Fund seeks to invest in intrinsically undervalued non-U.S. companies with strong and/or improving business fundamentals. del Rey Global performs bottom-up research on companies and industries focusing on qualitative factors such as restructuring, management strength, shareholder orientation and the ability to capitalize on improving industry fundamentals. In addition, a broad range of fundamental valuation metrics are utilized — price-to-cash flow, price-to-book, price-to-earnings and liquidation/replacement value.
 
Principal Investment Strategies
 
Under normal conditions, the Fund invests primarily in equity securities of issuers located in a number of different countries outside of the United States. Equity securities include common stocks; preferred stocks; warrants to purchase common stocks or preferred stocks; American Depositary Receipts (“ADRs”); European Depositary Receipts (“EDRs”); Global Depositary Receipts (“GDRs”); securities convertible into common or preferred stocks, such as convertible bonds and debentures, and other securities with equity characteristics.


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The Fund generally invests at least 80% of its total assets in common and preferred stock, ADRs, EDRs, GDRs and convertible securities. The Fund may invest in both sponsored and unsponsored ADRs, which typically are issued by an American bank or trust company and evidence ownership of underlying securities issued by a foreign corporation, EDRs, which are sometimes referred to as Continental Depositary Receipts, are receipts issued in Europe, typically by foreign banks and trust companies, that evidence ownership of either foreign or domestic underlying securities, and GDRs, which are depositary receipts structured like global debt issues to facilitate trading on an international basis. A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock or other equity security of the same or a different issuer within a particular period of time at a specified price or formula.
 
The Fund may invest up to 10% of its assets in Rule 144A securities, which are securities that can be offered and sold only to “qualified institutional buyers” under Rule 144A under the Securities Act of 1933. The Fund may also invest up to 20% of its assets in companies located in countries with emerging securities markets when del Rey Global believes they present an attractive investment opportunity.
 
The Fund seeks to invest in approximately 35-60 companies whose capitalizations are generally over $1 billion and represent strong risk/return characteristics. Generally a country’s weighting will be limited to 35% of the Fund’s total assets measured at the time of purchase.
 
The Fund may invest in other investment companies, including exchange-traded funds (“ETFs”), to the extent permitted under the Investment Company Act of 1940 (the “1940 Act”), as amended, and the rules, published guidance and exemptive orders under that Act. In the case of ETFs, the Fund may invest in excess of the limits imposed under the 1940 Act pursuant to exemptive orders obtained by certain ETFs and their sponsors from the Securities and Exchange Commission.
 
In the future, the Fund expects to lend portfolio securities on a short-term or long-term basis, in an amount up to 331/3% of its total assets, but the Fund does not currently do so.
 
The Fund may invest up to 15% of its net assets in illiquid securities. Illiquid securities are securities that the Fund may not sell within seven days at the approximate current value. Rule 144A securities will be deemed to be illiquid securities unless the Fund’s Board or del Rey Global determines otherwise.
 
The Fund’s investment strategy is not designed to track the performance of any specific benchmark.
 
The Fund invests in a particular segment of the securities markets that generally is not representative of the market as a whole. The Fund is designed to be used as part of broader asset allocation strategies. Accordingly, an investment in the Fund should not constitute a complete investment program. An investment in the Fund is not a bank deposit and it is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency, del Rey Global or any of its affiliates.
 
Non-Principal Investment Strategies
 
In addition to the principal investment strategies discussed above, the Fund may also invest or engage in the following investments/strategies:
 
The Fund may use derivatives for hedging purposes. Derivatives are financial instruments the value of which is derived from another security, a commodity (such as gold or oil), a currency or an index (a measure of value or rates, such as the S&P 500 Index or the prime lending rate). While using derivatives for hedging purposes can reduce the Fund’s risk of loss, it may also limit the Fund’s opportunity for gains or result in losses by offsetting or limiting the Fund’s ability to participate in favorable price movements in portfolio investments.
 
Cash Equivalents and Short-Term Fixed-Income Securities — Normally, the Fund will invest substantially all of its assets to meet its investment objectives. The Fund may invest the remainder of its assets in securities with maturities of less than one year or cash equivalents or it may hold cash. The Fund may hold all or a portion of its uninvested cash in foreign currencies or their equivalents. The percentage of the Fund invested in such holdings will vary and depends on several factors, including market conditions.


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When-Issued and Delayed Delivery Securities — The Fund may buy or sell securities on a when-issued or delayed delivery basis, paying for or taking delivery of the securities at a later date, normally within 15 to 45 days of the trade.
 
Defensive Investments — For temporary defensive purposes, including during periods of high cash inflows, the Fund may depart from its principal investment strategies and invest part or all of its assets in cash equivalents and short-term fixed-income securities or it may hold cash. During such periods, the Fund may not be able to achieve its investment objectives. The Fund may adopt a defensive strategy when its portfolio manager believes securities in which the Fund normally invests have elevated risks due to adverse market conditions, political or economic factors and in other extraordinary circumstances.
 
Principal Risks
 
This section contains more discussion of the principal risks of investing in the Fund. Risk is inherent in all investing. The value of your investment in the Fund, as well as the amount of return you receive on your investment, may fluctuate significantly from day to day and over time. You may lose part or all of your investment in the Fund or your investment may not perform as well as other similar investments. “Additional Information on Investment Strategies of the Fund” in the Statement of Additional Information (the “SAI”) also includes more information about the Fund, its investments and the related risks. As with any fund, there can be no guarantee that the Fund will meet its investment objective or that the Fund’s performance will be positive for any period of time.
 
Convertible Securities Risk — The market value of a convertible security performs like that of a regular debt security; that is, if market interest rates rise, the value of a convertible security usually falls. In addition, convertible securities are subject to the risk that the issuer will not be able to pay interest or dividends when due, and their market value may change based on changes in the issuer’s credit rating or the market’s perception of the issuer’s creditworthiness. Since it derives a portion of its value from the common stock into which it may be converted, a convertible security is also subject to the same types of market and issuer risks that apply to the underlying common stock. The income component of convertible securities causes fluctuations based upon changes in interest rates and the credit quality of the issuer. Convertible securities are often lower rated securities. The Fund may be required to redeem or convert a convertible security before the holder would otherwise choose.
 
Mandatory convertible securities are distinguished as a subset of convertible securities because the conversion is not optional and the conversion price at maturity is based solely upon the market price of the underlying common stock, which may be significantly less than par or the price (above or below par) paid. Mandatory convertible securities generally do not limit the potential for loss to the same extent as securities convertible at the option of the holder.
 
Depositary Receipts Risk — The issuers of unsponsored depositary receipts are not obligated to disclose information that is, in the United States, considered material. Therefore, there may be less information available regarding these issuers and there may not be a correlation between such information and the market value of the depositary receipts. Depositary receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Even when denominated in U.S. dollars, depositary receipts are subject to currency risk if the underlying security is denominated in a foreign currency. There can be no assurance that the price of depositary receipts will always track the price of the underlying foreign security.
 
Emerging Markets Risk — The risks of foreign investments are usually much greater for emerging markets. Investments in emerging markets may be considered speculative. Emerging markets include those in countries defined as emerging or developing by the World Bank, the International Finance Corporation or the United Nations. Emerging markets are riskier than more developed markets because they tend to develop unevenly and may never fully develop. They are more likely to experience hyperinflation and currency devaluations, which adversely affect returns to U.S. investors. In addition, many emerging markets have far lower trading volumes and less liquidity than developed markets. Since these markets are often small, they may be more likely to suffer sharp and frequent price changes or long-term price depression because of


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adverse publicity, investor perceptions or the actions of a few large investors. In addition, traditional measures of investment value used in the United States, such as price to earnings ratios, may not apply to certain small markets. Communications between the United States and emerging market countries may be unreliable, increasing the risk of delayed settlements or losses of security certificates.
 
Many emerging markets have histories of political instability and abrupt changes in policies. As a result, their governments are more likely to take actions that are hostile or detrimental to private enterprise or foreign investment than those of more developed countries. Some countries have pervasive corruption and crime that may hinder investments. Certain emerging markets may also face other significant internal or external risks, including the risk of war, and ethnic, religious and racial conflicts. In addition, governments in many emerging market countries participate to a significant degree in their economies and securities markets, which may impair investment and economic growth.
 
Equity Securities Risk — Common and preferred stocks represent equity ownership in a company. Stock markets are volatile. The price of equity securities will fluctuate and can decline and reduce the value of a portfolio investing in equities. The value of equity securities purchased by the Fund could decline if the financial condition of the companies the Fund invests in decline or if overall market and economic conditions deteriorate. They may also decline due to factors that affect a particular industry or industries, such as labor shortages or an increase in production costs and competitive conditions within an industry. In addition, they may decline due to general market conditions that are not specifically related to a company or industry, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or generally adverse investor sentiment.
 
Expense Risk — Fund expenses are subject to a variety of factors, including fluctuations in the Fund’s net assets. Accordingly, actual expenses may be greater than those indicated. For example, to the extent that the Fund’s net assets decrease due to market declines or redemptions, the Fund’s expenses will increase as a percentage of Fund net assets. During periods of high market volatility, these increases in the Fund’s expense ratio could be significant.
 
Foreign Investments Risk — Securities traded in foreign markets have often (though not always) performed differently from securities traded in the United States. However, such investments often involve special risks not present in U.S. investments that can increase the chances that the Fund will lose money. In particular, the Fund is subject to the risk that because there may be fewer investors on foreign exchanges and a smaller number of securities traded each day, it may be more difficult for the Fund to buy and sell securities on those exchanges. In addition, prices of foreign securities may go up and down more than prices of securities traded in the United States.
 
Certain Risks of Holding Fund Assets Outside the United States — The Fund generally holds its foreign securities and cash in foreign banks and securities depositories. Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. In addition, there may be limited or no regulatory oversight of their operations. Also, the laws of certain countries limit the Fund’s ability to recover its assets if a foreign bank, depository or issuer of a security, or any of their agents, goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund than for investment companies invested only in the United States.
 
Currency Risk — Securities and other instruments in which the Fund invests may be denominated or quoted in currencies other than the U.S. dollar. For this reason, changes in foreign currency exchange rates can affect the value of the Fund’s portfolio.
 
Generally, when the U.S. dollar rises in value against a foreign currency, a security denominated in that currency loses value because the currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against a foreign currency, a security denominated in that currency gains value because the currency is worth more U.S. dollars. This risk, generally known as “currency risk,” means that a strong U.S. dollar will reduce returns for U.S. investors while a weak U.S. dollar will increase those returns.


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Foreign Economy Risk — The economies of certain foreign markets may not compare favorably with the economy of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources and balance of payments position. Certain foreign economies may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, changes in international trading patterns, trade barriers and other protectionist or retaliatory measures. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of capital controls, nationalization of companies or industries, expropriation of assets or the imposition of punitive taxes. In addition, the governments of certain countries may prohibit or impose substantial restrictions on foreign investments in their capital markets or in certain industries. Any of these actions could severely affect securities prices or impair the Fund’s ability to purchase or sell foreign securities or transfer the Fund’s assets or income back into the United States, or otherwise adversely affect the Fund’s operations.
 
Other potential foreign market risks include foreign exchange controls, difficulties in pricing securities, defaults on foreign government securities, difficulties in enforcing legal judgments in foreign courts and political and social instability. Diplomatic and political developments, including rapid and adverse political changes, social instability, regional conflicts, terrorism and war, could affect the economies, industries and securities and currency markets, and the value of the Fund’s investments, in non-U.S. countries. These factors are extremely difficult, if not impossible, to predict and take into account with respect to the Fund’s investments.
 
Governmental Supervision and Regulation/Accounting Standards — Many foreign governments do not supervise and regulate stock exchanges, brokers and the sale of securities to the same extent as such regulations exist in the United States. They also may not have laws to protect investors that are comparable to U.S. securities laws. For example, some foreign countries may have no laws or rules against insider trading. Insider trading occurs when a person buys or sells a company’s securities based on material non-public information about that company. In addition, some countries may have legal systems that may make it difficult for the Fund to vote proxies, exercise shareholder rights, and pursue legal remedies with respect to its foreign investments. Accounting standards in other countries are not necessarily the same as in the United States. If the accounting standards in another country do not require as much detail as U.S. accounting standards, it may be harder for Fund management to completely and accurately determine a company’s financial condition.
 
Settlement Risk — Settlement and clearance procedures in certain foreign markets differ significantly from those in the United States. Foreign settlement and clearance procedures and trade regulations also may involve certain risks (such as delays in payment for or delivery of securities) not typically associated with the settlement of U.S. investments.
 
At times, settlements in certain foreign countries have not kept pace with the number of securities transactions. These problems may make it difficult for the Fund to carry out transactions. If the Fund cannot settle or is delayed in settling a purchase of securities, it may miss attractive investment opportunities and certain of its assets may be uninvested with no return earned thereon for some period. If the Fund cannot settle or is delayed in settling a sale of securities, it may lose money if the value of the security then declines or, if it has contracted to sell the security to another party; the Fund could be liable for any losses incurred.
 
Investment in Other Investment Companies Risk — The Fund may invest in other investment companies, including directly in ETFs. The Fund indirectly pays a portion of the expenses (including advisory fees, administration fees, custodial fees and operating expenses) incurred by the investment company in which the Fund invests. An investment company in which the Fund invests may buy the same securities that the Fund sells, or vice-versa. If this happens, an investor in the Fund would indirectly bear the costs of these transactions without accomplishing the intended investment purpose. Also, an investor in the Fund may receive taxable gains from portfolio transactions by an investment company that the Fund has invested in, as well as taxable gains from transactions in shares of the that investment company.
 
Investment Style Risk — Value investments are securities issued by companies that may be perceived as undervalued. Value investments can fail to appreciate for long periods of time and may never realize their full potential value. Value investments have generally performed better during periods of economic recovery.


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Therefore, this investment style may over time go in and out of favor. At times when the investment style used by the Fund is out of favor, the Fund may underperform other international equity funds that use different investment styles.
 
Liquidity Risk — If a security is illiquid, the Fund might be unable to sell the security at a time when del Rey Global might wish to sell, and the security could have the effect of decreasing the overall level of the Fund’s liquidity. Further, the lack of an established secondary market may make it more difficult to value some illiquid securities, which could vary from the amount the Fund could realize upon disposition. The Fund may make investments that become less liquid in response to market developments or adverse investor perception. The Fund could lose money if it cannot sell a security at the time and price that would be most beneficial to the Fund.
 
Market Risk — Market risk is the risk that one or more markets in which the Fund invests may go up or down in response to the prospects of individual issuers and/or general economic conditions. Securities markets may experience great short-term volatility and may fall sharply at times. Different markets may behave differently from each other and a foreign market may move in the opposite direction from the U.S. market. Price changes may be temporary or last for extended periods. You could lose money over short periods due to fluctuation in the Fund’s net asset value (“NAV”) in response to market movements, and over longer periods during market downturns.
 
Recently, international markets experienced extraordinary volatility, substantially lower valuations, reduced liquidity, credit downgrades, increased likelihood of default and valuation difficulties. Concerns have spread to domestic and international equity markets. Many governments have taken numerous steps to alleviate these market concerns, including without limitation, acquiring ownership interests in distressed institutions. However, there is no assurance that such actions will be successful. Continuing market problems and government intervention in the economy may adversely affect the Fund.
 
Rule 144A Securities Risk — Rule 144A securities are securities that are not registered under applicable securities laws but which are bought and sold solely by institutional investors. The market for Rule 144A securities typically is less active than the market for public securities. Rule 144A securities carry the risk that the trading market may not continue.
 
Securities Lending Risk — In order to generate additional income, the Fund may lend portfolio securities in an amount up to 331/3% of its assets to broker-dealers, major banks, or other recognized domestic institutional borrowers of securities. When the Fund lends its securities, it is responsible for investing the cash collateral it receives from the borrower of the securities, and the Fund could incur losses in connection with the investment of such cash collateral. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower default or fail financially. The Fund does not currently lend its securities, but expects to do so in the future.
 
Selection Risk — Selection risk is the risk that the securities selected by the Fund’s management may underperform the market or other securities selected by other funds. The Fund’s management could be wrong in its analysis of industries, companies, economic trends, the relative attractiveness of different securities or other matters. This means that you may lose money.
 
Small and Mid-Cap Capitalization Companies Risk — The Fund may invest in securities with as little as $1 billion in market capitalization and some securities may be considered small or mid-cap securities. Small and mid-cap companies may have limited product lines or markets. They may be less financially secure than larger, more established companies. They may depend on a small number of key personnel. If a product fails or there are other adverse developments, or if management changes, the Fund’s investment in a small or mid-cap company may lose substantial value. In addition, it is more difficult to get information on relatively smaller companies, which tend to be less well known, have shorter operating histories, do not have significant ownership by large investors and are followed by relatively few securities analysts. The securities of small and mid-cap companies generally trade in lower volumes and are subject to greater and more unpredictable price changes than large cap securities or the market as a whole. In addition, small and mid-cap securities may be particularly sensitive to


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changes in interest rates, borrowing costs and earnings. Investing in small or mid-cap securities requires a longer term view.
 
The Fund may also be subject to certain other risks associated with its investments and investment strategies, including:
 
Derivatives Risk — The Fund may use derivatives for hedging purposes, but does not intend to use derivatives as part of its principal investment strategy. The Fund’s use of derivatives may reduce the Fund’s returns and/or increase volatility. Volatility is defined as the characteristic of a security, an index or a market to fluctuate significantly in price within a short time period. A risk of the Fund’s use of derivatives is that the fluctuations in their values may not correlate perfectly with the overall securities markets. Using derivatives as a hedge against a portfolio investment subjects the Fund to the risk that the derivative will have imperfect correlation with the portfolio investment, which could result in the Fund incurring substantial losses. Derivatives are also subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. In addition, some derivatives are more sensitive to interest rate changes and market price fluctuations than other securities. The possible lack of a liquid secondary market for derivatives and the resulting inability of the Fund to sell or otherwise close a derivatives position could expose the Fund to losses and could make derivatives more difficult for the Fund to value accurately. The Fund could also suffer losses related to its derivatives positions as a result of unanticipated market movements, which losses are potentially unlimited. Finally, del Rey Global may not be able to predict correctly the direction of securities prices, interest rates and other economic factors, which could cause the Fund’s derivatives positions to lose value. When a derivative is used as a hedge against a position that the Fund holds, any loss generated by the derivative generally should be substantially offset by gains on the hedged investment, and vice versa. While hedging can reduce or eliminate losses, it can also reduce or eliminate gains. Hedges are sometimes subject to imperfect matching between the derivative and the underlying security, and there can be no assurance that the Fund’s hedging transactions will be effective. The income from certain derivatives may be subject to federal income tax.
 
When-Issued and Delayed Delivery Securities Risk — When-issued and delayed delivery securities involve the risk that the security the Fund buys will lose value prior to its delivery. There also is the risk that the security will not be issued or that the other party to the transaction will not meet its obligation. If this occurs, the Fund loses both the investment opportunity for the assets it set aside to pay for the security and any gain in the security’s price.
 
Portfolio Holdings Information
 
For a discussion of the Fund’s policies and procedures regarding the selective disclosure of its portfolio holdings, please see the SAI. Certain portfolio holdings information for the Fund will be available on the Fund’s website www.delreyglobal.com/monarchfund. By following these links, you can obtain a list of the Fund’s top ten holdings as of the end of the most recent month. A complete list of portfolio holdings information is generally made available on the Fund’s website following the end of each month with an approximately one-month lag. This information will remain available on the Fund’s website until the Fund files with the Securities and Exchange Commission its annual, semi-annual or quarterly holdings report for the fiscal period that includes the date(s) as of which the website information is current.
 
Fund Management
 
del Rey Global Investors
 
del Rey Global, the Fund’s investment manager, located at 6701 Center Drive West, Suite 655, Los Angeles, CA 90045, manages the Fund’s investments and its business operations subject to the oversight of the Board of Trustees (the “Board”) of the Fund. While del Rey Global is ultimately responsible for the management of the Fund, it is able to draw upon the trading, research and expertise of its asset management affiliates for portfolio decisions and management with respect to certain portfolio securities.


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del Rey Global, a registered investment adviser, was organized in 2009 to perform advisory services for investment companies, separate accounts and other investment pools. del Rey Global had approximately $1.118 billion in investment company and other portfolio assets under management as of December 31, 2010.
 
The Fund has entered into an investment advisory agreement (the “Management Agreement”) with del Rey Global under which del Rey Global receives for its services to the Fund a fee of 0.90% of the Fund’s average daily net assets.
 
del Rey Global has agreed to cap net expenses (excluding (i) interest, taxes, brokerage fees and commissions, and extraordinary charges, including, but not limited to, litigation costs; (ii) expenses incurred indirectly by the Fund as a result of investments in other investment companies and pooled investment vehicles; and (iii) other expenses attributable to, and incurred as a result of, the Fund’s investments) to 1.40% for Class A Shares and 1.15% for Institutional Shares until March 1, 2012. To achieve this expense cap, del Rey Global has agreed to waive and/or reimburse fees or expenses if the Fund’s operating expenses exceed the specified cap. The agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Fund or by a vote of a majority of the outstanding voting securities of the Fund.
 
With respect to this contractual agreement, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from del Rey Global, are less than the expense limit for that share class, the share class is required to repay del Rey Global up to the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement, provided that: (1) the Fund has more than $50 million in assets and (2) del Rey Global or an affiliate serves as the Fund’s manager. Any amount reimbursed by a share class will not cause the share class to exceed the applicable expense cap for that fiscal year.
 
A discussion of the basis for the Board’s approval of the Management Agreement with del Rey Global with respect to the Fund will be included in the Fund’s semi-annual shareholder report for the period ending April 30, 2011.
 
From time to time, a manager, analyst, or other employee of del Rey Global or its affiliates may express views regarding a particular asset class, company, security, industry, or market sector. The views expressed by any such person are the views of only that individual as of the time expressed and do not necessarily represent the views of del Rey Global or any other person within the organization. Any such views are subject to change at any time based upon market or other conditions and del Rey Global disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for the Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of the Fund.
 
Portfolio Manager Information
 
Information regarding the portfolio manager of the Fund is set out below. Further information regarding the portfolio manager, including other accounts managed, compensation, ownership of Fund shares, and possible conflicts of interest, is available under the section titled “Information Regarding the Portfolio Manager” in the Fund’s SAI.
 
                         
Portfolio Manager
   
Primary Role
    Since    
Title and Recent Biography
 
  Paul Hechmer       Portfolio Manager       2011     Managing Member, Chief Executive Officer and Chief Investment Officer of del Rey Global since September 2009.
                        Tradewinds Global Investors, LLC — Managing Member from January 2006 to June 2009; NWQ Investment Management Company - Managing Director, Portfolio Manager and Equity Analyst from September 2005 to 2006; NWQ Investment Management Company, LLC, Vice President & Portfolio Manager & Equity Analyst from August 2002 to August 2005.


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Conflicts of Interest
 
The investment activities of del Rey Global (including its managing members, officers and employees (collectively, the “Affiliates”)) in the management of, or their interest in, their own accounts and other accounts they manage, may present conflicts of interest that could disadvantage the Fund and its shareholders. del Rey Global and its Affiliates may provide investment management services to other funds and discretionary managed accounts that follow an investment program similar to that of the Fund. del Rey Global and its Affiliates may take positions for other clients’ portfolios that are different than the positions it takes for the Fund, based on differing investment strategies, guidelines and restrictions that may be imposed by individual clients, the age of the account, the size of the account as well as other factors that may distinguish portfolios. Further, certain accounts may pay performance fees, while other accounts pay a fee based on assets under management, like the Fund. Potential conflicts of interest may be present in these situations. Client accounts may also hold different security types of the same issuer. In doing so, del Rey Global or its Affiliates will evaluate each security type on the basis of its individual investment merits. This may result in del Rey Global or its Affiliates taking different actions for different security types of the same issuer. This could create a conflict of interest with respect to one security type that could adversely affect clients who are holding another security type. No Affiliate is under any obligation to share any investment opportunity, idea or strategy with the Fund. As a result, an Affiliate may compete with the Fund for appropriate investment opportunities. The results of the Fund’s investment activities, therefore, may differ from those of an Affiliate and of other accounts managed by an Affiliate, and it is possible that the Fund could sustain losses during periods in which one or more Affiliates and other accounts achieve profits on their trading for proprietary or other accounts. The opposite result is also possible. In addition, the Fund may, from time to time, enter into transactions in which an Affiliate or its other clients have an adverse interest. Furthermore, transactions undertaken by Affiliate-advised clients may adversely impact the Fund. Transactions by one or more Affiliate-advised clients or del Rey Global may have the effect of diluting or otherwise disadvantaging the values, prices or investment strategies of the Fund.
 
The activities of Affiliates may give rise to other conflicts of interest that could disadvantage the Fund and its shareholders. del Rey Global has adopted policies and procedures designed to address these potential conflicts of interest. See the SAI for further information.
 
Account Information
 
Details about the Share Classes
 
Class A — Retail Option
 
The following table shows the front-end sales charge that you may pay if you buy Class A Shares. The offering price for Class A Shares is the net asset value per share plus any front-end sales charge and the dealer compensation will be as shown in the last column. The front-end sales charge expressed as a percentage of the offering price may be higher or lower than the charge described below due to rounding.
 
You may qualify for a reduced sales charge, or the sales charge may be waived, as described in “How to Reduce Your Sales Charge.” Class A Shares are also subject to an annual distribution and service fee of 0.25% of the Fund’s average daily net assets, which compensates your financial professionals, financial intermediaries and other entities for providing ongoing services to you. The Fund’s distributor, Foreside Fund Services, LLC (the “Distributor”), retains the up-front sales charge and the distribution and service fee on accounts with no financial intermediary of record. Such amounts will be used by the Distributor to pay or reimburse other persons, including del Rey Global or its affiliates, for any distribution activity which may include sales and


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marketing expenses and will not be retained by the Distributor as compensation. The up-front Class A sales charge for the Fund is as follows:
 
                         
            Maximum
    Sales
      Financial
    Charge
      Intermediary
    As a % of
  Sales Charge
  Compensation
    Offering
  As a % of Your
  as a % of
Your Investment
  Price   Investment(1)   Offering Price
 
Less than $100,000
    5.00 %     5.26 %     5.00 %
$100,000 and over(2)
    None       None       None  
 
 
(1) Rounded to the nearest one-hundredth percent.
 
(2) If you invest $100,000 or more in Class A Shares, you will not pay an initial sales charge. In that case, del Rey Global compensates the financial intermediary from its own resources. However, if you redeem your shares within 18 months after purchase, you may be charged a deferred sales charge of 1.00% of the lesser of the original cost of the shares being redeemed or your redemption proceeds. Such deferred sales charge may be waived in connection with certain fee-based programs.
 
No initial sales charge applies to Class A Shares that you buy through reinvestment of Fund dividends or capital gains.
 
Institutional Shares
 
The public offering price of Institutional Shares of the Fund during the subscription period is $15.00 per share. You may purchase Institutional Shares only under limited circumstances, at the offering price, which is the net asset value per share without any up-front sales charge. Institutional Shares are not subject to sales charges or ongoing service or distribution fees. Institutional Shares have lower ongoing expenses than the Class A Shares. Institutional Shares are available for (i) purchases of $100,000 or more, (ii) purchases using dividends and capital gains distributions on Institutional Shares, and (iii) purchase by the following categories of investors:
 
  •  Certain trustees, directors, employees and affiliates of del Rey Global.
 
  •  Certain financial intermediary personnel.
 
  •  Certain bank or broker-affiliated trust departments.
 
  •  Certain employer-sponsored retirement plans
 
  •  Certain additional categories of investors, including certain advisory accounts of del Rey Global and its affiliates, and qualifying clients of investment advisers, financial planners, or other financial intermediaries that charge periodic or asset-based fees for their services.
 
Investment Minimums
 
         
   
Class A Shares
 
Institutional Shares
 
Minimum Initial Investment
  $2,000 for all accounts except:   $100,000 for institutions and individuals.
    $50 through systematic investment plan accounts.    
Minimum Additional Investment
  $50 for all accounts except certain retirement plans may have a lower minimum.   No subsequent minimum


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How to Reduce Your Sales Charge
 
    Rights of Accumulation.  In calculating the appropriate sales charge on a purchase of Class A Shares of the Fund, you may be able to add the amount of your purchase to the value on that day of all of your prior purchases of the Fund’s shares.
 
    Letter of Intent.  Subject to certain requirements, you may purchase Class A Shares of the Fund at the sales charge rate applicable to the total amount of the purchases you intend to make over a 13-month period.
 
For purposes of calculating the appropriate sales charge as described under Rights of Accumulation and Letter of Intent above, you may include purchases by (i) you, (ii) your spouse (or equivalent if recognized under local law) and children under 21 years of age, and (iii) a corporation, partnership or sole proprietorship that is 100% owned by any of the persons in (i) or (ii). In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
 
Class A Sales Charge Waivers
 
Class A Shares of the Fund may be purchased at net asset value without a sales charge as follows:
 
  •  Purchases of $100,000 or more.
 
  •  Certain employer-sponsored retirement plans.
 
  •  Certain employees and affiliates of del Rey Global. Purchases by any officers, trustees and former trustees of the Fund, as well as bona fide full-time and retired employees of del Rey Global, and subsidiaries thereof, and such employees’ immediate family members (as defined in the SAI).
 
  •  Financial intermediary personnel. Purchases by any person who, for at least the last 90 days, has been an officer, director, or bona fide employee of any financial intermediary or any such person’s immediate family member.
 
  •  Certain trust departments. Purchases by bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial, or similar capacity.
 
  •  Additional categories of investors. Purchases made by: (i) investors purchasing on a periodic fee, asset-based fee, or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program; and (ii) clients of investment advisers, financial planners, or other financial intermediaries that charge periodic or asset-based fees for their services.
 
In order to obtain a sales charge reduction or waiver, it may be necessary at the time of purchase for you to inform the Fund or your financial professional of the existence of other accounts, including accounts that may be held at different financial intermediaries, in which there are holdings eligible to be aggregated for such purposes. You may need to provide the Fund or your financial professional information or records, such as account statements, in order to verify your eligibility for a sales charge reduction or waiver. This may include account statements of family members and information regarding Fund shares held in accounts with other financial advisors. The financial professional or the Fund may request documentation — including account statements and records of the original cost of the shares owned by the investor, the investor’s spouse and/or children under the age of 21 — showing that the investor qualifies for a reduced sales charge. The investor should retain these records because — depending on where an account is held or the type of account — the Fund and/or the investor’s financial professional or the Fund’s transfer agent may not be able to maintain this information. You or your financial advisor must notify del Rey Global at the time of each purchase if you are eligible for any of these programs. The Fund may modify or discontinue these programs at any time.
 
More information about sales charge reductions is available in the “Information About the Fund’s Shares” section on page 42 of the SAI, which is available on the website or on request. Information about existing


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sales charge reductions and waivers is also available free of charge in a clear and prominent format via hyperlink at www.delreyglobal.com/monarchfund.
 
How to Buy Shares
 
A subscription period for the Fund’s Institutional Shares will end on February 15, 2011, unless extended. Subscriptions will be payable, shares will be issued and the Fund will commence operations on the next business day after the end of the subscription period. The Fund can terminate the subscription offering at any time, in which case the Fund will not commence operations or will commence operations with a limited number of shares. Class A Shares are not expected to be available for purchase until on or about March 1, 2011.
 
After a Fund commences operations, its shares can be purchased on each business day, which is any day the New York Stock Exchange (the “NYSE”) is open for business and normally ends at 4:00 p.m. New York time. Generally, the NYSE is closed on weekends and national holidays.
 
The share price you pay depends on when the Fund receives your order. Orders received before the close of trading on a business day will receive that day’s closing share price; otherwise, you will receive the next business day’s price.
 
Through Your Financial Professional
 
You may buy shares through your financial professional, who can handle all the details for you, including opening a new account. Financial professionals can also help you review your financial needs and formulate long-term investment goals and objectives. In addition, financial professionals generally can help you develop a customized financial plan, select investments and monitor and review your portfolio on an ongoing basis to help assure your investments continue to meet your needs as circumstances change. Financial professionals (including brokers or agents) are paid for providing ongoing investment advice and services, either from fund sales charges and fees or by charging you a separate fee in lieu of a sales charge.
 
Financial professionals or other dealer firms may charge their customers a processing or service fee in connection with the purchase or redemption of the Fund’s shares. The amount and applicability of such a fee is determined and disclosed to customers by each individual dealer. Processing or service fees typically are fixed, nominal dollar amounts and are in addition to the sales and other charges described in this prospectus and the SAI. Your dealer will provide you with specific information about any processing or service fees you will be charged.
 
By Mail
 
You may open an account and buy shares by mail by completing an application and mailing it along with your check to: PO Box 4766, Chicago, IL 60680-4766. Applications may be obtained by calling 1-866-876-9946. No third party checks will be accepted.
 
How to Sell Shares
 
You may sell (redeem) your shares on any business day. You will receive the net asset value of your shares next determined after the Fund has received your properly completed redemption request. Your redemption request must be received before the close of trading for you to receive that day’s price. If you are selling shares purchased recently with a check, you will not receive your redemption proceeds until your check has cleared. This may take up to ten days from your purchase date. You may be assessed a CDSC, if applicable. When you redeem Class A Shares subject to a CDSC, the Fund will first redeem any shares that are not subject to a CDSC, and then redeem the shares you have owned for the longest period of time, unless you ask the Fund to redeem your shares in a different order. No CDSC is imposed on shares you buy through the reinvestment of dividends and capital gains. The holding period is calculated on a monthly basis and begins the first day of the month in which the order for investment is received. When you redeem shares subject to a CDSC, the CDSC is calculated on the lower of your purchase price or redemption proceeds,


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deducted from your redemption proceeds, and paid to del Rey Global. The CDSC may be waived under certain special circumstances as described in the SAI.
 
Through Your Financial Professional
 
You may sell your shares through your financial professional, who can prepare the necessary documentation. Your financial professional may charge for this service.
 
By Mail
 
You can sell your shares at any time by sending a written request to the Fund, at PO Box 4766, Chicago, IL 60680-4766. Your request must include the following information:
 
  •  The Fund’s name;
 
  •  Your name and account number;
 
  •  The dollar or share amount you wish to redeem;
 
  •  The signature of each owner exactly as it appears on the account;
 
  •  The name of the person to whom you want your redemption proceeds paid (if other than to the shareholder of record);
 
  •  The address where you want your redemption proceeds sent (if other than the address of record); and
 
  •  Any required signature guarantees.
 
We will normally mail your check the next business day, but in no event more than ten days after we receive your request. If you purchased your shares by check, your redemption proceeds will not be mailed until your check has cleared. Guaranteed signatures are required if you are redeeming more than $50,000, you want the check payable to someone other than the shareholder of record or you want the check sent to another address (or the address of record has been changed within the last 30 days). Signature guarantees must be obtained from a bank, brokerage firm or other financial intermediary that is a member of an approved Medallion Guarantee Program or that a fund otherwise approves. A notary public cannot provide a signature guarantee.
 
By Telephone
 
If you have authorized telephone redemption privileges, call 1-866-876-9946 to redeem your shares. Telephone redemptions with respect to redemptions of the Class A Shares where the proceeds are payable by check may not exceed $50,000. Checks will only be issued to you as the shareholder of record and mailed to your address of record. If you have established certain account privileges, you may have redemption proceeds transferred electronically to your bank account. We will normally mail your check the next business day.
 
Redemptions In-Kind
 
The Fund generally pays redemption proceeds in cash. Under unusual conditions that make cash payment unwise and for the protection of existing shareholders, the Fund may pay all or a portion of your redemption proceeds in securities or other Fund assets. Although it is unlikely that your shares would be redeemed in-kind, you would probably have to pay brokerage costs to sell the securities distributed to you, as well as taxes on any capital gains from that sale.
 
Redemption Fee Policy
 
The Fund charges a 2% redemption fee on the proceeds of shares redeemed or exchanged within 60 days of acquisition. Investors making purchases into the Fund through a systematic investment plan will need to discontinue that plan at least 30 days before redeeming in full in order to avoid the redemption fee on recently purchased shares. The redemption fee is intended to offset the trading costs and the Fund’s operating expenses


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associated with frequent trading. The Fund may waive the redemption fee on share redemptions or exchanges by shareholders investing through qualified retirement plans such as 401(k) plans only if the plan sponsor or administrator certifies that the plan does not have the operational capability to assess the fee.
 
The Fund also may waive the redemption fee on redemptions or exchanges by shareholders investing through the fee-based platforms of certain financial intermediaries (where the intermediary charges an asset-based or comprehensive “wrap” fee for its services) in instances where the Fund reasonably believes either that the intermediary has internal policies and procedures in place to effectively discourage inappropriate trading activity or that the redemptions were effected for reasons other than the desire to profit from short-term trading in fund shares.
 
The Fund may waive the redemption fee in other specified circumstances reasonably determined by the Fund not to relate to inappropriate trading activity, and reserve the right to modify or eliminate redemption fee waivers at any time. For additional information, see “Frequent Trading Policy” in this prospectus.
 
Involuntary Redemption
 
From time to time, the Fund may establish minimum account size requirements. The Fund reserves the right to liquidate your account upon 30 days’ written notice if the value of your account falls below an established minimum. The Fund has set a minimum balance of $1,000 for Class A Shares and $100,000 for Institutional Shares. You will not be assessed a CDSC or redemption fee on an involuntary redemption.
 
Note on Low Balance Accounts — Because of the high cost of maintaining smaller shareholder accounts, the Fund may redeem the shares in your account (without charging any deferred sales charge) if the net asset value of your account falls below the required minimum initial investment due to redemptions you have made. You will be notified that the value of your account is less than the required minimum initial investment before the Fund makes an involuntary redemption. You will then have 30 days to make an additional investment to bring the value of your account to at least the required minimum initial investment before the Fund takes any action. This involuntary redemption does not apply to accounts of authorized qualified employee benefit plans, selected fee-based programs or accounts established under the Uniform Gifts or Transfers to Minors Acts.
 
Dividend Reinvestment
 
Unless you instruct the Fund to pay you dividends in cash, dividends and distributions paid by the Fund will be reinvested in additional shares of the Fund.
 
Distribution and Service Payments
 
Foreside Fund Services, LLC, the Distributor, serves as the distributor of the Fund’s shares in a continuous offering pursuant to a Distribution Agreement. In this capacity, the Distributor acts as agent of the Fund for the distribution of the Fund’s shares and as such will assist in coordinating with financial intermediaries for the purchase and sale of Fund shares and assist in reviewing Fund sales materials. The Distributor may enter into arrangements with banks, broker-dealers and other financial institutions through which investors may purchase or redeem shares. The Distributor is not affiliated with del Rey Global, The Northern Trust Company, the Fund’s administrator, transfer agent and custodian, or any of their respective affiliates.
 
The Fund pays the Distributor an annual fee equal to 0.01% of the Fund’s average daily net assets as compensation for its services under the Distribution Agreement. In addition, in order to compensate the Distributor for its costs in connection with these activities, including compensation paid to financial intermediaries, the Fund has adopted a distribution and service plan under Rule 12b-1 under the 1940 Act. The Fund may pay distribution and shareholder service fees pursuant to Rule 12b-1 under the 1940 Act to the Distributor at an annual rate not to exceed 0.25% of the Fund’s Class A Shares’ average daily net assets. Because these fees are paid out of the Fund’s Class A Shares’ assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges.


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The Distributor uses the distribution and service fee for Class A Shares as well as any up-front sales charge to compensate financial intermediaries for any activity primarily intended to result in the sale of Class A Shares of the Fund and for providing ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries, and providing other personal services to shareholders. These fees also compensate financial intermediaries for other expenses, including printing and distributing prospectuses to persons other than shareholders, and preparing, printing, and distributing advertising and sales literature and reports to shareholders used in connection with the sale of shares. del Rey Global has entered into a separate agreement with the Distributor under which it has agreed to compensate and reimburse the Distributor for any amounts payable by the Fund under the Distribution Agreement for its provision to the Fund of any distribution services for which the Fund is not authorized to compensate and reimburse the Distributor. The payments made by del Rey Global to the Distributor do not represent an additional expense to the Fund or its shareholders.
 
Other Payments to Financial Intermediaries
 
In addition to certain payments related to up-front sales charges and 12b-1 distribution and service fees paid by the Distributor, or del Rey Global in the case of certain sales charges, to financial intermediaries as previously described, del Rey Global may from time to time make additional payments, out of its own resources, to certain financial intermediaries that sell shares of the Fund in order to promote the sales and retention of the Fund’s shares by those firms and their customers. The amounts of these payments vary by financial intermediary and, with respect to a given firm, are typically calculated by reference to the amount of the firm’s recent gross sales of the Fund’s shares and/or total assets of the Fund held by the firm’s customers. The level of payments that del Rey Global is willing to provide to a particular financial intermediary may be affected by, among other factors, the firm’s total assets held in and recent net investments into the Fund, the firm’s level of participation in sales and marketing programs, the firm’s compensation program for its registered representatives who sell the Fund’s shares and provide services to the Fund’s shareholders, and the asset class of the Fund for which these payments are provided. The SAI contains additional information about these payments. del Rey Global may also make payments to financial intermediaries in connection with sales meetings, due diligence meetings, prospecting seminars and other meetings at which del Rey Global promotes its products and services.
 
In connection with the availability of the Fund within selected mutual fund no-transaction fee institutional platforms and fee-based wrap programs (together, “Platform Programs”) at certain financial intermediaries, del Rey Global may also make payments out of its own assets to those firms as compensation for certain recordkeeping, shareholder communications and other account administration services provided to the Fund’s shareholders who own their shares in these Platform Programs. These payments are in addition to the 12b-1 distribution and service fee and any applicable omnibus sub-accounting fees paid to these firms with respect to these services by the Fund out of fund assets.
 
Account Services and Privileges
 
The following are examples of account services and privileges available in your account. Your financial professional can help you complete the forms for these services, or you can call the Fund at 1-866-876-9946 for copies of the necessary forms.
 
Systematic Investing
 
Systematic investing allows you to make regular investments through automatic deductions from your bank account or from exchanging shares from another mutual fund account (simply complete the appropriate application). The minimum automatic deduction is $50 per month. There is no charge to participate in the Fund’s systematic investment plan. You can stop the deductions at any time by notifying your fund in writing.
 
  •  From Your Bank Account. You can make systematic investments of $50 or more per month by authorizing us to draw preauthorized checks on your bank account.


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Systematic Withdrawal
 
If the value of your fund account is at least $10,000, you may request to have $250 or more withdrawn automatically from your account. You may elect to receive payments monthly, quarterly, semi-annually or annually, and may choose to receive a check, have the monies transferred directly into your bank account, paid to a third party or sent payable to you at an address other than your address of record.
 
You should not establish systematic withdrawals if you intend to make concurrent purchases of Class A Shares because you may unnecessarily pay a sales charge or CDSC on these purchases.
 
Reinstatement Privilege
 
If you redeem shares, you may reinvest all or part of your redemption proceeds up to one year later without incurring any additional charges. You may only reinvest into the same share class you redeemed. If you paid a CDSC, we will refund your CDSC and reinstate your holding period. You may use this reinstatement privilege only once for any redemption.
 
Frequent Trading Policy
 
The Fund is intended for long-term investment and should not be used for excessive trading. Excessive trading in the Fund’s shares can disrupt portfolio management, lead to higher operating costs, and cause other operating inefficiencies for the Fund. However, the Fund is also mindful that shareholders may have valid reasons for periodically purchasing and redeeming fund shares.
 
Accordingly, the Board has adopted a Frequent Trading Policy that seeks to balance the Fund’s need to prevent excessive trading in its shares while offering investors the flexibility in managing their financial affairs to make periodic purchases and redemptions of shares.
 
The Fund’s Frequent Trading Policy generally limits an investor to two “round trip” trades in a 12-month period. A “round trip” is the purchase and subsequent redemption of the Fund’s shares. Each side of a round trip may be comprised of either a single transaction or a series of closely-spaced transactions. The Fund may also suspend the trading privileges of any investor who makes a round trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
 
The Fund primarily receives share purchase and redemption orders through third-party financial intermediaries, some of whom rely on the use of omnibus accounts. An intermediary’s account typically includes multiple investors and provides the Fund only with a net purchase or redemption amount on any given day where multiple purchases, redemptions and exchanges of shares occur in the account. The identity of individual purchasers, redeemers and exchangers whose orders are aggregated in omnibus accounts, and the size of their orders, will generally not be known by the Fund. Despite the Fund’s efforts to detect and prevent frequent trading, the Fund may be unable to identify frequent trading because the netting effect in omnibus accounts often makes it more difficult to identify frequent traders. Technical limitations in operational systems at the Fund’s transfer agent may also limit the Fund’s ability to detect and prevent frequent trading. In addition, the Fund may permit certain financial intermediaries, including broker-dealer and retirement plan administrators, among others, to enforce their own internal policies and procedures concerning frequent trading. Such policies may differ from the Fund’s Frequent Trading Policy and may be approved for use in instances where the Fund reasonably believes that the intermediary’s policies and procedures effectively discourage inappropriate trading activity. Shareholders holding their accounts with such intermediaries may wish to contact the intermediary for information regarding its frequent trading policy. Although the Fund does not knowingly permit frequent trading, it cannot guarantee that it will be able to identify and restrict all frequent trading activity.
 
The Fund reserves the right in its sole discretion to waive unintentional or minor violations (including transactions below certain dollar thresholds) if it determines that doing so would not harm the interests of the Fund’s other shareholders. In addition, certain categories of redemptions may be excluded from the application of the Frequent Trading Policy, as described in more detail in the SAI. These include, among others,


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redemptions pursuant to systematic withdrawal plans, redemptions in connection with the total disability or death of the investor, involuntary redemptions by operation of law, redemptions in payment of account or plan fees, and certain redemptions by retirement plans, including redemptions in connection with qualifying loans or hardship withdrawals, termination of plan participation, return of excess contributions, and required minimum distributions. The Fund may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
 
The Fund reserves the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine, in their sole discretion, that a transaction or a series of transactions involves market timing or excessive trading that may be detrimental to fund shareholders. The Fund also reserves the right to reject any purchase order, including exchange purchases, for any reason. For example, the Fund may refuse purchase orders if the Fund would be unable to invest the proceeds from the purchase order in accordance with the Fund’s investment policies and/or objectives, or if the Fund would be adversely affected by the size of the transaction, the frequency of trading in the account or various other factors. For more information about the Fund’s Frequent Trading Policy and its enforcement, see the SAI.
 
Valuation of Fund Investments
 
When you buy shares, you pay the net asset value, plus any applicable sales charge. This is the offering price. Shares are also redeemed at their net asset value, minus any applicable deferred sales charge. The Fund calculates the net asset value of each class of its shares (generally by using market quotations) each day the NYSE is open as of the close of business on the NYSE, based on prices at the time of closing. The NYSE generally closes at 4:00 p.m. (Eastern time). The net asset value used in determining your share price is the next one calculated after your purchase or redemption order is placed.
 
Generally, Institutional Shares will have a higher net asset value than Class A Shares because that class has lower expenses.
 
The Fund’s assets and liabilities are valued primarily on the basis of market quotations. Equity investments are valued at market value, which is generally determined using the last reported sale price on the exchange or market on which the security is primarily traded at the time of valuation. The Fund values fixed income portfolio securities using market prices provided directly from one or more broker-dealers, market makers, or independent third-party pricing services which may use matrix pricing and valuation models to derive values, each in accordance with valuation procedures approved by the Fund’s Board. Certain short-term debt securities are valued on the basis of amortized cost. For foreign securities, these securities may trade on weekends or other days when the Fund does not price its shares. As a result, the Fund’s net asset value may change on days when you will not be able to purchase or redeem the Fund’s shares. In addition, foreign currency exchange rates are generally determined as of the close of business on the NYSE.
 
Generally, trading in foreign securities, U.S. government securities and money market instruments and certain fixed income securities is substantially completed each day at various times prior to the close of business on the NYSE. The values of such securities used in computing the net asset value of the Fund’s shares are determined as of such times.
 
When market quotations are not readily available or are not believed by del Rey Global to be reliable, the Fund’s investments are valued at fair value. Fair value determinations are made by del Rey Global in accordance with procedures approved by the Board. del Rey Global may conclude that a market quotation is not readily available or is unreliable if a security or other asset or liability does not have a price source due to its lack of liquidity, if del Rey Global believes a market quotation from a broker-dealer or other source is unreliable, where the security or other asset or liability is thinly traded (e.g., municipal securities and certain non-U.S. securities) or where there is a significant event subsequent to the most recent market quotation. For this purpose, a “significant event” is deemed to occur if del Rey Global determines, in its business judgment prior to or at the time of pricing the Fund’s assets or liabilities, that it is likely that the event will cause a material change to the last closing market price of one or more assets or liabilities held by the Fund. Foreign securities whose values are affected by volatility that occurs in U.S. markets on a trading day after the close of foreign securities markets may be fair valued.


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Fair value represents a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value.
 
The Fund may accept orders from certain authorized financial intermediaries or their designees. The Fund will be deemed to receive an order when accepted by the intermediary or designee and the order will receive the net asset value next computed by the Fund after such acceptance. If the payment for a purchase order is not made by a designated later time, the order will be canceled and the financial intermediary could be held liable for any losses.
 
Dividends, Distributions and Taxes
 
The following discussion is very general and does not address investors subject to special rules, such as investors who hold shares in the Fund through an IRA, 401(k) or other tax-advantaged account. Because each shareholder’s circumstances are different and special tax rules may apply, you should consult your tax adviser about your investment in the Fund. In general, unless your shares are held in a qualified retirement plan, IRA or other tax deferred arrangement, redeeming shares, exchanging shares and receiving dividends and distributions (whether in cash or additional shares) are all taxable events.
 
The Fund will distribute net investment income, if any, and net realized capital gain, if any, at least annually. The Fund may also pay a special distribution at the end of the calendar year to comply with federal tax requirements. Dividends may be reinvested automatically in shares of the Fund at net asset value without a sales charge or may be taken in cash. If you would like to receive dividends in cash, contact your financial professional, financial intermediary or the Fund. Although this cannot be predicted with any certainty, the Fund anticipates that the majority of its dividends, if any, will consist of capital gains.
 
You will pay tax on dividends from the Fund whether you receive them in cash or additional shares. If you redeem Fund shares or exchange them for shares of another fund, you generally will be treated as having sold your shares and any gain on the transaction may be subject to tax. Certain dividend income received by the Fund during the taxable years beginning before January 1, 2011, including dividends received from qualifying foreign corporations, and long-term capital gains are eligible for taxation at a reduced rate that applies to non-corporate shareholders. To the extent the Fund makes any distributions derived from long-term capital gains and qualifying dividend income, such distributions will be eligible for taxation at the reduced rate.
 
A 3.8% Medicare contribution tax will be imposed on the net investment income (which includes taxable dividends and redemption proceeds) of certain individuals, trusts and estates, for taxable years beginning after December 31, 2012.
 
Dividends paid by the Fund to non-U.S. shareholders are generally subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty to the extent derived from investment income and short-term capital gains. Dividends paid by the Fund from net-tax exempt income or long-term capital gains are generally not subject to such withholding tax. In order to obtain a reduced rate of withholding, a non-U.S. shareholder will be required to provide an IRS Form W-8BEN certifying its entitlement to benefits under a treaty. The withholding tax does not apply to regular dividends paid to a non-U.S. shareholder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. shareholder’s conduct of a trade or business within the U.S. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. shareholder were a U.S. shareholder. A non-U.S. corporation receiving effectively connected dividends may also be subject to additional “branch profits tax” imposed at a rate of 30% (or lower treaty rate). A non-U.S. shareholder who fails to provide an IRS Form W-8BEN or other applicable form may be subject to back-up withholding at the appropriate rate.
 
A 30% withholding tax will be imposed on dividends and redemption proceeds paid after December 31, 2012, to (i) foreign financial institutions including non-U.S. investment funds unless they agree to collect and disclose to the IRS information regarding their direct and indirect U.S. account holders and (ii) certain other foreign entities unless they certify certain information regarding their direct and indirect U.S. owners. To avoid


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withholding, a foreign financial institution will need to enter into agreements with the IRS regarding providing the IRS information including the name, address and taxpayer identification number of direct and indirect U.S. account holders, to comply with due diligence procedures with respect to the identification of U.S. accounts, to report to the IRS certain information with respect to U.S. accounts maintained, to agree to withhold tax on certain payments made to non-compliant foreign financial institutions or to account holders who fail to provide the required information, and to determine certain other information as to their account holders. Other foreign entities will need to provide the name, address, and TIN of each substantial U.S. owner or certifications of no substantial U.S. ownership unless certain exceptions apply.
 
Dividends or other income (including, in some cases, capital gains) received by the Fund from investments in foreign securities may be subject to withholding and other taxes imposed by foreign countries. Tax conventions between certain countries and the United States may reduce or eliminate such taxes in some cases. If more than 50% of the Fund’s total assets at the close of its taxable year consists of stock or securities of foreign corporations, the Fund may elect for U.S. income tax purposes to treat foreign income taxes paid by it as paid by its shareholders. The Fund may qualify for and make this election in some, but not necessarily all, of its taxable years. If the Fund were to make an election, shareholders of the Fund would be required to take into account an amount equal to their pro rata portions of such foreign taxes in computing their taxable income and then treat an amount equal to those foreign taxes as a U.S. federal income tax deduction or as a foreign tax credit against their U.S. federal income taxes. Shortly after any year for which it makes such an election, the Fund will report to its shareholders the amount per share of such foreign income tax that must be included in each shareholder’s gross income and the amount which will be available for the deduction or credit. No deduction for foreign taxes may be claimed by a shareholder who does not itemize deductions. Certain limitations will be imposed on the extent to which the credit (but not the deduction) for foreign taxes may be claimed. Foreign taxes paid by the Fund will reduce the return from the Fund’s investments.
 
Distributions attributable to short-term capital gains are treated as dividends, taxable as ordinary income, currently taxed at a maximum rate of 35%. Taxable dividends and long-term capital gain distributions are taxable whether received in cash or reinvested in Fund shares. Although dividends (including dividends from short-term capital gains) are generally taxable as ordinary income, for taxable years beginning before January 1, 2013, individual shareholders who satisfy certain holding period and other requirements are taxed on such dividends at long-term capital gain rates to the extent the dividends are attributable to “qualified dividend income” received by the Fund. “Qualified dividend income” generally consists of dividends received from U.S. corporations (other than certain dividends from real estate investment trusts and regulated investment companies) and certain foreign corporations. Long-term capital gain distributions are taxable to you as long-term capital gain regardless of how long you have owned your shares. You may want to avoid buying shares when the Fund is about to declare a long-term capital gain distribution or dividend because it will be taxable to you even though it may actually be a return of a portion of your investment.
 
For taxable years beginning on or after January 1, 2013, the long-term capital gain rate is scheduled to return to 20% (10% for taxpayers in the 15% tax bracket).
 
A dividend declared by the Fund in October, November, or December and paid during January of the following year will, in certain circumstances, be treated as paid in December for tax purposes.
 
Unless your investment is in a tax deferred account, you may want to avoid buying shares shortly before the Fund pays a dividend. If you buy shares when a fund has declared but not yet distributed ordinary income or capital gains, you will pay the full price for the shares and then receive a portion of the price back in the form of a taxable dividend. Before investing you may want to consult your tax adviser.
 
By law, your dividends and redemption proceeds will be subject to a withholding tax if you have not provided a taxpayer identification number or social security number or the number you have provided is incorrect.
 
This Section summarizes some of the consequences under current federal tax law of an investment in the Fund. It is not a substitute for personal tax advice. Consult your personal tax adviser about the potential tax consequences of an investment in the Fund under all applicable tax laws.


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Financial Highlights
 
The Fund has not yet commenced operations so there is no financial or performance information for the Fund included in this Prospectus. Please note that certain financial information about the Fund is included under the caption “Financial Statements” in the SAI.
 
General Information
 
Shareholder Documents
 
Electronic Access to Annual Reports, Semi-Annual Reports and Prospectuses
 
Electronic copies of most financial reports and prospectuses are available on the Fund’s website. Shareholders can sign up for e-mail notifications of quarterly statements, annual and semi-annual reports and prospectuses by enrolling in the Fund’s electronic delivery program.
 
To enroll:
 
Shareholders Who Hold Accounts with Investment Advisers, Banks or Brokerages:  Please contact your financial professional. Please note that not all investment advisers, banks or brokerages may offer this service.
 
Delivery of Shareholder Documents
 
The Fund delivers only one copy of shareholder documents, including prospectuses, shareholder reports and proxy statements, to shareholders with multiple accounts at the same address. This practice is known as “householding” and is intended to eliminate duplicate mailings and reduce expenses. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please contact the Fund at 1-866-876-9946.
 
Certain Fund Policies
 
Anti-Money Laundering Requirements
 
The Fund is subject to the USA PATRIOT Act (the “Patriot Act”). The Patriot Act is intended to prevent the use of the U.S. financial system in furtherance of money laundering, terrorism or other illicit activities. Pursuant to requirements under the Patriot Act, the Fund may request information from shareholders to enable it to form a reasonable belief that it knows the true identity of its shareholders. This information will be used to verify the identity of investors or, in some cases, the status of financial professionals; it will be used only for compliance with the requirements of the Patriot Act.
 
The Fund reserves the right to reject purchase orders from persons who have not submitted information sufficient to allow the Fund to verify their identity. The Fund also reserves the right to redeem any amounts in the Fund from persons whose identity it is unable to verify on a timely basis. It is the Fund’s policy to cooperate fully with appropriate regulators in any investigations conducted with respect to potential money laundering, terrorism or other illicit activities.
 
The Fund will generally not accept investments from foreign investors (e.g., foreign financial institutions; non-U.S. persons). Where the Fund does accept such investments from a foreign investor the transfer agent is expected to conduct due diligence on such foreign investors as may be required under the Patriot Act and applicable U.S. Department of Treasury or Securities and Exchange Commission rules, regulations and guidance. The Fund will not accept applications for correspondent accounts from foreign financial institutions and does not intend to maintain business relationships with such entities.


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IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT
 
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions, including the Fund, to obtain, verify, and record information that identifies each person who opens an account.
 
What this means for you:  When you open an account, the Fund will ask for your name, address, date of birth, and other information that will allow the Fund to identify you. The Fund may also ask to see identifying documents.
 
Privacy Principles
 
Your privacy is very important to the Fund and del Rey Global. You provide the Fund and del Rey Global with non-public personal information, such as your address, social security number, assets and/or income information: (i) in related account opening documentation; (ii) in correspondence and conversations with del Rey Global; and (iii) through transactions involving your account. Neither the Fund nor del Rey Global will sell your non-public personal information to anyone. Nor will they disclose any non-public personal information about its investors to anyone, other than to:
 
  •  Affiliates for proper business purposes in connection with the provision of management and other services to the Fund;
 
  •  Non-affiliated third parties (such as brokers, custodians, attorneys, auditors and administrators) as necessary for the Fund and del Rey Global to provide agreed upon services and products to the Fund consistent with applicable law. Such entities are not allowed to use your non-public personal information for their own purposes and are contractually obligated to maintain strict confidentiality. The Fund and del Rey Global will limit those entities use of your non-public personal information to the performance of the specific services requested; and
 
  •  You, persons believed to be your authorized agent or representative, and, if compelled to do so, regulators and courts in order to satisfy regulatory and other obligations to such entities in accordance with applicable law.
 
The Fund and del Rey Global seek to carefully safeguard your private information and, to that end, restrict access to non-public personal information about you to those employees and other persons who need to know the information to enable the Fund and del Rey Global to provide services to you. The Fund and del Rey Global maintain physical, electronic and procedural safeguards to protect your non-public personal information.
 
Statement of Additional Information
 
If you would like further information about the Fund, including how it invests, please see the Statement of Additional Information.


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For More Information
 
Fund and Service Providers
 
FUND
 
del Rey Global Investors Funds
del Rey Monarch Fund
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
1-866-876-9946
Written Correspondence:
 
del Rey Global Investors Funds
del Rey Monarch Fund
PO Box 4766
Chicago, IL 60680-4766
 
INVESTMENT MANAGER
 
del Rey Global Investors, LLC
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
 
ADMINISTRATOR, TRANSFER AGENT AND CUSTODIAN
 
The Northern Trust Company
50 South LaSalle Street
Chicago, IL 60675
 
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
Deloitte & Touche LLP
Suite 200
350 South Grand Avenue
Los Angeles, CA 90071-3462
 
DISTRIBUTOR
 
Foreside Fund Services, LLC
Three Canal Plaza,
Suite 100
Portland, ME 04101
 
COUNSEL
 
Willkie Farr & Gallagher LLP
787 Seventh Avenue
New York, New York 10019


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Additional Information
 
This prospectus contains important information you should know before investing, including information about risks. Read it carefully and keep it for future reference. More information about the Fund is available at no charge upon request. This information includes:
 
Annual/Semi-Annual Reports
 
These reports contain additional information about each of the Fund’s investments. The annual report describes the Fund’s performance, lists portfolio holdings, and discusses recent market conditions, economic trends and Fund investment strategies that significantly affect the Fund’s performance for the prior fiscal year.
 
Statement of Additional Information
 
A Statement of Additional Information, dated January 28, 2011, has been filed with the Securities and Exchange Commission (SEC). The SAI, which includes additional information about the Fund, may be obtained free of charge, along with the Fund’s annual and semi-annual reports, by calling 1-866-876-9946. The SAI, as supplemented from time to time, is incorporated by reference into this prospectus.
 
The SAI and other information are available from a financial intermediary (such as a broker-dealer or bank) through which the Fund’s shares may be purchased or sold.
 
TO OBTAIN OTHER INFORMATION AND FOR SHAREHOLDER INQUIRIES:
 
BY TELEPHONE
Call 1-866-876-9946
 
BY MAIL
 
del Rey Global Investors Funds
del Rey Monarch Fund
PO Box 4766
Chicago, IL 60680-4766
 
ON THE INTERNET
 
General fund information and specific fund performance, including the prospectus, SAI and annual/semi-annual reports, can be accessed free of charge at www.delreyglobal.com/monarchfund.
 
Portfolio Characteristics and Holdings
 
A description of the Fund’s policies and procedures related to disclosure of portfolio characteristics and holdings is available in the SAI.
 
For information about portfolio holdings and characteristics, shareholders and prospective investors may call 1-866-876-9946.
 
Securities and Exchange Commission
 
You may also view and copy public information about the Fund, including the SAI, by visiting the EDGAR database on the SEC website (http://www.sec.gov) or the SEC’s Public Reference Room in Washington, D.C. Information about the operation of the Public Reference Room can be obtained by calling the SEC directly at (202) 551-8090. Copies of this information can be obtained, for a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Public Reference Room of the SEC, Washington, D.C. 20549-1520.
 
You should rely only on the information contained in this prospectus. No one is authorized to provide you with information that is different from information contained in this prospectus.
 
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense.
 
INVESTMENT COMPANY ACT FILE # 811-22434
©del Rey Global Investors, LLC
 
(DE LREY GLOBAL LOGO)


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STATEMENT OF ADDITIONAL INFORMATION
 
del Rey Global Investors Funds
 
del Rey Monarch Fund
 
PO Box 4766, Chicago, IL 60680-4766
Phone No. 1-866-876-9946
 
This Statement of Additional Information of del Rey Monarch Fund (the “Fund”) is not a prospectus and should be read in conjunction with the Prospectus of the Fund, dated January 28, 2011, which has been filed with the Securities and Exchange Commission (the “Commission” or the “SEC”) and can be obtained, without charge, by calling 1-866-876-9946 or by writing to the Fund at PO Box 4766, Chicago, IL 60680-4766. The Fund’s Prospectus is incorporated by reference into this Statement of Additional Information, and this Statement of Additional Information has been incorporated by reference into the Fund’s Prospectus.
 
References to the Investment Company Act of 1940, as amended (the “Investment Company Act” or the “1940 Act”), or other applicable law, will include interpretations or modifications by the Commission, Commission staff or other authority with appropriate jurisdiction, including court interpretations, and exemptive or other relief or permission from the Commission, Commission staff or other authority.
 
del Rey Global Investors, LLC — Investment Manager
 
     
    Ticker
Class
  Symbol
 
Class A Shares
  N/A
Institutional Shares
  N/A
 
The date of this Statement of Additional Information is January 28, 2011


 

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Table of Contents

INFORMATION ABOUT DEL REY MONARCH FUND
 
Organization of the Fund
 
The Fund was formed on January 14, 2011 as a series of del Rey Global Investors Funds (the “Trust”), a Delaware Trust, which was formed June 18, 2010. The Fund is classified as a diversified open-end investment company as defined under the Investment Company Act.
 
Additional Information on Investment Strategies of the Fund
 
The Fund’s investment objective is to seek long-term capital appreciation. del Rey Global Investors, LLC (the “Manager”) serves as the investment adviser of the Fund.
 
Set out below are descriptions of some of the types of investments and investment strategies that the Fund may use to seek its investment objective, and the risks and considerations associated with those investments and investment strategies. Please see the Fund’s Prospectus and “Investment Restrictions” below for further information on the Fund’s investment policies and risks.
 
Borrowing and Leverage.  The Fund may borrow as a temporary measure for extraordinary or emergency purposes, including to meet redemptions or to settle securities transactions. The purchase of securities while borrowings are outstanding will have the effect of leveraging the Fund. Such leveraging increases the Fund’s exposure to capital risk, and borrowed funds are subject to interest costs that will reduce net income. Leveraging may exaggerate changes in the net asset value of Fund shares and in the yield on the Fund’s portfolio. Although the principal of such borrowings will be fixed, the Fund’s assets may change in value during the time the borrowings are outstanding. Borrowings will create interest expenses for the Fund that can exceed the income from the assets purchased with the borrowings.
 
Certain types of borrowings by the Fund may result in the Fund being subject to covenants in credit agreements relating to asset coverage, portfolio composition requirements and other matters. It is not anticipated that observance of such covenants would impede the Manager from managing the Fund’s portfolio in accordance with the Fund’s investment objectives and policies. However, a breach of any such covenants not cured within the specified cure period may result in acceleration of outstanding indebtedness and require the Fund to dispose of portfolio investments at a time when it may be disadvantageous to do so.
 
Cash Flows; Expenses.  The ability of the Fund to satisfy its investment objective depends to some extent on the Manager’s ability to manage cash flow (primarily from purchases and redemptions and distributions from the Fund’s investments). The Manager will make investment changes to the Fund’s portfolio to accommodate cash flow while continuing to seek its investment objective.
 
Cash Management.  Generally, the Manager may employ futures and options on futures to provide liquidity necessary to meet anticipated redemptions or for day-to-day operating purposes. However, if considered appropriate in the opinion of the Manager, a portion of the Fund’s assets may be invested in certain types of instruments with remaining maturities of 397 days or less for liquidity purposes. Such instruments would consist of: (i) obligations of the U.S. Government, its agencies, instrumentalities, authorities or political subdivisions (“U.S. Government Securities”); (ii) other fixed-income securities rated Aa or higher by Moody’s or AA or higher by S&P or, if unrated, of comparable quality in the opinion of the Manager; (iii) commercial paper; (iv) bank obligations, including negotiable certificates of deposit, time deposits and bankers’ acceptances; and (v) repurchase agreements. At the time the Fund invests in commercial paper, bank obligations or repurchase agreements, the issuer or the issuer’s parent must have outstanding debt rated Aa or higher by Moody’s or AA or higher by S&P or outstanding commercial paper, bank obligations or other short-term obligations rated Prime-1 by Moody’s or A-1 by S&P; or, if no such ratings are available, the instrument must be of comparable quality in the opinion of the Manager.
 
Convertible Securities.  A convertible security is a bond, debenture, note, preferred stock or other security that may be converted into or exchanged for a prescribed amount of common stock or other equity security of the same or a different issuer within a particular period of time at a specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or the dividend paid on


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preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to nonconvertible income securities in that they ordinarily provide a stable stream of income with generally higher yields than those of common stocks of the same or similar issuers, but lower yields than comparable nonconvertible securities. The value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer and other factors also may have an effect on the convertible security’s investment value. Convertible securities rank senior to common stock in a corporation’s capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible security’s governing instrument.
 
The characteristics of convertible securities make them potentially attractive investments for an investment company seeking a high total return from capital appreciation and investment income. These characteristics include the potential for capital appreciation as the value of the underlying common stock increases, the relatively high yield received from dividend or interest payments as compared to common stock dividends and decreased risks of decline in value relative to the underlying common stock due to their fixed income nature. As a result of the conversion feature, however, the interest rate or dividend preference on a convertible security is generally less than would be the case if the securities were issued in nonconvertible form.
 
In analyzing convertible securities, the Manager will consider both the yield on the convertible security relative to its credit quality and the potential capital appreciation that is offered by the underlying common stock, among other things.
 
Convertible securities are issued and traded in a number of securities markets. Even in cases where a substantial portion of the convertible securities held by the Fund are denominated in U.S. dollars, the underlying equity securities may be quoted in the currency of the country where the issuer is domiciled. As a result, fluctuations in the exchange rate between the currency in which the debt security is denominated and the currency in which the share price is quoted will affect the value of the convertible security. With respect to convertible securities denominated in a currency different from that of the underlying equity securities, the conversion price may be based on a fixed exchange rate established at the time the security is issued, which may increase the effects of currency risk. As described below, the Fund is authorized to enter into foreign currency hedging transactions in which it may seek to reduce the effect of exchange rate fluctuations.
 
Apart from currency considerations, the value of convertible securities is influenced by both the yield on nonconvertible securities of comparable issuers and by the value of the underlying common stock. The value of a convertible security viewed without regard to its conversion feature (i.e., strictly on the basis of its yield) is sometimes referred to as its “investment value.” To the extent interest rates change, the investment value of the convertible security typically will fluctuate. At the same time, however, the value of the convertible security will be influenced by its “conversion value,” which is the market value of the underlying common stock that would be obtained if the convertible security were converted. Conversion value fluctuates directly with the price of the underlying common stock. If the conversion value of a convertible security is substantially below its investment value, the price of the convertible security is governed principally by its investment value. To the extent the conversion value of a convertible security increases to a point that approximates or exceeds its investment value, the price of the convertible security will be influenced principally by its conversion value. A convertible security will sell at a premium over the conversion value to the extent investors place value on the right to acquire the underlying common stock while holding a fixed income security. The yield and conversion premium of convertible securities issued in Japan and the Euromarket are frequently determined at levels that cause the conversion value to affect their market value more than the securities’ investment value.
 
Holders of convertible securities generally have a claim on the assets of the issuer prior to the common stockholders but may be subordinated to other debt securities of the same issuer. A convertible security may be subject to redemption at the option of the issuer at a price established in a charter provision, indenture or other governing instrument pursuant to which the convertible security was issued. If a convertible security held by the Fund is called for redemption, the Fund will be required to redeem the security, convert it into the


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underlying common stock or sell it to a third party. Certain convertible debt securities may provide a put option to the holder, which entitles the holder to cause the security to be redeemed by the issuer at a premium over the stated principal amount of the debt security under certain circumstances.
 
The Fund may also invest in synthetic convertible securities. Synthetic convertible securities may include either Cash-Settled Convertibles or Manufactured Convertibles. Cash-Settled Convertibles are instruments that are created by the issuer and have the economic characteristics of traditional convertible securities but may not actually permit conversion into the underlying equity securities in all circumstances. As an example, a private company may issue a Cash-Settled Convertible that is convertible into common stock only if the company successfully completes a public offering of its common stock prior to maturity and otherwise pays a cash amount to reflect any equity appreciation. Manufactured Convertibles are created by the Manager or another party by combining separate securities that possess one of the two principal characteristics of a convertible security, i.e., fixed income (“fixed income component”) or a right to acquire equity securities (“convertibility component”). The fixed income component is achieved by investing in nonconvertible fixed income securities, such as nonconvertible bonds, preferred stocks and money market instruments. The convertibility component is achieved by investing in call options, warrants, or other securities with equity conversion features (“equity features”) granting the holder the right to purchase a specified quantity of the underlying stocks within a specified period of time at a specified price or, in the case of a stock index option, the right to receive a cash payment based on the value of the underlying stock index.
 
A Manufactured Convertible differs from traditional convertible securities in several respects. Unlike a traditional convertible security, which is a single security that has a unitary market value, a Manufactured Convertible is comprised of two or more separate securities, each with its own market value. Therefore, the total “market value” of such a Manufactured Convertible is the sum of the values of its fixed income component and its convertibility component.
 
More flexibility is possible in the creation of a Manufactured Convertible than in the purchase of a traditional convertible security. Because many corporations have not issued convertible securities, the Manager may combine a fixed income instrument and an equity feature with respect to the stock of the issuer of the fixed income instrument to create a synthetic convertible security otherwise unavailable in the market. The Manager may also combine a fixed income instrument of an issuer with an equity feature with respect to the stock of a different issuer when the Manager believes such a Manufactured Convertible would better promote the Fund’s objective than alternative investments. For example, the Manager may combine an equity feature with respect to an issuer’s stock with a fixed income security of a different issuer in the same industry to diversify the Fund’s credit exposure, or with a U.S. Treasury instrument to create a Manufactured Convertible with a higher credit profile than a traditional convertible security issued by that issuer. A Manufactured Convertible also is a more flexible investment in that its two components may be purchased separately and, upon purchasing the separate securities, “combined” to create a Manufactured Convertible. For example, the Fund may purchase a warrant for eventual inclusion in a Manufactured Convertible while postponing the purchase of a suitable bond to pair with the warrant pending development of more favorable market conditions.
 
The value of a Manufactured Convertible may respond to certain market fluctuations differently from a traditional convertible security with similar characteristics. For example, in the event the Fund created a Manufactured Convertible by combining a short-term U.S. Treasury instrument and a call option on a stock, the Manufactured Convertible would be expected to outperform a traditional convertible of similar maturity that is convertible into that stock during periods when Treasury instruments outperform corporate fixed income securities and underperform during periods when corporate fixed income securities outperform Treasury instruments.
 
Depositary Receipts (ADRs, EDRs and GDRs).  The Fund may invest in the securities of foreign issuers in the form of Depositary Receipts or other securities convertible into securities of foreign issuers. Depositary Receipts may not necessarily be denominated in the same currency as the underlying securities into which they may be converted. The Fund may invest in both sponsored and unsponsored American Depositary Receipts (“ADRs”), European Depositary Receipts (“EDRs”), Global Depositary Receipts (“GDRs”) and other


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similar global instruments. ADRs typically are issued by an American bank or trust company and evidence ownership of underlying securities issued by a foreign corporation. EDRs, which are sometimes referred to as Continental Depositary Receipts, are receipts issued in Europe, typically by foreign banks and trust companies, that evidence ownership of either foreign or domestic underlying securities. GDRs are depositary receipts structured like global debt issues to facilitate trading on an international basis. Unsponsored ADR, EDR and GDR programs are organized independently and without the cooperation of the issuer of the underlying securities. As a result, available information concerning the issuer may not be as current as for sponsored ADRs, EDRs and GDRs, and the prices of unsponsored ADRs, EDRs and GDRs may be more volatile than if such instruments were sponsored by the issuer. Depositary Receipts are generally subject to the same risks as the foreign securities that they evidence or into which they may be converted. Investments in ADRs, EDRs and GDRs present additional investment considerations as described under “Foreign Investment Risks.”
 
Derivatives.  The Fund may use instruments referred to as derivative securities. Derivatives are financial instruments the value of which is derived from another security, a commodity (such as gold or oil), a currency or an index (a measure of value or rates, such as the S&P 500 Index or the prime lending rate). The Fund may use derivatives for hedging purposes. The Fund may not use any derivative to gain exposure to an asset or class of assets that it would be prohibited by its investment restrictions from purchasing directly.
 
Hedging.  Hedging is a strategy in which a derivative is used to offset the risks associated with other Fund holdings. Losses on the other investment may be substantially reduced by gains on a derivative that reacts in an opposite manner to market movements. While hedging can reduce losses, it can also reduce or eliminate gains or cause losses if the market moves in a manner different from that anticipated by the Fund or if the cost of the derivative outweighs the benefit of the hedge. Hedging also involves correlation risk, i.e. the risk that changes in the value of the derivative will not match those of the holdings being hedged as expected by the Fund, in which case any losses on the holdings being hedged may not be reduced or may be increased. The inability to close options and futures positions also could have an adverse impact on the Fund’s ability to hedge effectively its portfolio. There is also a risk of loss by the Fund of margin deposits or collateral in the event of bankruptcy of a broker with whom the Fund has an open position in an option, a futures contract or a related option. There can be no assurance that the Fund’s hedging strategies will be effective. The Fund is not required to engage in hedging transactions and the Fund may choose not to do so.
 
The Fund may use derivative instruments and trading strategies for hedging purposes, including the following:
 
Options on Securities and Securities Indices.  The Fund may engage in transactions in options on individual securities, baskets of securities or securities indices, or particular measurements of value or rates (an “index”), such as an index of the price of treasury securities or an index representative of short-term interest rates. Such investments may be made on exchanges and in the over-the-counter (“OTC”) markets. In general, exchange-traded options have standardized exercise prices and expiration dates and require the parties to post margin against their obligations, and the performance of the parties’ obligations in connection with such options is guaranteed by the exchange or a related clearing corporation. OTC options have more flexible terms negotiated between the buyer and the seller, but generally do not require the parties to post margin and are subject to greater credit risk. OTC options also involve greater liquidity risk. See “Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC Derivatives” below.
 
Call Options.  The Fund may purchase call options on any of the types of securities or instruments in which it may invest. A purchased call option gives the Fund the right to buy, and obligates the seller to sell, the underlying security at the exercise price at any time during the option period. The Fund also may purchase and sell call options on indices. Index options are similar to options on securities except that, rather than taking or making delivery of securities underlying the option at a specified price upon exercise, an index option gives the holder the right to receive cash upon exercise of the option if the level of the index upon which the option is based is greater than the exercise price of the option.
 
The Fund also is authorized to write (i.e., sell) covered call options on the securities or instruments in which it may invest and to enter into closing purchase transactions with respect to certain of such options. A


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covered call option is an option in which the Fund, in return for a premium, gives another party a right to buy specified securities owned by the Fund at a specified future date and price set at the time of the contract. The principal reason for writing call options is the attempt to realize, through the receipt of premiums, a greater return than would be realized on the securities alone. By writing covered call options, the Fund gives up the opportunity, while the option is in effect, to profit from any price increase in the underlying security above the option exercise price. In addition, the Fund’s ability to sell the underlying security will be limited while the option is in effect unless the Fund enters into a closing purchase transaction. A closing purchase transaction cancels out the Fund’s position as the writer of an option by means of an offsetting purchase of an identical option prior to the expiration of the option it has written. Covered call options also serve as a partial hedge to the extent of the premium received against the price of the underlying security declining.
 
A call option is considered to be covered if the Fund holds a call on the same security or index as the call written where the exercise price of the call held is (i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written provided the difference is maintained by the Fund in liquid assets designated on the adviser’s or sub-adviser’s books and records to the extent required by Commission guidelines.
 
The Fund also is authorized to write (i.e., sell) uncovered call options on securities or instruments in which it may invest but that are not currently held by the Fund. The principal reason for writing uncovered call options is to realize income without committing capital to the ownership of the underlying securities or instruments. When writing uncovered call options, the Fund must deposit and maintain sufficient margin with the broker-dealer through which it made the uncovered call option as collateral to ensure that the securities can be purchased for delivery if and when the option is exercised. In addition, in connection with each such transaction the Fund will segregate unencumbered liquid securities or cash with a value at least equal to the Fund’s exposure (the difference between the unpaid amounts owed by the Fund on such transaction minus any collateral deposited with the broker-dealer), on a marked-to-market basis (as calculated pursuant to requirements of the Commission). Such segregation will ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and will avoid any potential leveraging of the Fund’s portfolio. Such segregation will not limit the Fund’s exposure to loss. During periods of declining securities prices or when prices are stable, writing uncovered calls can be a profitable strategy to increase the Fund’s income with minimal capital risk. Uncovered calls are riskier than covered calls because there is no underlying security held by the Fund that can act as a partial hedge. Uncovered calls have speculative characteristics and the potential for loss is unlimited. When an uncovered call is exercised, the Fund must purchase the underlying security to meet its call obligation. There is also a risk, especially with less liquid preferred and debt securities, that the securities may not be available for purchase. If the purchase price exceeds the exercise price, the Fund will lose the difference.
 
Put Options.  The Fund is authorized to purchase put options to seek to hedge against a decline in the value of its securities. By buying a put option, the Fund acquires a right to sell the underlying securities or instruments at the exercise price, thus limiting the Fund’s risk of loss through a decline in the market value of the securities or instruments until the put option expires. The amount of any appreciation in the value of the underlying securities or instruments will be partially offset by the amount of the premium paid for the put option and any related transaction costs. Prior to its expiration, a put option may be sold in a closing sale transaction and profit or loss from the sale will depend on whether the amount received is more or less than the premium paid for the put option plus the related transaction costs. A closing sale transaction cancels out the Fund’s position as the purchaser of an option by means of an offsetting sale of an identical option prior to the expiration of the option it has purchased. The Fund also may purchase uncovered put options.
 
The Fund also has authority to write (i.e., sell) put options on the types of securities or instruments that may be held by the Fund, provided that such put options are covered, meaning that such options are secured by segregated, liquid assets. The Fund will receive a premium for writing a put option, which increases the Fund’s return. The Fund will not sell puts if, as a result, more than 50% of the Fund’s assets would be required to cover its potential obligations under its hedging transactions.


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The Fund is also authorized to write (i.e., sell) uncovered put options on securities or instruments in which it may invest but with respect to which the Fund does not currently have a corresponding short position or has not deposited as collateral cash equal to the exercise value of the put option with the broker-dealer through which it made the uncovered put option. The principal reason for writing uncovered put options is to receive premium income and to acquire such securities or instruments at a net cost below the current market value. The Fund has the obligation to buy the securities or instruments at an agreed upon price if the price of the securities or instruments decreases below the exercise price. If the price of the securities or instruments increases during the option period, the option will expire worthless and the Fund will retain the premium and will not have to purchase the securities or instruments at the exercise price. In connection with such a transaction, the Fund will segregate unencumbered liquid assets with a value at least equal to the Fund’s exposure, on a marked-to-market basis (as calculated pursuant to requirements of the Commission). Such segregation will ensure that the Fund has assets available to satisfy its obligations with respect to the transaction and will avoid any potential leveraging of the Fund’s portfolio. Such segregation will not limit the Fund’s exposure to loss.
 
There are several risks associated with transactions in options on securities and indexes. For example, there are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition, a liquid secondary market for particular options, whether traded over-the-counter or on a national securities exchange may be absent for reasons which include the following: there may be insufficient trading interest in certain options; restrictions may be imposed by a national securities exchange on opening transactions or closing transactions or both; trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities; unusual or unforeseen circumstances may interrupt normal operations on a national securities exchange; the facilities of a national securities exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading volume; or one or more national securities exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that national securities exchange (or in that class or series of options) would cease to exist, although outstanding options that had been issued by the Options Clearing Corporation as a result of trades on that national securities exchange would continue to be exercisable in accordance with their terms.
 
Futures.  The Fund may engage in transactions in futures and options on futures. Futures are standardized, exchange-traded contracts that obligate a purchaser to take delivery, and a seller to make delivery, of a specific amount of an asset at a specified future date at a specified price. No price is paid upon entering into a futures contract. Rather, upon purchasing or selling a futures contract the Fund is required to deposit collateral (“margin”) equal to a percentage (generally less than 10%) of the contract value. Each day thereafter until the futures position is closed, the Fund will pay additional margin representing any loss experienced as a result of the futures position the prior day or be entitled to a payment representing any profit experienced as a result of the futures position the prior day. Futures involve substantial leverage risk.
 
The sale of a futures contract limits the Fund’s risk of loss from a decline in the market value of portfolio holdings correlated with the futures contract prior to the futures contract’s expiration date. In the event the market value of the portfolio holdings correlated with the futures contract increases rather than decreases, however, the Fund will realize a loss on the futures position and a lower return on the portfolio holdings than would have been realized without the purchase of the futures contract.
 
The purchase of a futures contract may protect the Fund from having to pay more for securities as a consequence of increases in the market value for such securities during a period when the Fund was attempting to identify specific securities in which to invest in a market the Fund believes to be attractive. In the event that such securities decline in value or the Fund determines not to complete an anticipatory hedge transaction relating to a futures contract, however, the Fund may realize a loss relating to the futures position.
 
The Fund is also authorized to purchase or sell call and put options on futures contracts including financial futures and stock indices. Generally, these strategies would be used under the same market and market sector conditions (i.e., conditions relating to specific types of investments) in which the Fund entered


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into futures transactions. The Fund may purchase put options or write call options on futures contracts and stock indices in lieu of selling the underlying futures contract in anticipation of a decrease in the market value of its securities. Similarly, the Fund can purchase call options, or write put options on futures contracts and stock indices, as a substitute for the purchase of such futures to hedge against the increased cost resulting from an increase in the market value of securities which the Fund intends to purchase.
 
To maintain greater flexibility, the Fund may invest in instruments which have characteristics similar to futures contracts. These instruments may take a variety of forms, such as debt securities with interest or principal payments determined by reference to the value of a security, an index of securities or a commodity at a future point in time. The risks of such investments could reflect the risks of investing in futures and securities, including volatility and illiquidity.
 
Risks Associated with Futures.  The primary risks associated with the use of futures contracts and options are (a) the imperfect correlation between the change in market value of the instruments held by the Fund and the price of the futures contract or option; (b) possible lack of a liquid secondary market for a futures contract and the resulting inability to close a futures contract when desired; (c) losses caused by unanticipated market movements, which are potentially unlimited; (d) the Manager’s or sub-adviser’s inability to predict correctly the direction of securities prices, interest rates, currency exchange rates and other economic factors; and (e) the possibility that the counterparty will default in the performance of its obligations.
 
The Manager has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act (“CEA”) pursuant to Rule 4.5 under the CEA. The Manager is not, therefore, subject to registration or regulation as a “commodity pool operator” under the CEA and the Fund is operated so as not to be deemed a “commodity pool” under the regulations of the Commodity Futures Trading Commission.
 
Foreign Exchange Transactions.  The Fund may engage in spot and forward foreign exchange transactions and currency swaps, purchase and sell options on currencies and purchase and sell currency futures and related options thereon (collectively, “Currency Instruments”) for purposes of hedging against the decline in the value of currencies in which its portfolio holdings are denominated against the U.S. dollar. Such transactions could be effected with respect to hedges on foreign dollar denominated securities owned by the Fund, sold by the Fund but not yet delivered, or committed or anticipated to be purchased by the Fund. As an illustration, the Fund may use such techniques to hedge the stated value in U.S. dollars of an investment in a yen-denominated security. In such circumstances, for example, the Fund may purchase a foreign currency put option enabling it to sell a specified amount of yen for dollars at a specified price by a future date. To the extent the hedge is successful, a loss in the value of the yen relative to the dollar will tend to be offset by an increase in the value of the put option. To offset, in whole or in part, the cost of acquiring such a put option, the Fund may also sell a call option which, if exercised, requires it to sell a specified amount of yen for dollars at a specified price by a future date (a technique called a “straddle”). By selling such a call option in this illustration, the Fund gives up the opportunity to profit without limit from increases in the relative value of the yen to the dollar. “Straddles” of the type that may be used by the Fund are considered to constitute hedging transactions. The Fund will not attempt to hedge all of its foreign portfolio positions.
 
Currency Swaps.  Currency swaps usually involve the delivery of the entire principal value of one designated currency in exchange for the other designated currency. As a result, the entire principal value of a currency swap is subject to the risk that the other party to the swap will default on its contractual delivery obligations.
 
Forward Foreign Exchange Transactions.  Forward foreign exchange transactions are OTC contracts to purchase or sell a specified amount of a specified currency or multinational currency unit at a price and future date set at the time of the contract. Spot foreign exchange transactions are similar but require current, rather than future, settlement. The Fund will enter into foreign exchange transactions for purposes of hedging a specific transaction or portfolio position. The Fund may enter into a foreign exchange transaction for purposes of hedging a specific transaction by, for example, purchasing a currency needed to settle a security transaction or selling a currency in which the Fund has received or anticipates receiving a dividend or distribution. The Fund may enter into a foreign exchange transaction for purposes of hedging a portfolio position by selling


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forward a currency in which a portfolio position of the Fund is denominated or by purchasing a currency in which the Fund anticipates acquiring a portfolio position in the near future. The Fund may also hedge portfolio positions through currency swaps, which are transactions in which one currency is simultaneously bought for a second currency on a spot basis and sold for the second currency on a forward basis. The Fund may also engage in proxy hedging transactions to reduce the effect of currency fluctuations on the value of existing or anticipated holdings of portfolio securities. Proxy hedging is often used when the currency to which the Fund is exposed is difficult to hedge or to hedge against the dollar. Proxy hedging entails entering into a forward contract to sell a currency whose changes in value are generally considered to be linked to a currency or currencies in which some or all of the Fund’s securities are, or are expected to be, denominated, and to buy U.S. dollars. Proxy hedging involves some of the same risks and considerations as other transactions with similar instruments. Currency transactions can result in losses to the Fund if the currency being hedged fluctuates in value to a degree or in a direction that is not anticipated. In addition, there is the risk that the perceived linkage between various currencies may not be present or may not be present during the particular time that the Fund is engaged in proxy hedging. The Fund may also cross-hedge currencies by entering into forward contracts to sell one or more currencies that are expected to decline in value relative to other currencies to which the Fund has or in which the Fund expects to have portfolio exposure. Forward foreign exchange transactions involve substantial currency risk, and also involve credit and liquidity risk. The Fund may also hedge a currency by entering into a transaction in a currency instrument denominated in a currency other than the currency being hedged (a “cross-hedge”). The Fund will only enter into a cross-hedge if the Manager believes that (i) there is a demonstrably high correlation between the currency in which the cross-hedge is denominated and the currency being hedged, and (ii) executing a cross-hedge through the currency in which the cross-hedge is denominated will be significantly more cost-effective or provide substantially greater liquidity than executing a similar hedging transaction by means of the currency being hedged.
 
Some of the forward foreign currency contracts entered into by the Fund are classified as non-deliverable forwards (“NDF”). NDFs are cash-settled, short-term forward contracts that may be thinly traded or are denominated in non-convertible foreign currency, where the profit or loss at the time at the settlement date is calculated by taking the difference between the agreed upon exchange rate and the spot rate at the time of settlement, for an agreed upon notional amount of funds. All NDFs have a fixing date and a settlement date. The fixing date is the date at which the difference between the prevailing market exchange rate and the agreed upon exchange rate is calculated. The settlement date is the date by which the payment of the difference is due to the party receiving payment. NDFs are commonly quoted for time periods of one month up to two years, and are normally quoted and settled in U.S. dollars. They are often used to gain exposure to and/or hedge exposure to foreign currencies that are not internationally traded.
 
Currency Futures.  The Fund may also seek to hedge against the decline in the value of a currency through use of currency futures or options thereon. Currency futures are similar to forward foreign exchange transactions except that futures are standardized, exchange-traded contracts while forward foreign exchange transactions are traded in the OTC market. Currency futures involve substantial currency risk, and also involve leverage risk.
 
Currency Options.  The Fund may also seek to hedge against the decline in the value of a currency through the use of currency options. Currency options are similar to options on securities. For example, in consideration for an option premium the writer of a currency option is obligated to sell (in the case of a call option) or purchase (in the case of a put option) a specified amount of a specified currency on or before the expiration date for a specified amount of another currency. The Fund may engage in transactions in options on currencies either on exchanges or OTC markets. The Fund may write covered call options on up to 100% of the currencies in its portfolio. See “Types of Options” above and “Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC Derivatives” below. Currency options involve substantial currency risk, and may also involve credit, leverage or liquidity risk.
 
Limitations on Currency Transactions.  The Fund will not hedge a currency in excess of the aggregate market value of the securities that it owns (including receivables for unsettled securities sales), or has committed to purchase or anticipates purchasing, which are denominated in such currency. Open positions in forward foreign exchange transactions used for non-hedging purposes will be covered by the segregation of


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liquid assets and are marked to market daily. The Fund’s exposure to futures or options on currencies will be covered as described below under “Risk Factors in Derivatives.”
 
Risk Factors in Hedging Foreign Currency.  Hedging transactions involving currency instruments involve substantial risks, including correlation risk. While the Fund’s use of Currency Instruments to effect hedging strategies is intended to reduce the volatility of the net asset value of the Fund’s shares, the net asset value of the Fund’s shares will fluctuate. Moreover, although Currency Instruments will be used with the intention of hedging against adverse currency movements, transactions in Currency Instruments involve the risk that anticipated currency movements will not be accurately predicted and that the Fund’s hedging strategies will be ineffective. To the extent that the Fund hedges against anticipated currency movements that do not occur, the Fund may realize losses and decrease its total return as the result of its hedging transactions. Furthermore, the Fund will only engage in hedging activities from time to time and may not be engaging in hedging activities when movements in currency exchange rates occur.
 
In connection with its trading in forward foreign currency contracts, the Fund will contract with a foreign or domestic bank, or foreign or domestic securities dealer, to make or take future delivery of a specified amount of a particular currency. There are no limitations on daily price moves in such forward contracts, and banks and dealers are not required to continue to make markets in such contracts. There have been periods during which certain banks or dealers have refused to quote prices for such forward contracts or have quoted prices with an unusually wide spread between the price at which the bank or dealer is prepared to buy and that at which it is prepared to sell. Governmental imposition of credit controls might limit any such forward contract trading. With respect to its trading of forward contracts, if any, the Fund will be subject to the risk of bank or dealer failure and the inability of, or refusal by, a bank or dealer to perform with respect to such contracts. Any such default would deprive the Fund of any profit potential or force the Fund to cover its commitments for resale, if any, at the then market price and could result in a loss to the Fund.
 
It may not be possible for the Fund to hedge against currency exchange rate movements, even if correctly anticipated, in the event that (i) the currency exchange rate movement is so generally anticipated that the Fund is not able to enter into a hedging transaction at an effective price, or (ii) the currency exchange rate movement relates to a market with respect to which Currency Instruments are not available and it is not possible to engage in effective foreign currency hedging. The cost to the Fund of engaging in foreign currency transactions varies with such factors as the currencies involved, the length of the contract period and the market conditions then prevailing. Since transactions in foreign currency exchange usually are conducted on a principal basis, no fees or commissions are involved.
 
Risk Factors in Derivatives.  Derivatives are volatile and involve significant risks, including:
 
Credit Risk — the risk that the counterparty in a derivative transaction will be unable to honor its financial obligation to the Fund, or the risk that the reference entity in a credit default swap or similar derivative will not be able to honor its financial obligations.
 
Currency Risk — the risk that changes in the exchange rate between two currencies will adversely affect the value (in U.S. dollar terms) of an investment.
 
Leverage Risk — the risk associated with certain types of investments or trading strategies (such as, for example, borrowing money to increase the amount of investments) that relatively small market movements may result in large changes in the value of an investment. Certain investments or trading strategies that involve leverage can result in losses that greatly exceed the amount originally invested.
 
Liquidity Risk — the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth.
 
Correlation Risk — the risk that changes in the value of a derivative will not match the changes in the value of the portfolio holdings that are being hedged or of the particular market or security to which the Fund seeks exposure.
 
Index Risk — If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Fund could receive lower interest


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payments or experience a reduction in the value of the derivative to below what the Fund paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index.
 
The Fund intends to enter into transactions involving derivatives only if there appears to be a liquid secondary market for such instruments or, in the case of illiquid instruments traded in OTC transactions, such instruments satisfy the criteria set forth below under “Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC Derivatives.” However, there can be no assurance that, at any specific time, either a liquid secondary market will exist for a derivative or the Fund will otherwise be able to sell such instrument at an acceptable price. It may, therefore, not be possible to close a position in a derivative without incurring substantial losses, if at all.
 
Certain transactions in derivatives (such as futures transactions or sales of put options) involve substantial leverage risk and may expose the Fund to potential losses that exceed the amount originally invested by the Fund. When the Fund engages in such a transaction, the Fund will deposit in a segregated account liquid assets with a value at least equal to the Fund’s exposure, on a mark-to-market basis, to the transaction (as calculated pursuant to requirements of the Commission). Such segregation will ensure that the Fund has assets available to satisfy its obligations with respect to the transaction, but will not limit the Fund’s exposure to loss.
 
Additional Risk Factors of OTC Transactions; Limitations on the Use of OTC Derivatives.  Certain derivatives traded in OTC markets, including indexed securities, swaps and OTC options, involve substantial liquidity risk. The absence of liquidity may make it difficult or impossible for the Fund to sell such instruments promptly at an acceptable price. The absence of liquidity may also make it more difficult for the Fund to ascertain a market value for such instruments. The Fund will, therefore, acquire illiquid OTC instruments (i) if the agreement pursuant to which the instrument is purchased contains a formula price at which the instrument may be terminated or sold, or (ii) for which the Manager anticipates the Fund can receive on each business day at least two independent bids or offers, unless a quotation from only one dealer is available, in which case that dealer’s quotation may be used.
 
Because derivatives traded in OTC markets are not guaranteed by an exchange or clearing corporation and generally do not require payment of margin, to the extent that the Fund has unrealized gains in such instruments or has deposited collateral with its counterparty the Fund is at risk that its counterparty will become bankrupt or otherwise fail to honor its obligations. The Fund will attempt to minimize these risks by engaging in transactions in derivatives traded in OTC markets only with financial institutions that have substantial capital or that have provided the Fund with a third-party guaranty or other credit enhancement.
 
Equity Securities.  The Fund may invest in equity securities, which include common stock and preferred stock (including convertible preferred stock); bonds, notes and debentures convertible into common or preferred stock; stock purchase warrants and rights; equity interests in trusts; general and limited partnerships and limited liability companies; and depositary receipts. For a discussion of the types of equity securities in which the Fund may invest and the risks associated with investing in such equity securities, see the Fund’s Prospectus.
 
Foreign Investment Risks.  The Fund may invest in foreign securities, including securities from issuers located in emerging market countries. These securities may be denominated in U.S. dollars or in a foreign currency. Investing in foreign securities involves risks not typically associated with investing in securities of companies organized and operated in the United States that can increase the chances that the Fund will lose money. Securities issued by certain companies organized outside the United States may not be deemed to be foreign securities (but rather deemed to be U.S. securities) if the company’s principal operations are conducted from the U.S., the company’s equity securities trade principally on a U.S. stock exchange, or the company does a substantial amount of business in the U.S.
 
In addition to equity securities, foreign investments of the Fund may include: (a) debt obligations issued or guaranteed by foreign sovereign governments or their agencies, authorities, instrumentalities or political


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subdivisions, including a foreign state, province or municipality; (b) debt obligations of supranational organizations; (c) debt obligations of foreign banks and bank holding companies; (d) debt obligations of domestic banks and corporations issued in foreign currencies; (e) debt obligations denominated in the Euro; and (f) foreign corporate debt securities and commercial paper. Such securities may include loan participations and assignments, convertible securities and zero-coupon securities.
 
Dividends or interest on, or proceeds from the sale of, foreign securities may be subject to foreign withholding taxes.
 
Foreign Market Risk.  Because the Fund invests in foreign securities, its strategy offers the potential for more diversification than the Fund that invests only in the United States because securities traded on foreign markets have often (though not always) performed differently from securities traded in the United States. However, such investments often involve risks not present in U.S. investments that can increase the chances that the Fund will lose money. In particular, the Fund is subject to the risk that, because there are generally fewer investors on foreign exchanges and a smaller number of shares traded each day, it may be difficult for the Fund to buy and sell securities on those exchanges. In addition, prices of foreign securities may fluctuate more than prices of securities traded in the United States. Investments in foreign markets may also be adversely affected by governmental actions such as the imposition of punitive taxes. In addition, the governments of certain countries may prohibit or impose substantial restrictions on foreign investing in their capital markets or in certain industries. Any of these actions could severely affect security prices, impair the Fund’s ability to purchase or sell foreign securities or transfer the Fund’s assets or income back into the United States, or otherwise adversely affect the Fund’s operations. Other potential foreign market risks include exchange controls, difficulties in pricing securities, defaults on foreign government securities, difficulties in enforcing favorable legal judgments in foreign courts, and political and social conditions, such as diplomatic relations, confiscatory taxation, expropriation, limitation on the removal of funds or assets, or imposition of (or change in) exchange control regulations. Legal remedies available to investors in certain foreign countries may be less extensive than those available to investors in the United States or other foreign countries. In addition, changes in government administrations or economic or monetary policies in the U.S. or abroad could result in appreciation or depreciation of portfolio securities and could favorably or adversely affect the Fund’s operations. Also, brokerage commissions and other costs of buying or selling securities often are higher in foreign countries than they are in the United States. This reduces the amount the Fund can earn on its investments.
 
Foreign Economy Risk.  The economies of certain foreign markets often do not compare favorably with that of the United States with respect to such issues as growth of gross national product, reinvestment of capital, resources, and balance of payments position. Certain such economies may rely heavily on particular industries or foreign capital and are more vulnerable to diplomatic developments, the imposition of economic sanctions against a particular country or countries, changes in international trading patterns, trade barriers, and other protectionist or retaliatory measures.
 
Currency Risk and Exchange Risk.  Because foreign securities generally are denominated and pay dividends or interest in foreign currencies, the value of the Fund that invests in foreign securities as measured in U.S. dollars will be affected favorably or unfavorably by changes in exchange rates. Generally, when the U.S. dollar rises in value against a foreign currency, a security denominated in that currency loses value because the currency is worth fewer U.S. dollars. Conversely, when the U.S. dollar decreases in value against a foreign currency, a security denominated in that currency gains value because the currency is worth more U.S. dollars. This risk, generally known as “currency risk,” means that a stronger U.S. dollar will reduce returns for U.S. investors while a weak U.S. dollar will increase those returns.
 
Governmental Supervision and Regulation/Accounting Standards.  Many foreign governments supervise and regulate stock exchanges, brokers and the sale of securities less than does the United States. Some countries may not have laws to protect investors comparable to the U.S. securities laws. For example, some foreign countries may have no laws or rules against insider trading. Insider trading occurs when a person buys or sells a company’s securities based on nonpublic information about that company. Accounting standards in other countries are not necessarily the same as in the United States. If the accounting standards in another


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country do not require as much detail as U.S. accounting standards, it may be harder for Fund management to completely and accurately determine a company’s financial condition. In addition, the U.S. Government has from time to time in the past imposed restrictions, through penalties and otherwise, on foreign investments by U.S. investors such as the Fund. If such restrictions should be reinstituted, it might become necessary for the Fund to invest all or substantially all of its assets in U.S. securities.
 
Certain Risks of Holding Fund Assets Outside the United States.  The Fund generally holds its foreign securities and cash in foreign banks and securities depositories. Some foreign banks and securities depositories may be recently organized or new to the foreign custody business. In addition, there may be limited or no regulatory oversight over their operations. Also, the laws of certain countries may put limits on the Fund’s ability to recover its assets if a foreign bank or depository or issuer of a security or any of their agents goes bankrupt. In addition, it is often more expensive for the Fund to buy, sell and hold securities in certain foreign markets than in the United States. The increased expense of investing in foreign markets reduces the amount the Fund can earn on its investments and typically results in a higher operating expense ratio for the Fund as compared to investment companies that invest only in the United States.
 
Publicly Available Information.  In general, less information is publicly available with respect to foreign issuers than is available with respect to U.S. companies. Most foreign companies are also not subject to the uniform accounting and financial reporting requirements applicable to issuers in the United States. While the volume of transactions effected on foreign stock exchanges has increased in recent years, it remains appreciably below that of the New York Stock Exchange. Accordingly, the Fund’s foreign investments may be less liquid and their prices may be more volatile than comparable investments in securities in U.S. companies. In addition, there is generally less government supervision and regulation of securities exchanges, brokers and issuers in foreign countries than in the United States.
 
Settlement Risk.  Settlement and clearance procedures in certain foreign markets differ significantly from those in the United States. Foreign settlement procedures and trade regulations also may involve certain risks (such as delays in payment for or delivery of securities) not typically generated by the settlement of U.S. investments. Communications between the United States and emerging market countries may be unreliable, increasing the risk of delayed settlements or losses of security certificates in markets that still rely on physical settlement. Settlements in certain foreign countries at times have not kept pace with the number of securities transactions; these problems may make it difficult for the Fund to carry out transactions. If the Fund cannot settle or is delayed in settling a purchase of securities, it may miss attractive investment opportunities and certain of its assets may be uninvested with no return earned thereon for some period. If the Fund cannot settle or is delayed in settling a sale of securities, it may lose money if the value of the security then declines or, if it has contracted to sell the security to another party, the Fund could be liable to that party for any losses incurred.
 
Illiquid or Restricted Securities.  The Fund may invest up to 15% of its net assets in securities that lack an established secondary trading market or otherwise are considered illiquid. Liquidity of a security relates to the ability to dispose easily of the security and the price to be obtained upon disposition of the security, which may be less than would be obtained for a comparable more liquid security. Illiquid securities may trade at a discount from comparable, more liquid investments. Investment of the Fund’s assets in illiquid securities may restrict the ability of the Fund to dispose of its investments in a timely fashion and for a fair price as well as its ability to take advantage of market opportunities. The risks associated with illiquidity will be particularly acute where the Fund’s operations require cash, such as when the Fund redeems shares or pays dividends, and could result in the Fund borrowing to meet short-term cash requirements or incurring capital losses on the sale of illiquid investments.
 
The Fund may invest in securities that are not registered under the Securities Act (“restricted securities”). Restricted securities may be sold in private placement transactions between issuers and their purchasers and may be neither listed on an exchange nor traded in other established markets. In many cases, privately placed securities may not be freely transferable under the laws of the applicable jurisdiction or due to contractual restrictions on resale. As a result of the absence of a public trading market, privately placed securities may be less liquid and more difficult to value than publicly traded securities. To the extent that privately placed


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securities may be resold in privately negotiated transactions, the prices realized from the sales, due to illiquidity, could be less than those originally paid by the Fund or less than their fair market value. In addition, issuers whose securities are not publicly traded may not be subject to the disclosure and other investor protection requirements that may be applicable if their securities were publicly traded. If any privately placed securities held by the Fund are required to be registered under the securities laws of one or more jurisdictions before being resold, the Fund may be required to bear the expenses of registration. Certain of the Fund’s investments in private placements may consist of direct investments and may include investments in smaller, less seasoned issuers, which may involve greater risks. These issuers may have limited product lines, markets or financial resources, or they may be dependent on a limited management group. In making investments in such securities, the Fund may obtain access to material nonpublic information, which may restrict the Fund’s ability to conduct portfolio transactions in such securities.
 
Some of these securities are new and complex, and trade only among institutions; the markets for these securities are still developing, and may not function as efficiently as established markets. Owning a large percentage of restricted or illiquid securities could hamper the fund’s ability to raise cash to meet redemptions. Also, because there may not be an established market price for these securities, the Fund may have to estimate their value, which means that their valuation (and, to a much smaller extent, the valuation of the Fund) may have a subjective element. Transactions in restricted or illiquid securities may entail registration expense and other transaction costs that are higher than those for transactions in unrestricted or liquid securities. Where registration is required for restricted or illiquid securities a considerable time period may elapse between the time the fund decides to sell the security and the time it is actually permitted to sell the security under an effective registration statement. If during such period, adverse market conditions were to develop, the Fund might obtain less favorable pricing terms that when it decided to sell the security.
 
Inflation Risk.  Like all mutual funds, the Fund is subject to inflation risk. Inflation risk is the risk that the present value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of the Fund’s assets can decline as can the value of the Fund’s distributions.
 
Initial Public Offering (“IPO”) Risk.  The volume of initial public offerings and the levels at which the newly issued stocks trade in the secondary market are affected by the performance of the stock market overall. If initial public offerings are brought to the market, availability may be limited and the Fund may not be able to buy any shares at the offering price, or if it is able to buy shares, it may not be able to buy as many shares at the offering price as it would like. In addition, the prices of securities involved in initial public offerings are often subject to greater and more unpredictable price changes than more established stocks. IPOs have the potential to produce substantial gains. There is no assurance that the Fund will have access to profitable IPOs and therefore investors should not rely on any past gains from IPOs as an indication of future performance. The investment performance of the Fund during periods when it is unable to invest significantly or at all in IPOs may be lower than during periods when it is able to do so. In addition, as the Fund increases in size, the impact of IPOs on its performance will generally decrease. Securities issued in IPOs are subject to many of the same risks as investing in companies with smaller market capitalizations. Securities issued in IPOs have no trading history, and information about the companies may be available for very limited periods.
 
Investment in Emerging Markets.  The Fund may invest up to 20% of its total assets in the securities of issuers domiciled in various countries with emerging securities markets when the Manager believes they present an attractive investment opportunity. Specifically, a country with an emerging capital market is any country that the World Bank, the International Finance Corporation, the United Nations or its authorities has determined to have a low or middle income economy. Countries with emerging markets can be found in regions such as Asia, Latin America, Eastern Europe and Africa.
 
Investments in the securities of issuers domiciled in countries with emerging capital markets involve certain additional risks that do not generally apply to investments in securities of issuers in more developed capital markets, such as (i) low or non-existent trading volume, resulting in a lack of liquidity and increased volatility in prices for such securities, as compared to securities of comparable issuers in more developed capital markets; (ii) uncertain national policies and social, political and economic instability, increasing the


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potential for expropriation of assets, confiscatory taxation, high rates of inflation or unfavorable diplomatic developments; (iii) possible fluctuations in exchange rates, differing legal systems and the existence or possible imposition of exchange controls, custodial restrictions or other foreign or U.S. governmental laws or restrictions applicable to such investments; (iv) national policies that may limit the Fund’s investment opportunities such as restrictions on investment in issuers or industries deemed sensitive to national interests; and (v) the lack or relatively early development of legal structures governing private and foreign investments and private property. In addition to withholding taxes on investment income, some countries with emerging markets may impose differential capital gains taxes on foreign investors.
 
Political and economic structures in emerging market countries may be undergoing significant evolution and rapid development, and these countries may lack the social, political and economic stability characteristic of more developed countries. In such a dynamic environment, there can be no assurance that any or all of these capital markets will continue to present viable investment opportunities for the Fund. In the past, governments of such nations have expropriated substantial amounts of private property, and most claims of the property owners have never been fully settled. There is no assurance that such expropriations will not reoccur. In such an event, it is possible that the Fund could lose the entire value of its investments in the affected market. As a result the risks described above, including the risks of nationalization or expropriation of assets, may be heightened. In addition, unanticipated political or social developments may affect the value of investments in these countries and the availability to the Fund of additional investments. The small size and inexperience of the securities markets in certain of these countries and the limited volume of trading in securities in these countries may make investments in the countries illiquid and more volatile than investments in Japan or most Western European countries.
 
Also, there may be less publicly available information about issuers in emerging markets than would be available about issuers in more developed capital markets, and such issuers may not be subject to accounting, auditing and financial reporting standards and requirements comparable to those to which U.S. companies are subject. In certain countries with emerging capital markets, reporting standards vary widely. As a result, traditional investment measurements used in the United States, such as price/earnings ratios, may not be applicable. Emerging market securities may be substantially less liquid and more volatile than those of mature markets, and company shares may be held by a limited number of persons. This may adversely affect the timing and pricing of the Fund’s acquisition or disposal of securities.
 
Practices in relation to settlement of securities transactions in emerging markets involve higher risks than those in developed markets, in part because the Fund will need to use brokers and counterparties that are less well capitalized, and custody and registration of assets in some countries may be unreliable. The possibility of fraud, negligence, undue influence being exerted by the issuer or refusal to recognize ownership exists in some emerging markets, and, along with other factors, could result in ownership registration being completely lost. The Fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation.
 
Investment in non-dollar denominated securities including securities from issuers located in emerging market countries may be on either a currency hedged or unhedged basis, and the Fund may hold from time to time various foreign currencies pending investment or conversion into U.S. dollars. Some of these instruments may have the characteristics of futures contracts. In addition, the Fund may engage in foreign currency exchange transactions to seek to protect against changes in the level of future exchange rates which would adversely affect the Fund’s performance. These investments and transactions involving foreign securities, currencies, options (including options that relate to foreign currencies), futures, hedging and cross-hedging are described below and under “Derivatives — Futures” and “Foreign Exchange Transactions.”
 
Restrictions on Certain Investments.  A number of publicly traded closed-end investment companies have been organized to facilitate indirect foreign investment in developing countries, and certain of such countries, such as Thailand, South Korea, Chile and Brazil, have specifically authorized such funds. There also are investment opportunities in certain of such countries in pooled vehicles that resemble open-end investment companies. In accordance with the Investment Company Act, the Fund may invest up to 10% of its total assets in securities of other investment companies, not more than 5% of which may be invested in any one such


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company. In addition, under the Investment Company Act, the Fund may not own more than 3% of the total outstanding voting stock of any investment company. These restrictions on investments in securities of investment companies may limit opportunities for the Fund to invest indirectly in certain developing countries. Shares of certain investment companies may at times be acquired only at market prices representing premiums to their net asset values. If the Fund acquires shares of other investment companies, shareholders would bear both their proportionate share of expenses of the Fund (including management and advisory fees) and, indirectly, the expenses of such other investment companies.
 
Investment in Other Investment Companies.  The Fund may, subject to applicable law, invest in other investment companies, including money market funds and exchange traded funds, which are typically open-end funds or unit investment trusts listed on a stock exchange. In accordance with the Investment Company Act, the Fund may invest up to 10% of its total assets in securities of other investment companies. In addition, under the Investment Company Act the Fund may not own more than 3% of the total outstanding voting stock of any investment company and not more than 5% of the value of the Fund’s total assets may be invested in securities of any investment company. Pursuant to the Investment Company Act (or alternatively, pursuant to exemptive orders received from the Commission) these percentage limitations do not apply to investments in affiliated money market funds, and under certain circumstances, do not apply to investments in affiliated investment companies, including exchange traded funds. To the extent the Fund is held by an affiliated fund, the ability of the Fund itself to purchase other affiliated investment companies may be limited. As with other investments, investments in other investment companies are subject to market and selection risk. In addition, if the Fund acquires shares in investment companies, including affiliated investment companies, shareholders would bear both their proportionate share of expenses in the Fund (including management and advisory fees) and, indirectly, the expenses of such investment companies (including management and advisory fees). Investments by the Fund in wholly owned investment entities created under the laws of certain countries will not be deemed an investment in other investment companies.
 
The Fund may invest in exchange-traded funds (“ETFs”), to the extent permitted under the Investment Company Act. In the case of ETFs, the Fund may invest in excess of the limits imposed under the Investment Company Act pursuant to exemptive orders obtained by certain ETFs and their sponsors from the Securities and Exchange Commission. An ETF is a fund that holds a portfolio of common stocks or bonds designed to track the performance of a securities index, including industry, sector, country and region indexes. ETFs trade on a securities exchange and their shares may, at times, trade at a premium or discount to their net asset value. An ETF may not replicate exactly the performance of the index it seeks to track for a number of reasons, including transaction costs incurred by the ETF. ETFs incur fees and expenses, such as operating expenses, licensing fees, trustee fees and marketing expenses, which are borne proportionately by ETF shareholders, such as the fund. The Fund will also incur brokerage costs when purchasing and selling shares of ETFs.
 
Liquidity Management.  As a temporary defensive measure, if the Manager determines that market conditions warrant, the Fund may invest without limitation in high quality money market instruments. The Fund may also invest in high quality money market instruments pending investment or to meet anticipated redemption requests. High quality money market instruments include U.S. government obligations, U.S. government agency obligations, dollar denominated obligations of foreign issuers, bank obligations, including U.S. subsidiaries and branches of foreign banks, corporate obligations, commercial paper, repurchase agreements and obligations of supranational organizations. Generally, such obligations will mature within one year from the date of settlement, but may mature within two years from the date of settlement.
 
Preferred Stock.  The Fund may invest in preferred stocks. Preferred stock has a preference over common stock in liquidation (and generally dividends as well) but is subordinated to the liabilities of the issuer in all respects. As a general rule, the market value of preferred stock with a fixed dividend rate and no conversion element varies inversely with interest rates and perceived credit risk, while the market price of convertible preferred stock generally also reflects some element of conversion value. Because preferred stock is junior to debt securities and other obligations of the issuer, deterioration in the credit quality of the issuer will cause greater changes in the value of a preferred stock than in a more senior debt security with similar stated yield characteristics. Unlike interest payments on debt securities, preferred stock dividends are payable


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only if declared by the issuer’s board of directors. Preferred stock also may be subject to optional or mandatory redemption provisions.
 
Repurchase Agreements and Purchase and Sale Contracts.  Under repurchase agreements and purchase and sale contracts, the other party agrees, upon entering into the contract with the Fund, to repurchase a security sold to the Fund at a mutually agreed-upon time and price in a specified currency, thereby determining the yield during the term of the agreement.
 
A purchase and sale contract differs from a repurchase agreement in that the contract arrangements stipulate that securities are owned by the Fund and the purchaser receives any interest on the security paid during the period. In the case of repurchase agreements, the prices at which the trades are conducted do not reflect accrued interest on the underlying obligation; whereas, in the case of purchase and sale contracts, the prices take into account accrued interest. The Fund may enter into “tri-party” repurchase agreements. In “tri-party” repurchase agreements, an unaffiliated third party custodian maintains accounts to hold collateral for the Fund and its counterparties and, therefore, the Fund may be subject to the credit risk of those custodians.
 
Repurchase agreements and purchase and sale contracts result in a fixed rate of return insulated from market fluctuations during the term of the agreement, although such return may be affected by currency fluctuations. However, in the event of a default under a repurchase agreement or under a purchase and sale contract, instead of the contractual fixed rate, the rate of return to the Fund would be dependent upon intervening fluctuations of the market values of the securities underlying the contract and the accrued interest on those securities. In such event, the Fund would have rights against the seller for breach of contract with respect to any losses arising from market fluctuations following the default.
 
Both types of agreement usually cover short periods, such as less than one week, although they may have longer terms, and may be construed to be collateralized loans by the purchaser to the seller secured by the securities transferred to the purchaser. In the case of a repurchase agreement, as a purchaser, the Manager will monitor the creditworthiness of the seller, and the Fund will require the seller to provide additional collateral if the market value of the securities falls below the repurchase price at any time during the term of the repurchase agreement. The Fund does not have this right to seek additional collateral as a purchaser in the case of purchase and sale contracts. The Fund’s adviser or sub-adviser will mark-to-market daily the value of the securities. Securities subject to repurchase agreements and purchase and sale contracts will be held by the Fund’s custodian (or sub-custodian) in the federal Reserve/Treasury book-entry system or by another authorized securities depository.
 
In the event of default by the seller under a repurchase agreement construed to be a collateralized loan, the underlying securities are not owned by the Fund but only constitute collateral for the seller’s obligation to pay the repurchase price. Therefore, the Fund may suffer time delays and incur costs or possible losses in connection with disposition of the collateral. If the seller becomes insolvent and subject to liquidation or reorganization under applicable bankruptcy or other laws, the Fund’s ability to dispose of the underlying securities may be restricted. Finally, it is possible that the Fund may not be able to substantiate its interest in the underlying securities. To minimize this risk, the securities underlying the repurchase agreement will be held by the custodian at all times in an amount at least equal to the repurchase price, including accrued interest. If the seller fails to repurchase the securities, the Fund may suffer a loss to the extent proceeds from the sale of the underlying securities are less than the repurchase price.
 
The Fund may not invest in repurchase agreements or purchase and sale contracts maturing in more than seven days if such investments, together with the Fund’s other illiquid investments, would exceed 15% of the Fund’s net assets.
 
Reverse Repurchase Agreements.  The Fund may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements. Under a reverse repurchase agreement, the Fund sells securities to another party and agrees to repurchase them at a particular date and price. The Fund may enter into a reverse repurchase agreement when it is anticipated that the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction.


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At the time the Fund enters into a reverse repurchase agreement, it will segregate liquid assets with a value not less than the repurchase price (including accrued interest). The use of reverse repurchase agreements may be regarded as leveraging and, therefore, speculative. Furthermore, reverse repurchase agreements involve the risks that (i) the interest income earned in the investment of the proceeds will be less than the interest expense, (ii) the market value of the securities retained in lieu of sale by the Fund may decline below the price of the securities the Fund has sold but is obligated to repurchase, (iii) the market value of the securities sold will decline below the price at which the Fund is required to repurchase them and (iv) the securities will not be returned to the Fund.
 
In addition, if the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Fund’s obligations to repurchase the securities and the Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision.
 
Rights Offerings and Warrants to Purchase.  The Fund may participate in rights offerings and may purchase warrants, which are privileges issued by corporations enabling the owners to subscribe to and purchase a specified number of shares of the corporation at a specified price during a specified period of time. Subscription rights normally have a short life span to expiration. The purchase of rights or warrants involves the risk that the Fund could lose the purchase value of a right or warrant if the right to subscribe to additional shares is not exercised prior to the rights’ and warrants’ expiration. Also, the purchase of rights and/or warrants involves the risk that the effective price paid for the right and/or warrant added to the subscription price of the related security may exceed the value of the subscribed security’s market price such as when there is no movement in the level of the underlying security. Buying a warrant does not make the Fund a shareholder of the underlying stock. The warrant holder has no voting or dividend rights with respect to the underlying stock. A warrant does not carry any right to assets of the issuer, and for this reason investment in warrants may be more speculative than other equity-based investments.
 
Rule 144A Securities.  A Fund may purchase securities that can be offered and sold only to “qualified institutional buyers” under Rule 144A under the Securities Act. Rule 144A securities will be deemed to be illiquid securities unless the Fund’s Board or the Manager determines otherwise. The Trustees may determine to treat as liquid Rule 144A securities that are either freely tradable in their primary markets offshore or to be liquid in accordance with the policies and procedures adopted by the Fund’s Trustees. The Trustees may adopt guidelines and delegate to the Manager the daily function of determining and monitoring liquidity of Rule 144A securities. The Trustees, however, will retain sufficient oversight and will ultimately be responsible for the determinations. Since it is not possible to predict with assurance exactly how the market for securities sold and offered under Rule 144A will continue to develop, the Trustees will carefully monitor the Fund’s investments in these securities. This investment practice could have the effect of increasing the level of illiquidity in the Fund to the extent that qualified institutional buyers become for a time uninterested in purchasing these securities.
 
Securities Lending.  In the future, the Fund expects to lend portfolio securities on a short-term or long-term basis, but does not currently do so. In such case the Fund may lend portfolio securities with a value not exceeding 331/3% of its total assets or the limit prescribed by applicable law to banks, brokers and other financial institutions. In return, the Fund receives collateral in cash or securities issued or guaranteed by the U.S. Government, which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The Fund maintains the ability to obtain the right to vote or consent on proxy proposals involving material events affecting securities loaned. The Fund receives the income on the loaned securities. Where the Fund receives securities as collateral, the Fund receives a fee for its loans from the borrower and does not receive the income on the collateral. Where the Fund receives cash collateral, it may invest such collateral and retain the amount earned, net of any amount rebated to the borrower. As a result, the Fund’s yield may increase. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions. The Fund is obligated to return the collateral to the borrower at the termination of the loan. The Fund could suffer a loss in the event the Fund must return the cash collateral and there are losses on investments made with the cash collateral. In the event the borrower defaults on any of its obligations with


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respect to a securities loan, the Fund could suffer a loss where there are losses on investments made with the cash collateral or where the value of the securities collateral falls below the market value of the borrowed securities. The Fund could also experience delays and costs in gaining access to the collateral. The Fund may pay reasonable finder’s, lending agent, administrative and custodial fees in connection with its loans.
 
The Fund would continue to accrue interest on loaned securities and would also earn income on investment collateral for such loans. Any cash collateral received by the Fund in connection with such loans may be invested in a broad range of high quality, U.S. dollar-denominated money market instruments that meet Rule 2a-7 restrictions for money market funds. Specifically, cash collateral may be invested in any of the following instruments: (a) securities issued or guaranteed as to principal and interest by the U.S. Government or by its agencies or instrumentalities and related custodial receipts; (b) “first tier” quality commercial paper and other obligations issued or guaranteed by U.S. and foreign corporations and other issuers rated (at the time of purchase) in the highest rating category by at least two NRSROs, or one if only rated by one NRSRO; (c) U.S. dollar-denominated obligations issued or supported by the credit of U.S. or foreign banks or savings institutions with total assets in excess of $1 billion (including obligations of foreign branches of such banks) (i.e., CDs, BAs and time deposits); (d) repurchase agreements relating to the above instruments, as well as corporate debt; and (e) unaffiliated and, to the extent permitted by SEC guidelines, affiliated money market funds. Any such investments must be rated “first tier” and must have a maturity of 397 days or less from the date of purchase.
 
Standby Commitment Agreements.  Standby commitment agreements commit the Fund, for a stated period of time, to purchase a stated amount of securities that may be issued and sold to the Fund at the option of the issuer. The price of the security is fixed at the time of the commitment. At the time of entering into the agreement, the Fund is paid a commitment fee, regardless of whether or not the security is ultimately issued. The Fund will enter into such agreements for the purpose of investing in the security underlying the commitment at a price that is considered advantageous to the Fund. The Fund will limit its investment in such commitments so that the aggregate purchase price of securities subject to such commitments, together with the value of the Fund’s other illiquid investments, will not exceed 15% of its net assets taken at the time of the commitment. The Fund segregates liquid assets in an aggregate amount equal to the purchase price of the securities underlying the commitment.
 
There can be no assurance that the securities subject to a standby commitment will be issued, and the value of the security, if issued, on the delivery date may be more or less than its purchase price. Since the issuance of the security underlying the commitment is at the option of the issuer, the Fund may bear the risk of a decline in the value of such security and may not benefit from an appreciation in the value of the security during the commitment period.
 
The purchase of a security pursuant to a standby commitment agreement and the related commitment fee will be recorded on the date on which the security can reasonably be expected to be issued, and the value of the security thereafter will be reflected in the calculation of the Fund’s net asset value. The cost basis of the security will be adjusted by the amount of the commitment fee. In the event the security is not issued, the commitment fee will be recorded as income on the expiration date of the standby commitment.
 
When-Issued and Delayed Delivery Securities.  The Fund may purchase or sell securities that it is entitled to receive on a when issued basis. The Fund may also purchase or sell securities on a delayed delivery basis or through a forward commitment. (including “TBA” (to be announced) basis). These transactions involve the purchase or sale of securities by the Fund at an established price with payment and delivery taking place in the future. The Fund enters into these transactions to obtain what is considered an advantageous price to the Fund at the time of entering into the transaction. When the Fund purchases securities in these transactions, the Fund segregates liquid securities in an amount equal to the amount of its purchase commitments.
 
There can be no assurance that a security purchased on a when issued basis will be issued or that a security purchased or sold on a delayed delivery basis or through a forward commitment will be delivered. Also, the value of securities in these transactions on the delivery date may be more or less than the price paid by the Fund to purchase the securities. The Fund will lose money if the value of the security in such a


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transaction declines below the purchase price and will not benefit if the value of the security appreciates above the sale price during the commitment period.
 
If deemed advisable as a matter of investment strategy, the Fund may dispose of or renegotiate a commitment after it has been entered into, and may sell securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. In these cases the Fund may realize a taxable capital gain or loss.
 
When the Fund engages in when-issued, TBA or forward commitment transactions, it relies on the other party to consummate the trade. Failure of such party to do so may result in the Fund’s incurring a loss or missing an opportunity to obtain a price considered to be advantageous.
 
The market value of the securities underlying a commitment to purchase securities, and any subsequent fluctuations in their market value, is taken into account when determining the market value of the Fund starting on the day the Fund agrees to purchase the securities. The Fund does not earn interest on the securities it has committed to purchase until they are paid for and delivered on the settlement date.
 
Investment Restrictions
 
The Fund has adopted restrictions and policies relating to the investment of the Fund’s assets and its activities. Certain of the restrictions are fundamental policies of the Fund and may not be changed without the approval of the holders of a majority of the Fund’s outstanding voting securities (which for this purpose and under the Investment Company Act, means the lesser of (i) 67% of the shares represented at a meeting at which more than 50% of the outstanding shares are represented or (ii) more than 50% of the outstanding shares). The Fund has also adopted certain non-fundamental investment restrictions, which may be changed by the Board of Trustees without shareholder approval. Set forth below are the Fund’s fundamental and non-fundamental investment restrictions. Unless otherwise provided, all references below to the assets of the Fund are in terms of current market value.
 
Under its fundamental investment restrictions, the Fund may not:
 
(1) With respect to 75% of its total assets, purchase the securities of any issuer (except securities issued or guaranteed by the United States government or any agency or instrumentality thereof) if, as a result, (i) more than 5% of the Fund’s total assets would be invested in securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer.
 
(2) Issue senior securities, borrow money or pledge its assets, except that the Fund may borrow from banks or enter into reverse repurchase agreements or dollar rolls in amounts aggregating not more than 331/3% of the value of its total assets (calculated when the loan is made) to take advantage of investment opportunities and may pledge up to 331/3% of the value of its total assets to secure such borrowings. The Fund is also authorized to borrow an additional 5% of its total assets without regard to the foregoing limitations for temporary purposes such as clearance of portfolio transactions and share redemptions. For purposes of these restrictions, the purchase or sale of securities on a “when-issued,” delayed delivery or forward commitment basis, the purchase and sale of options and futures contracts and collateral arrangements with respect thereto are not deemed to be the issuance of a senior security, a borrowing or a pledge of assets.
 
(3) Act as an underwriter of another issuer’s securities, except to the extent that the Fund may be deemed to be an underwriter within the meaning of the Securities Act in connection with the purchase and sale of portfolio securities.
 
(4) Make loans except as permitted by the Investment Company Act, except that the Fund may purchase and hold debt instruments and enter into repurchase agreements in accordance with its investment objective and policies and may lend portfolio securities.
 
(5) Purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options, futures


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contracts, or other derivative instruments, or from investing in securities or other instruments backed by physical commodities).
 
(6) Purchase or sell real estate unless acquired as a result of ownership of securities or other instruments (but this shall not prohibit the Fund from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities).
 
(7) Purchase the securities of any issuer if, as a result, 25% or more of the Fund’s total assets would be invested in the securities of issuers whose principal business activities are in the same industry; except that this restriction shall not be applicable to securities issued or guaranteed by the U.S. government or any agency or instrumentality thereof.
 
The foregoing restrictions and limitations will apply only at the time of purchase of securities, and the percentage limitations will not be considered violated unless an excess or deficiency occurs or exists immediately after and as a result of an acquisition of securities, unless otherwise indicated. With respect to (2) above, however, in the event that the asset coverage on borrowings falls below 300 percent, the Fund shall, to the extent required by the 1940 Act, within three days thereafter (not including Sundays and holidays) reduce the amount of its borrowings to an extent that the asset coverage of such borrowings shall be at least 300 percent.
 
Under its non-fundamental investment restrictions, the Fund may not:
 
(1) Sell securities short, unless the Fund owns or has the right to obtain securities equivalent in kind and amount to the securities sold short at no added cost, and provided that transactions in options, futures contracts, options on futures contracts, or other derivative instruments are not deemed to constitute selling securities short.
 
(2) Purchase securities on margin, except that the Fund may obtain such short term credits as are necessary for the clearance of transactions; and provided that margin deposits in connection with futures contracts, options on futures contracts, or other derivative instruments shall not constitute purchasing securities on margin.
 
(3) Pledge, mortgage or hypothecate any assets owned by the Fund except as may be necessary in connection with permissible borrowings or investments and then such pledging, mortgaging, or hypothecating may not exceed 331/3% of the Fund’s total assets at the time of the borrowing or investment.
 
(4) Purchase securities of open-end or closed-end investment companies except in compliance with the Investment Company Act and applicable state law.
 
(5) Enter into futures contracts or related options if more than 30% of the Fund’s net assets would be represented by futures contracts or more than 5% of the Fund’s net assets would be committed to initial margin deposits and premiums on futures contracts and related options.
 
(6) Invest in direct interests in oil, gas or other mineral exploration programs or leases; however, the Fund may invest in the securities of issuers that engage in these activities.
 
(7) Invest in illiquid securities if, as a result of such investment, more than 15% of the Fund’s net assets would be invested in illiquid securities.
 
Defensive Investments
 
For temporary defensive purposes, including during periods of high cash inflows, the Fund may depart from its principal investment strategies and invest part or all of its assets in cash equivalents and short-term fixed-income securities or it may hold cash. During such periods, the Fund may not be able to achieve its investment objectives. The Fund may adopt a defensive strategy when its portfolio manager believes securities in which the Fund normally invests have elevated risks due to political or economic factors and in other extraordinary circumstances.


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The Fund may invest up to 100% of its total assets for temporary defensive purposes or to keep cash on hand fully in cash equivalents, and short-term taxable fixed income securities. The short-term taxable fixed income securities issuers shall have a long-term rating of at least A or higher by S&P, Moody’s or Fitch and shall have a maturity of one year or less. Short-term taxable fixed income securities are defined to include, without limitation, the following:
 
(1) The Fund may invest in U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. government agencies or instrumentalities. U.S. government agency securities include securities issued by (a) the Federal Housing Administration, Farmers Home Administration, Export-Import Bank of the United States, Small Business Administration, and the Government National Mortgage Association, whose securities are supported by the full faith and credit of the United States; (b) the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the Tennessee Valley Authority, whose securities are supported by the right of the agency to borrow from the U.S. Treasury; (c) the Federal National Mortgage Association, whose securities are supported by the discretionary authority of the U.S. government to purchase certain obligations of the agency or instrumentality; and (d) the Student Loan Marketing Association, whose securities are supported only by its credit. While the U.S. government provides financial support to such U.S. government-sponsored agencies or instrumentalities, no assurance can be given that it always will do so since it is not so obligated by law. The U.S. government, its agencies, and instrumentalities do not guarantee the market value of their securities, and consequently, the value of such securities may fluctuate. In addition, the Fund may invest in sovereign debt obligations of non-U.S. countries. A sovereign debtor’s willingness or ability to repay principal and interest in a timely manner may be affected by a number of factors, including its cash flow situation, the extent of its non-U.S. reserves, the availability of sufficient non-U.S. exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the sovereign debtor’s policy toward principal international lenders and the political constraints to which it may be subject.
 
(2) The Fund may invest in certificates of deposit issued against funds deposited in a bank or savings and loan association. Such certificates are for a definite period of time, earn a specified rate of return, and are normally negotiable. If such certificates of deposit are non-negotiable, they will be considered illiquid securities and be subject to the Fund’s 15% restriction on investments in illiquid securities. Pursuant to the certificate of deposit, the issuer agrees to pay the amount deposited plus interest to the bearer of the certificate on the date specified thereon. Under current FDIC regulations, the maximum insurance payable as to any one certificate of deposit is $100,000; therefore, certificates of deposit purchased by the Fund may not be fully insured.
 
(3) The Fund may invest in bankers’ acceptances, which are short-term credit instruments used to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then “accepted” by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset or it may be sold in the secondary market at the going rate of interest for a specific maturity.
 
(4) The Fund may invest in repurchase agreements which involve purchases of debt securities. In such an action, at the time the Fund purchases the security, it simultaneously agrees to resell and redeliver the security to the seller, who also simultaneously agrees to buy back the security at a fixed price and time. This assures a predetermined yield for the Fund during its holding period since the resale price is always greater than the purchase price and reflects an agreed-upon market rate. Such actions afford an opportunity for the Fund to invest temporarily available cash. The Fund may enter into repurchase agreements only with respect to obligations of the U.S. government, its agencies or instrumentalities; certificates of deposit; or bankers’ acceptances in which the Fund may invest. Repurchase agreements may be considered loans to the seller, collateralized by the underlying securities. The risk to the Fund is limited to the ability of the seller to pay the agreed-upon sum on the repurchase date; in the event of default, the repurchase agreement provides that the Fund is entitled to sell the underlying collateral. If the value of the collateral declines after the agreement is entered into, however, and if the seller defaults


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under a repurchase agreement when the value of the underlying collateral is less than the repurchase price, the Fund could incur a loss of both principal and interest. The portfolio manager monitors the value of the collateral at the time the action is entered into and at all times during the term of the repurchase agreement. The portfolio manager does so in an effort to determine that the value of the collateral always equals or exceeds the agreed-upon repurchase price to be paid to the Fund. If the seller were to be subject to a federal bankruptcy proceeding, the ability of the Fund to liquidate the collateral could be delayed or impaired because of certain provisions of the bankruptcy laws.
 
(5) The Fund may invest in bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest. There may be penalties for the early withdrawal of such time deposits, in which case the yields of these investments will be reduced.
 
(6) The Fund may invest in commercial paper, which are short-term unsecured promissory notes, including variable rate master demand notes issued by corporations to finance their current operations. Master demand notes are direct lending arrangements between the Fund and a corporation. There is no secondary market for the notes. However, they are redeemable by the Fund at any time. The portfolio manager will consider the financial condition of the corporation (e.g., earning power, cash flow, and other liquidity ratios) and will continuously monitor the corporation’s ability to meet all of its financial obligations, because the Fund’s liquidity might be impaired if the corporation were unable to pay principal and interest on demand. The Fund may only invest in commercial paper rated A-2 or better by S&P, Prime-2 or higher by Moody’s or F2 or higher by Fitch, or unrated commercial paper which is, in the opinion of the portfolio manager, of comparable quality.
 
Portfolio Turnover
 
While the Fund generally does not expect to engage in trading for short term gains, it will effect portfolio transactions without regard to any holding period if, in Fund management’s judgment, such transactions are advisable in light of a change in circumstances of a particular company or within a particular industry or in general market, economic or financial conditions. The portfolio turnover rate is calculated by dividing the lesser of the Fund’s annual sales or purchases of portfolio securities (exclusive of purchases or sales of U.S. government securities and all other securities whose maturities at the time of acquisition were one year or less) by the monthly average value of the securities in the portfolio during the year. A high rate of portfolio turnover results in certain tax consequences, such as increased capital gain dividends and/or ordinary income dividends, and in correspondingly greater transaction costs in the form of dealer spreads and brokerage commissions, which are borne directly by the Fund.
 
Portfolio Holdings Disclosure
 
The Fund has adopted policies and procedures to protect against improper portfolio holdings disclosure. A Fund may provide portfolio holdings information to third parties no earlier than the time a report is filed with the Commission that is required to contain such information or one day after the information is posted on the Fund’s publicly accessible website, www.delreyglobal.com/monarchfund. Currently, the Fund generally makes available complete portfolio holdings information on the Fund’s website following the end of each month with an approximately one-month lag. Additionally, the Fund publishes on the website a list of its top ten holdings as of the end of each month, approximately 2-5 business days after the end of the month for which the information is current. This information will remain available on the website at least until the Fund files with the Commission its Form N-CSR or Form N-Q for the period that includes the date as of which the website information is current.
 
Additionally, the Fund may disclose portfolio holdings information that has not been included in a filing with the Commission or posted on the Fund’s website (i.e., non-public portfolio holdings information) only if there is a legitimate business purpose for doing so and if the recipient is required, either by explicit agreement or by virtue of the recipient’s duties to the Fund as an agent or service provider, to maintain the confidentiality of the information and to not use the information in an improper manner (e.g., personal trading). In this


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connection, the Fund may disclose on an ongoing basis non-public portfolio holdings information in the normal course of their investment and administrative operations to various service providers, including the Fund’s Manager, independent registered public accounting firm, custodian, financial printer, proxy voting service(s), and to the legal counsel for the Fund’s independent Trustees. The Fund’s investment manager may also provide certain portfolio holdings information to broker-dealers from time to time in connection with the purchase or sale of securities or requests for price quotations or bids on one or more securities. In the event that any officer, Trustee or employee of the Trust or the Fund or a service provider officer or employee believes it is necessary to share a Fund’s portfolio information with third parties, such person must obtain the prior consent of the chief compliance officer of the Manager.
 
The chief compliance officer of the Trust and the chief compliance officer of the Manager periodically monitor overall compliance with the policy to ascertain whether portfolio holdings information is disclosed in a manner that is consistent with the Fund’s policies and procedures. Reports are made to the Board on an annual basis.
 
The Fund’s portfolio holdings policy is designed to prevent sharing of portfolio information with third parties that have no legitimate business purpose for accessing the information. The policy may not be effective to limit access to portfolio holdings information in all circumstances, however. There is no assurance that the Fund’s policies on portfolio holdings information will protect the Fund from the potential misuse of portfolio holdings information by individuals or firms in possession of such information.
 
Information on Trustees and Officers
 
The Board of Trustees of the Fund (the “Board”) consists of four individuals (each a “Trustee”), three of whom are not “interested persons” of the Fund as defined in the Investment Company Act (the “Independent Trustees”). The Board has overall responsibility for the oversight of the Fund. The Chairman of the Board, Gerald W. Wheeler, is an interested person of the Fund. The Trustees may exercise their informed business judgment to appoint an individual of their choosing to serve as Chairman, regardless of whether the Trustee happens to be independent or a member of management. The Trustees have determined that an interested Chairman is currently appropriate for the Fund and the Trustees have also determined that there be no lead Independent Trustee of the Board owing to the relatively small size of the Board. The Independent Trustees have concluded that they can act independently and effectively without having an Independent Trustee serve as Chairman and that a key structural component for assuring that they are in a position to do so is for the Independent Trustees to constitute at least a majority of the Board. In addition to providing feedback and direction during Board meetings, the Independent Trustees meet regularly, outside the presence of Fund management, in executive session or with other service providers to the Fund and an Independent Trustee chairs all committees of the Board (each, a “Committee”). The Board has two standing Committees: an Audit Committee and a Nominating and Corporate Governance Committee.
 
The Chairman of the Board’s role is to preside at all meetings of the Board, and to act as a liaison with service providers, officers, attorneys, and other Trustees generally between meetings. The Chairman of each Committee performs a similar role with respect to the Committee. The Chairman of the Board or a Committee may also perform such other functions as may be delegated by the Board or the Committee from time to time. The Board has committed to regular meetings four times a year, and may hold special meetings if required before its next regular meeting. Each Committee will meet regularly to conduct the oversight functions delegated to that Committee by the Board and report its findings to the Board. The Board and each standing Committee will conduct annual assessments of their oversight function and structure. The Board has determined that the Board’s leadership structure is appropriate because it allows the Board to exercise independent judgment over management and to allocate areas of responsibility among Committees and the full Board to enhance effective oversight.
 
The Board has engaged the Manager to manage the Fund on a day-to-day basis. The Board is responsible for overseeing the Manager, other service providers, the operations of the Fund and associated risk in accordance with the provisions of the Investment Company Act, state law, other applicable laws, the Fund’s charter, and the Fund’s investment objectives and strategies. The Board will review, on an ongoing basis, the


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Fund’s performance, operations, and investment strategies and techniques. The Board will also conduct reviews of the Manager and its role in running the operations of the Fund.
 
Subject to the supervision of the Board, day-to-day risk management with respect to the Fund is the responsibility of the Manager or other service providers (depending on the nature of the risk) subject to the supervision of the Manager. The Fund is subject to a number of risks, including investment, compliance, operational and valuation risks, among others. While there are a number of risk management functions performed by the Manager or other service providers, as applicable, it is not possible to eliminate all of the risks applicable to the Fund. Risk oversight forms part of the Board’s general oversight of the Fund and will be addressed as part of various Board and Committee activities. The Board, directly or through a Committee, will also review reports from, among others, management, the independent registered public accounting firm for the Fund and any internal audits or internal control reports from the Fund’s service providers, as appropriate, regarding risks faced by the Fund and management’s or the service provider’s risk functions. The Committee system facilitates the timely and efficient consideration of matters by the Trustees, and facilitates effective oversight of compliance with legal and regulatory requirements and of the Fund’s activities and associated risks. The Board has appointed a Chief Compliance Officer, who will oversee the implementation and testing of the Fund’s compliance program and will report to the Board regarding compliance matters for the Fund and their service providers. The Independent Trustees have engaged independent legal counsel to assist them in performing their oversight responsibilities.
 
The members of the Audit Committee are David G. Chrencik, Roger Hartley and Guy Talarico, all of whom are Independent Trustees. The initial chairman of the Audit Committee is David G. Chrencik. The principal responsibilities of the Audit Committee are to approve the selection, retention, termination and compensation of the Fund’s independent registered public accounting firm (the “independent auditors”) and to oversee the independent auditors’ work. The Audit Committee’s responsibilities include, without limitation, to (1) evaluate the qualifications and independence of the independent auditors; (2) approve all audit engagement terms and fees for the Fund; (3) review the conduct and results of each independent audit of the Fund’s financial statements; (4) review with the independent auditor any audit problems or difficulties encountered during or related to the conduct of the audit; (5) review with the independent auditors and service providers the Fund’s internal control structure and any periodic assessments and evaluations of the internal controls of the Fund with respect to accounting and financial matters, including recommendations for improvement; (6) oversee policies, procedures and controls regarding valuation of the Fund’s investments; and (7) resolve any disagreements between Fund management and the independent auditors regarding financial reporting. The Board has adopted a written charter for the Audit Committee.
 
The members of the Nominating and Corporate Governance Committee (the “Governance Committee”) are David G. Chrencik, Roger Hartley and Guy Talarico, all of whom are Independent Trustees. The initial chairman of the Governance Committee is Guy Talarico. The principal responsibilities of the Governance Committee are, without limitation, to (1) identify individuals qualified to serve as Independent Trustees of the Fund and recommend Independent Trustee nominees for election by shareholders or appointment by the Board; (2) advise the Board with respect to Board composition, procedures and committees; (3) oversee periodic self-assessments of the Board and committees of the Board; (4) review and make recommendations regarding Independent Trustee compensation; (5) monitor corporate governance matters, develop appropriate recommendations to the Board and assess ongoing adherence to industry corporate governance best practices; and (6) make recommendations to the Board regarding executive and trustee compensation practices. The Governance Committee may consider nominations for the office of Trustee made by Fund shareholders as it deems appropriate. Fund shareholders who wish to recommend a nominee should send nominations to the Secretary of the Fund that include biographical information and set forth the qualifications of the proposed nominee. Compensation paid to the Independent Trustees will be subject to approval of the Governance Committee. The Board has adopted a written charter for the Governance Committee.
 
The charter for the Governance Committee adopted by the Board includes policies that describe the experience, qualifications, skills and attributes that are necessary and desirable for potential Independent Trustee candidates. The Board believes that each Independent Trustee satisfied, at the time he or she was initially elected or appointed a Trustee, and continues to satisfy, the standards contemplated by these policies.


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Furthermore, in determining that a particular Trustee was and continues to be qualified to serve as a Trustee, the Board has considered a variety of criteria, none of which, in isolation, is controlling. The Board believes that, collectively, the Trustees have balanced and diverse experience, skills, attributes and qualifications, which allow the Board to operate effectively in governing the Fund and protecting the interests of shareholders. Among the attributes common to all Trustees is their substantial experience, work experience or relationships that contribute to the overall effectiveness of the Board, their educational background or professional training, and their ongoing commitment and willing participation in Board and committee meetings.
 
Information about the specific experience, skills, attributes and qualifications of each Trustee, which in each case led to the Board’s conclusion that the Trustee should serve (or continue to serve) as a trustee of the Fund, is provided below, in “Biographical Information.”
 
Biographical Information
 
Certain biographical and other information relating to the Trustees of the Fund is set forth below, including their age, their principal occupations for at least the last five years, the length of time served in their position with the Fund and any public directorships in the past five years. The address for each of the Trustees is 6701 Center Drive West, Suite 655, Los Angeles, CA 90045.
 
                     
                Number of
  Other
                Portfolios in
  Directorships/
                Fund
  Trusteeships
        Length of
      Complex
  Held
    Position
  Time
  Principal Occupation(s)
  Overseen by
  During Past
Name and Age
 
With Fund
 
Served
 
During Past Five Years
  Director  
Five Years
 
INTERESTED TRUSTEES
                   
Gerald W. Wheeler* (47)
  Chairman of the Board, President, Chief Financial Officer and Secretary   Since 2011   del Rey Global Investors, LLC, Managing Member, Chief Operating Officer and Chief Compliance Officer, March 2010 — present; Ivory Investment Management, L.P., Principal and General Counsel, June 2006 — March 2010; NWQ Investment Management Company, LLC, Managing Director, General Counsel and Chief Compliance Officer, September 2005 — June 2006.   One   None
David G. Chrencik (62)
  Trustee   Since 2011   GeoGreen Biofuels, Inc., Vice President, Finance, Chief Financial Officer and Secretary, May 2010 — present; PricewaterhouseCoopers LLP, Partner, July 1972 — June 2009.   One   None


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                Number of
  Other
                Portfolios in
  Directorships/
                Fund
  Trusteeships
        Length of
      Complex
  Held
    Position
  Time
  Principal Occupation(s)
  Overseen by
  During Past
Name and Age
 
With Fund
 
Served
 
During Past Five Years
  Director  
Five Years
 
Roger Hartley (50)
  Trustee   Since 2011   Mitchell Hartley Advisers, Managing Member, December 2009 — present; Sarus Capital Management, Advisory Board Member, May 2009 — present; Coast Asset Management, Chief Operating Officer, December 2007 — February 2009, and Board Member August 2008 — February 2009; Jefferies & Co., Managing Director, July 2007 — December 2007; Putnam Lovell NBF, Managing Director, 2002 — July 2007.   One   None
Guy F. Talarico (55)
  Trustee   Since 2011   Alaric Compliance Services, Chief Executive Officer, December 2005 — present; EOS Compliance Services, co-Chief Executive Officer, June 2004 — December 2005; Senior Director, Investors Bank and Trust Company, February 2001 — June 2004; Division Executive, JPMorgan-Chase, October 1986 — February 2001.   One   None
 
 
* Mr. Wheeler is an interested person of the Fund because he is an executive officer and a managing member of the Manager.
 
Certain biographical and other information relating to the officers of the Fund that are not Trustees is set forth below, including their age, their principal occupations for at least the last five years and the length of time served in their position with the Fund:
 
             
        Length of
   
    Position
  Time
  Principal Occupation(s)
Name and Age
 
With Fund
  Served  
During Past Five Years
 
OFFICERS
           
Paul J. Hechmer (45)
  Chief Executive Officer; Portfolio Manager   Since 2011   del Rey Global Investors, Managing Member, Chief Executive Officer and Chief Investment Officer, September 2009 — present; Tradewinds Global Investors, LLC, Managing Member, January 2006 — June 2009; NWQ Investment Management Company, LLC, Managing Director, Portfolio Manager and Equity Analyst, September 2005 — January 2006.
James M. Atwood (45)
  Chief Compliance Officer   Since 2011   Director, Foreside Compliance Services, LLC, 2007 — present; personal sabbatical, 2004 — 2007; Attorney, Pierce Atwood (law firm), 2001-2004.
 
The Board has concluded that, based on each Trustee’s experience, qualifications, attributes or skills on an individual basis and in combination with those of the other Trustees, each Trustee should serve as a Trustee

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of the Board. Among the attributes common to all Trustees is their ability to review critically, evaluate, question and discuss information provided to them, to interact effectively with the Manager, other service providers, counsel and the independent registered public accounting firm, and to exercise effective business judgment in the performance of their duties as Trustee. A Trustee’s ability to perform his or her duties effectively may have been attained through the Trustee’s educational background or professional training; business, consulting, public service or academic positions; experience from service as a board member of the Fund, other investment funds, public companies, or non-profit entities or other organizations; and/or other life experiences. Also, set forth below is a brief discussion of the specific experience, qualifications, attributes or skills of each Trustee that led the Board to conclude that he or she should serve as a Trustee.
 
     
Trustee
 
Experience, Qualifications and Skills
 
Gerald W. Wheeler
  Mr. Wheeler has been a Trustee since the Fund’s inception. In addition, he has over 14 years of executive and business experience in the asset management industry. Mr. Wheeler has an extensive background in compliance and legal matters for investment companies and has served as general counsel and chief compliance officer for asset management firms.
David G. Chrencik
  Mr. Chrencik has served as a Trustee since the Fund’s inception. Mr. Chrencik spent over 35 years at PricewaterhouseCoopers, including 26 years as a partner, and will serve as the “audit committee financial expert” for the Fund. Mr. Chrencik has spent most of his career as an accountant and served many investment companies in that capacity. Mr. Chrencik now serves as the head of finance for an alternative energy company.
Roger Hartley
  Mr. Hartley has served as a Trustee since the Fund’s inception. Mr. Hartley has over 29 years of experience in the financial services industry, and particularly with respect to the asset management sector. During his career, Mr. Hartley has advised many asset management companies and has also served in a senior executive position with an asset management firm. He has corporate governance experience serving on the board of an asset management firm.
Guy Talarico
  Mr. Talarico has served as a Trustee since the Fund’s inception. He has served as the Chief Executive Officer of Alaric Compliance Services LLC, a full service compliance consulting firm since December of 2005. Prior to this role he was the Co-CEO of EOS Compliance Services, LLC from June 2004 to December 2005. Mr. Talarico’s 25 years of experience in the financial services industry includes: serving as Chief Compliance Officer to various mutual funds, and investment advisors registered with the SEC and the NFA since October of 2004; the management of a $45 billion asset management and services group at JP Morgan Chase; client management of SEC-registered advisers within the Institutional Custody Division of Investors Bank & Trust Company; development of an outsourced SEC regulatory compliance program for registered advisers; and legal compliance support. Mr. Talarico also served three terms in the New Jersey State Assembly and sponsored numerous laws, including regulatory reforms in the insurance and banking industries.
 
Share Ownership
 
As of December 31, 2010, no Trustee owned shares of the Fund. Trustees of the Fund are eligible to purchase Institutional Shares of the Fund.
 
As of December 31, 2010, the Trustees and officers of the Fund then in office as a group owned an aggregate of less than 1% of the outstanding shares of the Fund. As of December 31, 2010, none of the non-interested Trustees of the Fund then in office or their immediate family members owned beneficially or of record any securities of affiliates of the Manager, Foreside Fund Services, LLC, the Fund’s distributor, or any person directly or indirectly controlling, controlled by, or under common control with the Manager or Foreside Fund Services, LLC.
 
As of January 24, 2011, del Rey Global Investors, LLC, the Manager, is deemed a control person of the Fund by virtue of its direct ownership of 100% of the Fund’s outstanding shares.


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Compensation of Trustees
 
Each Trustee who is a non-interested Trustee will be paid $5,000 plus reimbursement of expenses for the Fund’s organizational Board meeting that occurred on January 14, 2011. Each non-interested Trustee will be paid $5,000 for, and reimbursed for expenses in connection with, each Board meeting attended in-person until the Fund holds its next in-person meeting, which is expected to occur on or about March 23, 2011. At the next in-person meeting, the Trustees intend to revisit and determine the annual compensation and the provision of any other benefits for the non-interested Trustees from or after the next quarterly in-person meeting.
 
             
        Estimated
   
    Annual
  Annual
  Aggregate
    Compensation
  Benefits Upon
  Compensation
Name
  from the Fund(1)   Retirement(2)   from the Fund
 
Interested Trustees
           
Gerald W. Wheeler(3)
  None   None   N/A
Non-Interested Trustees
           
David G. Chrencik
  *   None   *
Roger Hartley
  *   None   *
Guy Talarico
  *   None   *
 
 
(1) The Trust is newly organized, and the amounts listed are estimated for the fiscal year ended October 31, 2011. For a discussion of the independent trustees’ compensation, see above.
 
(2) The Trust does not currently have a profit-sharing or retirement plan, and trustees do not receive any pension or retirement benefits, but may adopt one in the future.
 
(3) Mr. Wheeler is employed and paid by, and may be compensated through his ownership interests in, del Rey Global Investors, LLC.
 
As noted above, the Trustees intend to revisit and determine the annual compensation and the provision of any other benefits for the non-interested Trustees at the next quarterly in-person meeting.
 
The Trust will compensate James M. Atwood for his services as its Chief Compliance Officer indirectly pursuant to an agreement with Foreside Compliance Services, LLC, his employer.
 
Code of Ethics
 
The Fund and the Manager have adopted codes of ethics under Rule 17j-1 under the 1940 Act. These codes permit personnel subject to the codes to invest in securities, including securities that may be purchased or held by the Fund. These codes of ethics can be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-202-551-8090. The codes of ethics are available on the EDGAR Database on the SEC’s web site (http://www.sec.gov), and copies of these codes may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov, or by writing the SEC’s Public Reference Section, Washington, D.C. 20549-0102.
 
Proxy Voting Policies and Procedures
 
The Board of has delegated the voting of proxies relating to the Fund’s portfolio holdings to the Manager pursuant to the Manager’s Proxy Voting Policies and Procedures. The Manager exercises its voting responsibility, as a fiduciary, with the goal of maximizing value to shareholders consistent with the governance laws and investment policies of the Fund. While portfolio holdings are not purchased to exercise control or to seek to effect corporate change through share ownership, the Manager supports sound corporate governance practices within companies in which they invest.
 
The Manager’s Proxy Voting Policies and Procedures seek to ensure that proxies for which the Manager has ultimate voting authority are voted consistently and solely in the best economic interests of the beneficiaries of these equity investments. In addition, the Manager may determine not to vote proxies relating


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to certain securities if the Manager determines it would be in its clients’ overall best interests not to vote, such as when the securities are foreign securities subject to share blocking (short-term prohibitions on selling after voting). If the Fund requests the Manager to follow specific voting guidelines, the Manager will review the request and inform the Fund only if the Manager is not able to follow the Fund’s request.
 
The Manager will generally vote with the management of the companies in which the Fund invests on all routine matters, but will analyze other proposals from management on a case by case basis. The Manager will generally, except under special circumstances, oppose any ant-takeover proposals. Any shareholder proposals will be individually analyzed by the Manager.
 
The portfolio manager of the Fund is responsible for oversight of the proxy voting process. A copy of Manager’s Proxy Voting Policies and Procedures will be provided upon written request. Also, shareholders may request information on how the Manager voted the Fund’s securities. The Manager will provide such information through the most recently completed calendar quarter.
 
No later than August 31 of each year, information regarding how the Manager, on behalf of the Fund, voted proxies relating to the Fund’s portfolio securities for the 12 months ended the preceding June 30 will be available without charge by calling 1-866-876-9946 or on the SEC’s website at sec.gov. A copy of the Manager’s Proxy Voting Policies and Procedures also is available without charge by calling 1-866-876-9946.
 
Although the Manager does not anticipate that proxy voting will generally present a conflict of interest between the Fund and the Manager or one or more of its affiliates, the Manager recognizes that it is possible that a conflict of interest could arise. If the Manager identifies a situation which it believes presents a conflict of interest and if the matter is one for which the Manager’s proxy policies require a specific vote (e.g., an anti-takeover matter), then the proxy will be voted in accordance with the predetermined policy.
 
Investment Manager
 
del Rey Global Investors, LLC, the Manager, located at 6701 Center Drive West, Suite 655, Los Angeles, CA 90045 serves as the investment adviser of the Fund. The Manager is a Delaware limited liability company.
 
Effective January 14, 2011, the Fund entered into a new investment advisory agreement with the Manager (the “Management Agreement”), pursuant to which the Manager receives for its services to the Fund monthly compensation at the annual rate of 0.90% of the average daily net assets of the Fund.
 
Pursuant to the Management Agreement, the Manager may delegate certain of its management functions under the Management Agreement to the extent permitted by applicable law.
 
Unless sooner terminated, the Management Agreement will continue in effect with respect to the Fund until January 14, 2013. Thereafter, the Management Agreement will continue in effect for successive 12-month periods, provided that the continuance is approved at least annually (i) by the vote of a majority of the Trustees who are not parties to the Management Agreement or “interested persons” (as such term is defined in the 1940 Act) of any party thereto, cast in person at a meeting called for the purpose of voting on such approval and (ii) by the Trustees or by the vote of a majority of the outstanding shares of the Fund (as defined under “Information About the Fund’s Shares”). The Management Agreement is terminable at any time without penalty by the Fund (by specified Trustee or shareholder action) or by the Manager on 60 days’ written notice.
 
The Manager has agreed to cap net expenses (excluding (i) interest, taxes, brokerage fees and commissions, and extraordinary charges, including, but not limited to, litigation costs; (ii) expenses incurred indirectly by the Fund as a result of investments in other investment companies and pooled investment vehicles; and (iii) other expenses attributable to, and incurred as a result of, the Fund’s investments) to 1.40% for Class A Shares and 1.15% for Institutional Shares until March 1, 2012. To achieve this expense cap, del Rey Global has agreed to waive and/or reimburse fees or expenses if the Fund’s operating expenses exceed a certain limit. The agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Fund or by a vote of a majority of the outstanding voting securities of the Fund.
 
With respect to this contractual agreement, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the


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Manager, are less than the expense limit for that share class, the share class is required to repay the Manager up to the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement, provided that: (1) the Fund has more than $50 million in assets and (2) the Manager or an affiliate serves as the Fund’s manager.
 
Information Regarding the Portfolio Manager
 
Paul Hechmer is the Fund’s portfolio manager.
 
Other Funds and Accounts Managed
 
The following table sets forth information about funds and accounts other than the Fund for which the Fund’s portfolio manager is primarily responsible for the day-to-day portfolio management as of the Trust’s fiscal year ended October 31, 2010.
 
                                                 
    Number of Other Accounts Managed
  Number of Accounts and Assets for which
    and Assets by Account Type   Advisory Fee is Performance-Based
    Registered
  Other Pooled
      Registered
  Other Pooled
   
    Investment
  Investment
  Other
  Investment
  Investment
  Other
Name of Portfolio Manager
  Companies   Vehicles   Accounts   Companies   Vehicles   Accounts
 
Paul Hechmer
    0       3       4       0       0       0  
    $ 0     $ 685,991,501     $ 6,782,255     $ 0     $ 0     $ 0  
 
As of December 31, 2010, the portfolio manager did not directly own securities in the Fund.
 
Portfolio Manager Compensation Overview
 
As of the date of this Statement of Additional Information, the Manager’s portfolio manager participates in a highly competitive compensation structure with the purpose of attracting and retaining the most talented investment professionals and rewarding them through a total compensation program. The total compensation program consists of both a base salary and an annual bonus that can be a multiple of the base salary. Bonus compensation is primarily a function of the firm’s overall annual profitability.
 
The total compensation package for portfolio managers includes an equity-like incentive (whose value is determined by various factors including the increase in profitability of the Manager over time).
 
Portfolio Manager Potential Material 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 account. More specifically, portfolio managers who manage multiple accounts are presented with the following potential conflicts:
 
  •  The management of multiple accounts may result in a portfolio manager devoting unequal time and attention to the management of each account. The Manager seeks to manage such competing interests for the time and attention of portfolio managers by having portfolio managers focus on a particular investment discipline. Most accounts managed by a portfolio manager in a particular investment strategy are managed using the same investment models.
 
  •  If a portfolio manager identifies a limited investment opportunity which may be suitable for more than one account, an account may not be able to take full advantage of that opportunity due to an allocation of filled purchase or sale orders across all eligible accounts. To deal with these situations, the Manager has adopted procedures for allocating portfolio transactions across multiple accounts.
 
  •  With respect to many of its clients’ accounts, the Manager determines which broker to use to execute transaction orders, consistent with its duty to seek best execution of the transaction. However, with respect to certain other accounts, the Manager may be limited by the client with respect to the selection of brokers or may be instructed to direct trades through a particular broker. In these cases, the Manager may place separate, non-simultaneous, transactions for the Fund and other accounts which may


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  temporarily affect the market price of the security or the execution of the transaction, or both, to the detriment of the Fund or the other accounts.
 
  •  Some clients are subject to different regulations. As a consequence of this difference in regulatory requirements, some clients may not be permitted to engage in all the investment techniques or transactions or to engage in these transactions to the same extent as the other accounts managed by the portfolio manager. Finally, the appearance of a conflict of interest may arise where the Manager has an incentive, such as a performance-based management fee, which relates to the management of some accounts, with respect to which a portfolio manager has day-to-day management responsibilities.
 
The Manager has adopted certain compliance procedures which are designed to address these types of conflicts common among investment managers. However, there is no guarantee that such procedures will detect each and every situation in which a conflict arises.
 
Fund Service Providers
 
Transfer Agent
 
Under its Transfer Agency Agreement with the Fund, The Northern Trust Company (the “Transfer Agent”), with principal offices at 50 South LaSalle Street, Chicago, IL 60675, as transfer agent has undertaken to perform some or all of the following services: (i) answer shareholder inquiries and respond to requests for information regarding the Fund; (ii) process purchase and redemption transactions; (iii) establish and maintain shareholder accounts and subaccounts; (iv) furnish confirmations in accordance with applicable law, and provide periodic account statements to each shareholder; (v) furnish annual and semiannual financial statements, and dividend, distribution and tax notices to shareholders; (vi) act as income disbursing agent; and (vii) maintain appropriate records relating to its services.
 
Custodian
 
Under its Custodian Agreement with the Fund, The Northern Trust Company (the “Custodian”), with principal offices at 50 South LaSalle Street, Chicago, IL 60675, (i) holds the Fund’s cash and securities, (ii) maintains such cash and securities in separate accounts in the name of the Fund, (iii) makes receipts and disbursements of funds on behalf of the Fund, (iv) receives, delivers and releases securities on behalf of the Fund, (v) collects and receives all income, principal and other payments in respect of the Fund’s investments held by the Custodian and (vi) maintains the accounting records of the Fund.
 
Administrator
 
The Northern Trust Company (the “Administrator”), with principal offices at 50 South LaSalle Street, Chicago, IL 60675, acts as administrator and fund accountant for the Fund under a Fund Administration and Accounting Services Agreement (“Administration Agreement”). Subject to the general supervision of the Board, the Administrator provides supervision of all aspects of the Fund’s non-investment advisory operations and performs various corporate secretarial and treasury services, including but not limited to: (i) furnishing data processing services, clerical services, and executive and administrative services and standard stationery and office supplies; (ii) performing all functions ordinarily performed by the office of a corporate treasurer, and furnishing the services and facilities ordinarily incident thereto, such as expense accrual monitoring and payment of the Fund’s bills, preparing monthly reconciliation of the Fund’s expense records, updating projections of annual expenses, preparing materials for review by the Board and compliance testing; (iii) preparing and submitting reports to the Fund’s shareholders and the Commission; (iv) preparing and arranging for printing of financial statements; (v) preparing monthly Fund profile reports; (vi) preparing and filing the Fund’s federal and state tax returns (other than those required to be filed by the Fund’s Custodian and Transfer Agent) and providing shareholder tax information to the Transfer Agent; (vii) assisting the Manager, at the Manager’s request, in monitoring and developing compliance procedures for the Fund which will include, among other matters, procedures to assist the Manager in monitoring compliance with the Fund’s investment objective, policies, restrictions, tax matters and applicable laws and regulations; (viii) assisting in marketing strategy and product development; (ix) performing oversight/management responsibilities, such as


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the supervision and coordination of certain of the Fund’s service providers; (x) coordinating the performance of “blue sky” compliance functions; (xi) assisting in maintaining corporate records and good standing status of the Trust in its state of organization; and (xii) monitoring the Trust’s arrangements with respect to services provided by third party service organizations to their customers who are the beneficial owners of shares, pursuant to servicing arrangements between the Fund and such servicing agents.
 
Subject to the limitations described below, as compensation for its administrative services and the assumption of related expenses, the Administrator is entitled to a fee from the Fund, computed daily and payable monthly, at an annual rate of 0.0275% of the first $250 million of average daily net assets of the Fund, an annual rate of 0.0225% of the next $250 million of average daily net assets of the Fund, and an annual rate of 0.0150% of the average daily net assets of the Fund over $500,000 and an annual base fee of $150,000. As compensation for its fund accounting services and the assumption of related expenses, the Administrator is entitled to a fee from the Fund, computed daily and payable monthly, at an annual rate of 0.0125% of the first $250 million of average daily net assets of the Fund, an annual rate of 0.01% of the next $250 million of average daily net assets of the Fund, and an annual rate of 0.0075% of the average daily net assets of the Fund over $500,000 and an annual base fee of $50,000, plus additional fees for additional share classes and fair valuation services.
 
Unless sooner terminated, the Administration Agreement will continue in effect with respect to the Fund for three years. Thereafter, the Administration Agreement will continue in effect for successive 12-month periods, provided that the continuance is approved at least annually by the vote of a majority of the Trustees. The Administration Agreement is terminable in the event of the Fund’s reasonable dissatisfaction with the Administrator’s services under the Administration Agreement upon no less than 60 days’ written notice by the Trust with respect to the Fund, provided that the Administrator is permitted to cure such dissatisfaction within 60 days, or upon 180 days’ prior written notice by the Administrator to the Fund. The Fund may also terminate the Administration Agreement at any time: (i) upon the breach of the Agreement caused by or was a result of willful misfeasance, willful default, willful misconduct, bad faith, fraud, negligence or gross negligence on the Administrator’s part or the part of its agents or employees, in the performance of, or from reckless disregard by the Administrator or its agents or employees of, the duties and obligations under the Agreement; (ii) if the Administrator (a) breaches any material provision of the Agreement, or (b) is in default in the performance of its duties or obligations and such default has, or may reasonably have, a material adverse effect on the Fund; or (iii) upon the occurrence of the bankruptcy of the Administrator. The Administration Agreement also provides that the Trust will indemnify the Administrator against all claims except those resulting from the willful misfeasance, willful default, willful misconduct, bad faith, fraud, negligence or gross negligence of the Administrator.
 
Distributor
 
The Fund also has entered into a Distribution Agreement under which Foreside Fund Services, LLC (the “Distributor”), with principal offices at Three Canal Plaza, Suite 100, Portland, ME 04101, serves as distributor of the Fund’s shares. The Distributor may enter into arrangements with banks, broker-dealers and other financial institutions through which investors may purchase or redeem shares. The Distributor is not affiliated with the Manager, The Northern Trust Company, the Fund’s administrator, transfer agent and custodian, or any of their affiliates. Pursuant to the Distribution Agreement, the Fund pays an annual distribution fee equal to 0.01% of the Fund’s average daily net assets to the Distributor for services specified under the Distribution Agreement. The Manager has entered into a separate agreement with the Distributor under which it has agreed to compensate and reimburse the Distributor for any amounts payable by the Fund under the Distribution Agreement for its provision to the Fund of any distribution services for which the Fund is not authorized to compensate and reimburse the Distributor. The payments made by the Manager to the Distributor do not represent an additional expense to the Fund or its shareholders. The Distribution Agreement provides that the Fund will indemnify the Distributor for any losses arising out of or relating to (i) the Distributor providing services to the Fund in accordance with the standards in the Distribution Agreement; (ii) that Fund’s breach of any of its obligations, representations, warranties or covenants contained in the Distribution Agreement; (iii) the Fund’s failure to comply with any applicable securities laws or regulations;


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or (iv) any claim that the Registration Statement, Prospectus, shareholder reports, sales literature and advertising materials or other information filed or made public by the Fund (as from time to time amended) include or included an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not materially misleading under applicable law. The Fund will not indemnify the Distributor against any liability to the Fund or its shareholders to which the Distributor would otherwise be subject by reason of willful misfeasance, willful default, willful misconduct, bad faith, fraud, or gross negligence on the Distributor’s part or the part of its agents or employees, in the performance of, or from reckless disregard by the Distributor or its agents or employees of, the duties and obligations specifically set out in the Distribution Agreement.
 
CCO Services
 
The Trust has entered into a Fund CCO Agreement (the “CCO Agreement”), under which Foreside Compliance Services, LLC (“FCS”) provides a Chief Compliance Officer (“CCO”) to the Trust. FCS is an affiliate of the Distributor. Neither the Distributor or FCS, nor any of their officers or employees who serve as an officer of the Fund, has any role in determining the Fund’s investment policies or which securities are to be purchased or sold by the Fund. Certain officers or employees of FCS are officers of the Trust.
 
For making available the CCO under the CCO Agreement, FCS receives a fee from the Trust of $75,000 per annum, plus $5,000 for any additional series of the Trust; provided that such fee is reduced to $60,000 for the first year of operations. FCS also receives reimbursement for reasonable out-of-pocket expenses associated with certain matters.
 
The CCO Agreement with respect to the Trust continues in effect until terminated. The CCO Agreement is terminable with or without cause and without penalty by the Board of the Trust or by FCS with respect to the Fund on 60 days’ written notice to the other party.
 
Under the CCO Agreement, FCS is not liable to the Trust or the Fund’s shareholders for any act or omission, except for willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of reckless disregard of its obligations and duties under the CCO Agreement. Under the CCO Agreement, FCS and its officers, directors and employees are indemnified by the Trust against any and all losses, claims and expenses related to FCS’s actions or omissions, except for any act or omission resulting from FCS’s willful misfeasance, bad faith or gross negligence in the performance of its duties or by reason of reckless disregard of its obligations and duties under the CCO Agreement.
 
12b-1 Distribution and Service Plans
 
The Fund has adopted a plan (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act, which provides that Class A Shares are subject to an annual distribution and service fee. Institutional Shares are not subject to either distribution or service fees.
 
The distribution and service fee applicable to Class A Shares under the Fund’s Plan will be payable to financial intermediaries to finance any activity primarily intended to result in the sale of Class A Shares of the Fund and in connection with the provision of ongoing account services to shareholders. These services may include establishing and maintaining shareholder accounts, answering shareholder inquiries and providing other personal services to shareholders. The Class A Shares are also subject to an up-front sales charge used to compensate selected securities dealers and financial intermediaries. See “Information About the Fund’s Shares.”
 
The Fund may spend up to 0.25% per year of the average daily net assets of Class A Shares as a distribution and service fee under the Plan.
 
Under the Fund’s Plan, the Board shall receive, and the Trustees shall review, at least quarterly, written reports complying with the requirements of Rule 12b-1, which set out the amounts expended under the Plan and the purposes for which those expenditures were made. The Plan may be terminated at any time with respect to any class of shares, without the payment of any penalty, by a vote of a majority of the independent


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trustees who have no direct or indirect financial interest in the Plan or by vote of a majority of the outstanding voting securities of such class. The Plan may be renewed from year to year if approved by a vote of the Board and a vote of the independent trustees who have no direct or indirect financial interest in the Plan cast in person at a meeting called for the purpose of voting on the Plan. The Plan may be continued only if the trustees who vote to approve such continuance conclude, in the exercise of reasonable business judgment and in light of their fiduciary duties under applicable law, that there is a reasonable likelihood that the Plan will benefit the Fund and its shareholders. The Plan may not be amended to increase materially the cost which a class of shares may bear under the Plan without the approval of the shareholders of the affected class, and any other material amendments of the Plan must be approved by the independent trustees by a vote cast in person at a meeting called for the purpose of considering such amendments. During the continuance of the Plan, the selection and nomination of the independent trustees of the Fund will be committed to the discretion of the independent trustees then in office.
 
Brokerage Allocation and Other Practices
 
Subject to policies established by the Board, the Manager is primarily responsible for the execution of the Fund’s portfolio transactions and the allocation of brokerage. The Manager does not execute transactions through any particular broker or dealer, but seeks to obtain the best net results for the Fund, taking into account such factors as price (including the applicable brokerage commission or dealer spread), size of order, difficulty of execution, operational facilities of the firm and the firm’s risk and skill in positioning blocks of securities.
 
While the Manager generally seeks reasonable trade execution costs, the Fund does not necessarily pay the lowest spread or commission available, and payment of the lowest commission or spread is not necessarily consistent with obtaining the best price and execution in particular transactions. Subject to applicable legal requirements, the Manager may select a broker based partly upon brokerage or research services provided to the Manager and its clients, including the Fund. In return for such services, the Manager may cause the Fund to pay a higher commission than other brokers would charge if the Manager determines in good faith that the commission is reasonable in relation to the services provided.
 
In selecting brokers or dealers to execute portfolio transactions, the Manager seeks to obtain the best price and most favorable execution for the Fund, taking into account a variety of factors including: (i) the size, nature and character of the security or instrument being traded and the markets in which it is purchased or sold; (ii) the desired timing of the transaction; (iii) the Manager’s knowledge of the expected commission rates and spreads currently available; (iv) the activity existing and expected in the market for the particular security or instrument, including any anticipated execution difficulties; (v) the full range of brokerage services provided; (vi) the broker’s or dealer’s capital (vii) the quality of research and research services provided; (viii) the reasonableness of the commission, dealer spread or its equivalent for the specific transaction; and (ix) the Manager’s knowledge of any actual or apparent operational problems of a broker or dealer.
 
Section 28(e) of the Exchange Act (“Section 28(e)”) permits an investment adviser, under certain circumstances, to cause an account to pay a broker or dealer a commission for effecting a transaction that exceeds the amount another broker or dealer would have charged for effecting the same transaction in recognition of the value of brokerage and research services provided by that broker or dealer. This includes commissions paid on riskless principal transactions under certain conditions. Brokerage and research services include: (1) furnishing advice as to the value of securities, including pricing and appraisal advice, credit analysis, risk measurement analysis, performance and other analysis, as well as the advisability of investing in, purchasing or selling securities, and the availability of securities or purchasers or sellers of securities; (2) furnishing analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy, and the performance of accounts; and (3) effecting securities transactions and performing functions incidental to securities transactions (such as clearance, settlement, and custody). The Manager believes that access to independent investment research is beneficial to its investment decision-making processes and, therefore, to the Fund.


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The Manager may participate in client commission arrangements under which the Manager may execute transactions through a broker-dealer and request that the broker-dealer allocate a portion of the commissions or commission credits to another firm that provides research to the Manager. The Manager believes that research services obtained through soft dollar or commission sharing arrangements enhance its investment decision-making capabilities, thereby increasing the prospects for higher investment returns. The Manager will engage only in soft dollar or commission sharing transactions that comply with the requirements of Section 28(e). The Manager regularly evaluates the soft dollar products and services utilized, as well as the overall soft dollar and commission sharing arrangements to ensure that trades are executed by firms that are regarded as best able to execute trades for client accounts, while at the same time providing access to the research and other services the Manager views as have an effect on its trading results.
 
The Manager may utilize soft dollars and related services, including research (whether prepared by the broker-dealer or prepared by a third-party and provided to the Manager by the broker-dealer) and execution or brokerage services within applicable rules and the Manager’s policies to the extent that such permitted services do not compromise the Manager’s ability to seek to obtain best execution. In this regard, the portfolio management investment and/or trading teams may consider a variety of factors, including the degree to which the broker-dealer: (a) provides access to company management; (b) provides access to their analysts; (c) provides meaningful or insightful research notes on companies or other potential investments; (d) facilitates calls on which meaningful or insightful ideas about companies or potential investments are discussed; (e) facilitates conferences at which meaningful or insightful ideas about companies or potential investments are discussed; or (f) provides research tools such as market data, financial analysis, and other third party related research and brokerage tools that aid in the investment process.
 
Research-oriented services for which the Manager might pay with Fund commissions may be in written form or through direct contact with individuals and may include information as to particular companies or industries and securities or groups of securities, as well as market, economic, or institutional advice and statistical information, political developments and technical market information that assists in the valuation of investments. Except as noted immediately below, research services furnished by brokers may be used in servicing some or all client accounts and not all services may be used in connection with the Fund or account that paid commissions to the broker providing such services. In some cases, research information received from brokers by mutual fund management personnel, or personnel principally responsible for the Manager’s individually managed portfolios, is not necessarily shared by and between such personnel. Any investment advisory or other fees paid by the Fund to the Manager are not reduced as a result of the Manager’s receipt of research services. In some cases, the Manager may receive a service from a broker that has both a “research” and a “non-research” use. When this occurs the Manager makes a good faith allocation, under all the circumstances, between the research and non-research uses of the service. The percentage of the service that is used for research purposes may be paid for with client commissions, while the Manager will use its own funds to pay for the percentage of the service that is used for non-research purposes. In making this good faith allocation, the Manager faces a potential conflict of interest, but the Manager believes that its allocation procedures are reasonably designed to ensure that it appropriately allocates the anticipated use of such services to their research and non-research uses.
 
From time to time, the Fund may purchase new issues of securities in a fixed price offering. In these situations, the broker may be a member of the selling group that will, in addition to selling securities, provide the Manager with research services. The Financial Industry Regulatory Authority (FINRA) has adopted rules expressly permitting these types of arrangements under certain circumstances. Generally, the broker will provide research “credits” in these situations at a rate that is higher than that available for typical secondary market transactions. These arrangements may not fall within the safe harbor of Section 28(e).
 
The Manager does not consider sales of shares of the mutual funds it advises as a factor in the selection of brokers or dealers to execute portfolio transactions for the Fund; however, whether or not a particular broker or dealer sells shares of the mutual funds advised by the Manager neither qualifies nor disqualifies such broker or dealer to execute transactions for those mutual funds.


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The Fund anticipates that its brokerage transactions involving foreign securities generally will be conducted primarily on the principal stock exchanges of the applicable country. Foreign equity securities may be held by the Fund in the form of depositary receipts, or other securities convertible into foreign equity securities. Depositary receipts may be listed on stock exchanges, or traded in over-the-counter markets in the United States or Europe, as the case may be. American Depositary Receipts, like other securities traded in the United States, will be subject to negotiated commission rates. Because the shares of the Fund are redeemable on a daily basis in U.S. dollars, the Fund intends to manage its portfolio so as to give reasonable assurance that it will be able to obtain U.S. dollars to the extent necessary to meet anticipated redemptions. Under present conditions, it is not believed that these considerations will have a significant effect on the Fund’s portfolio strategies.
 
The Fund may invest in certain securities traded in the OTC market and intends to deal directly with the dealers who make a market in the particular securities, except in those circumstances in which better prices and execution are available elsewhere. Under the Investment Company Act, persons affiliated with the Fund and persons who are affiliated with such affiliated persons are prohibited from dealing with the Fund as principal in the purchase and sale of securities unless a permissive order allowing such transactions is obtained from the Commission. Since transactions in the OTC market usually involve transactions with the dealers acting as principal for their own accounts, the Fund will not deal with affiliated persons in connection with such transactions.
 
Over-the-counter issues, including most fixed income securities such as corporate debt and U.S. Government securities, are normally traded on a “net” basis without a stated commission, through dealers acting for their own account and not as brokers. The Fund will primarily engage in transactions with these dealers or deal directly with the issuer unless a better price or execution could be obtained by using a broker. Prices paid to a dealer with respect to both foreign and domestic securities will generally include a “spread,” which is the difference between the prices at which the dealer is willing to purchase and sell the specific security at the time, and includes the dealer’s normal profit.
 
Purchases of money market instruments by the Fund are made from dealers, underwriters and issuers. The Fund does not currently expect to incur any brokerage commission expense on such transactions because money market instruments are generally traded on a “net” basis with dealers acting as principal for their own accounts without a stated commission. The price of the security, however, usually includes a profit to the dealer. Each money market fund intends to purchase only securities with remaining maturities of 13 months or less as determined in accordance with the rules of the Commission. As a result, the portfolio turnover rates of a money market fund will be relatively high. However, because brokerage commissions will not normally be paid with respect to investments made by a money market fund, the turnover rates should not adversely affect the Fund’s net asset values or net income.
 
Securities purchased in underwritten offerings include a fixed amount of compensation to the underwriter, generally referred to as the underwriter’s concession or discount. When securities are purchased or sold directly from or to an issuer, no commissions or discounts are paid.
 
The Manager may seek to obtain an undertaking from issuers of commercial paper or dealers selling commercial paper to consider the repurchase of such securities from the Fund prior to maturity at their original cost plus interest (sometimes adjusted to reflect the actual maturity of the securities), if it believes that the Fund’s anticipated need for liquidity makes such action desirable. Any such repurchase prior to maturity reduces the possibility that the Fund would incur a capital loss in liquidating commercial paper, especially if interest rates have risen since acquisition of such commercial paper.
 
Investment decisions for the Fund and for other investment accounts managed by the Manager are made independently of each other in light of differing conditions. The Manager allocates investments among client accounts in a fair and equitable manner. A variety of factors will be considered in making such allocations. These factors include: (i) investment objectives or strategies for particular accounts, including sector, industry, country or region and capitalization weightings, (ii) tax considerations of an account, (iii) risk or investment concentration parameters for an account, (iv) supply or demand for a security at a given price level, (v) size of available investment, (vi) cash availability and liquidity requirements for accounts, (vii) regulatory restrictions,


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(viii) minimum investment size of an account, (ix) relative size of account, and (x) such other factors as may be approved by the Manager’s general counsel. Moreover, investments may not be allocated to one client account over another based on any of the following considerations: (i) to favor one client account at the expense of another, (ii) to generate higher fees paid by one client account over another or to produce greater performance compensation to the Manager, (iii) to develop or enhance a relationship with a client or prospective client, (iv) to compensate a client for past services or benefits rendered to the Manager or to induce future services or benefits to be rendered to the Manager, or (v) to manage or equalize investment performance among different client accounts.
 
Equity securities will generally be allocated among client accounts within the same investment mandate on a pro rata basis. This pro rata allocation may result in the Fund receiving less of a particular security than if pro-ration had not occurred. All allocations of equity securities will be subject, where relevant, to share minimums established for accounts and compliance constraints.
 
Initial public offerings of securities may be over-subscribed and subsequently trade at a premium in the secondary market. When the Manager is given an opportunity to invest in such an initial offering or “new” or “hot” issue, the supply of securities available for client accounts is often less than the amount of securities the accounts would otherwise take. In order to allocate these investments fairly and equitably among client accounts over time, each portfolio manager or a member of his or her respective investment team will indicate to the Manager’s trading desk their level of interest in a particular offering with respect to eligible clients accounts for which that team is responsible. Initial public offerings of U.S. equity securities will be identified as eligible for particular client accounts that are managed by portfolio teams who have indicated interest in the offering based on market capitalization of the issuer of the security and the investment mandate of the client account and in the case of international equity securities, the country where the offering is taking place and the investment mandate of the client account. Generally, shares received during the initial public offering will be allocated among participating client accounts within each investment mandate on a pro rata basis. In situations where supply is too limited to be allocated among all accounts for which the investment is eligible, portfolio managers may rotate such investment opportunities among one or more accounts so long as the rotation system provides for fair access for all client accounts over time. Other allocation methodologies that are considered by the Manager to be fair and equitable to clients may be used as well.
 
Because different accounts may have differing investment objectives and policies, the Manager may buy and sell the same securities at the same time for different clients based on the particular investment objective, guidelines and strategies of those accounts. For example, the Manager may decide that it may be entirely appropriate for a growth fund to sell a security at the same time a value fund is buying that security. To the extent that transactions on behalf of more than one client of the Manager or its affiliates during the same period may increase the demand for securities being purchased or the supply of securities being sold, there may be an adverse effect on price. For example, sales of a security by the Manager on behalf of one or more of its clients may decrease the market price of such security, adversely impacting other clients of the Manager that still hold the security. If purchases or sales of securities arise for consideration at or about the same time that would involve the Fund or other clients or funds for which the Manager or an affiliate act as investment manager, transactions in such securities will be made, insofar as feasible, for the respective funds and clients in a manner deemed equitable to all.
 
In certain instances, the Manager may find it efficient for purposes of seeking to obtain best execution, to aggregate or “bunch” certain contemporaneous purchases or sale orders of its advisory accounts. In general, all contemporaneous trades for client accounts under management by the same portfolio manager or investment team will be bunched in a single order if the trader believes the bunched trade would provide each client with an opportunity to achieve a more favorable execution at a potentially lower execution cost. The costs associated with a bunched order will be shared pro rata among the clients in the bunched order. Generally, if an order for a particular portfolio manager or management team is filled at several different prices through multiple trades, all accounts participating in the order will receive the average price except in the case of certain international markets where average pricing is not permitted. While in some cases this practice could have a detrimental effect upon the price or value of the security as far as the Fund is concerned, in other cases it could be beneficial to the Fund. Transactions effected by the Manager on behalf of more than one of its


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clients during the same period may increase the demand for securities being purchased or the supply of securities being sold, causing an adverse effect on price. The trader will give the bunched order to the broker dealer that the trader has identified as being able to provide the best execution of the order. Orders for purchase or sale of securities will be placed within a reasonable amount of time of the order receipt and bunched orders will be kept bunched only long enough to execute the order.
 
The Fund will not purchase securities during the existence of any underwriting or selling group relating to such securities of which the Distributor or any affiliated person (as defined in the Investment Company Act) of the Distributor is a member except pursuant to procedures adopted by the Board in accordance with Rule 10f-3 under the Investment Company Act. In no instance will portfolio securities be purchased from or sold to the Distributor or any affiliated person of the Distributor entities except as permitted by Commission exemptive order or by applicable law.
 
Information About the Fund’s Shares
 
Under the Amended and Restated Trust Agreement that establishes the Fund, the Trustees are authorized to issue beneficial interests in the Fund and create future series. Under the Amended and Restated Trust Agreement, the Trustees may also, subject to applicable law, (i) divide the beneficial interests in the Fund or each class thereof into shares, with or without par value as the Trustees shall determine; (ii) issue shares without limitation as to number (including fractional shares) at such time or times and on such terms as the Trustees may deem appropriate; (iii) classify or reclassify any issued shares of the Fund or any class thereof into shares of one or more series or classes thereof; and (iv) take such other action with respect to the shares as the Trustees may deem desirable. The Fund’s shares currently are divided into Class A and Institutional Shares.
 
Under the Delaware Statutory Trust Act (the “Delaware Act”), shareholders are not personally liable for obligations of the Fund. The Delaware Act entitles shareholders of the Fund to the same limitation of liability as is available to shareholders of private for-profit corporations. However, no similar statutory or other authority limiting statutory trust shareholder liability exists in many other states. As a result, to the extent that the Fund or a shareholder is subject to the jurisdiction of courts in such other states, those courts may not apply Delaware law and may subject the shareholders to liability.
 
General Information About Share Classes
 
As described in the Prospectus, the Fund provides you with alternative ways of purchasing Fund shares based upon your individual investment needs and preferences.
 
Each class of shares of the Fund represents an interest in the same portfolio of investments. Each class of shares is identical in all respects except that each class bears its own class expenses, including distribution and administration expenses, and each class has exclusive voting rights with respect to any distribution or service plan applicable to its shares. As a result of the differences in the expenses borne by each class of shares, net income per share, dividends per share and net asset value per share will vary among the Fund’s classes of shares. There are no conversion, preemptive or other subscription rights.
 
Shareholders of each class will share expenses proportionately for services that are received equally by all shareholders. A particular class of shares will bear only those expenses that are directly attributable to that class, where the type or amount of services received by a class varies from one class to another. For example, class-specific expenses generally will include distribution and service fees for those classes that pay such fees.
 
The minimum initial investment is $2,000 for Class A Shares and $50 if you establish a systematic investment plan and $100,000 for Institutional Shares. The Fund reserves the right to reject purchase orders and to waive or increase the minimum investment requirements.
 
The expenses to be borne by specific classes of shares may include (i) transfer agency fees attributable to a specific class of shares, (ii) printing and postage expenses related to preparing and distributing materials such as shareholder reports, prospectuses and proxy statements to current shareholders of a specific class of shares, (iii) Commission and state securities registration fees incurred by a specific class of shares, (iv) the


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expense of administrative personnel and services required to support the shareholders of a specific class of shares, (v) litigation or other legal expenses relating to a specific class of shares, (vi) directors’ fees or expenses incurred as a result of issues relating to a specific class of shares, (vii) accounting expenses relating to a specific class of shares and (viii) any additional incremental expenses subsequently identified and determined to be properly allocated to one or more classes of shares.
 
Class A Shares
 
Class A Shares may be purchased at a public offering price equal to the applicable net asset value per share plus an up-front sales charge imposed at the time of purchase as set out in the Prospectus. Shareholders may qualify for a reduced sales charge, or the sales charge may be waived in its entirety, as described below. Class A Shares are also subject to an annual distribution and service fee of up to 0.25%. See “12b-1 Distribution and Service Plans.”
 
The Fund receives the entire net asset value of all Class A Shares that are sold. The ongoing up-front sales charge and service fees will cause Class A Shares to have a higher expense ratio, pay lower dividends and have a lower total return than Institutional Shares.
 
The Distributor may reallow discounts to selected securities dealers and will use any such balance over discounts to pay or reimburse other persons, including the Manager, for any distribution activity and will not retain the balances. Since securities dealers selling front-end load shares of the Fund will typically receive a concession equal to the sales charge, they may be deemed to be underwriters.
 
Rights of Accumulation
 
You may qualify for a reduced sales charge on a purchase of Class A Shares of the Fund if the amount of your purchase, when added to the value that day of all of your shares of the Fund, falls within the amounts stated in the Class A Sales Charges and Commissions table in “How to Buy Shares” in the Prospectus. You or your financial professional must notify the Fund’s transfer agent of any cumulative discount whenever you plan to purchase Class A Shares of the Fund that you wish to qualify for a reduced sales charge.
 
Letter of Intent
 
You may qualify for a reduced sales charge on a purchase of Class A Shares of the Fund if you plan to purchase Class A Shares of the Fund over the next 13 months and the total amount of your purchases would, if purchased at one time, qualify you for the reduced sales charges shown in the Class A Sales Charges and Commissions table in “How to Buy Shares” in the Prospectus. In order to take advantage of this option, you must complete the applicable section of the Application Form or sign and deliver either to a financial intermediary or to the Fund’s transfer agent a written Letter of Intent in a form acceptable to the Fund. A Letter of Intent states that you intend, but are not obligated, to purchase over the next 13 months a stated total amount of Class A Shares that would qualify you for a reduced sales charge shown above.
 
By establishing a Letter of Intent, you agree that your first purchase of Class A Shares of the Fund following execution of the Letter of Intent will be at least 5% of the total amount of your intended purchases. You further agree that shares representing 5% of the total amount of your intended purchases will be held in escrow pending completion of these purchases. All dividends and capital gains distributions on Class A Shares held in escrow will be credited to your account. If total purchases, less redemptions, prior to the expiration of the 13 month period equal or exceed the amount specified in your Letter of Intent, the Class A Shares held in escrow will be transferred to your account. If the total purchases, less redemptions, exceed the amount specified in your Letter of Intent and thereby qualify for a lower sales charge than the sales charge specified in your Letter of Intent, you will receive this lower sales charge retroactively, and the difference between it and the higher sales charge paid will be used to purchase additional Class A Shares on your behalf. If the total purchases, less redemptions, are less than the amount specified, you must pay the Fund an amount equal to the difference between the amounts paid for these purchases and the amounts which would have been paid if the higher sales charge had been applied. If you do not pay the additional amount within 20 days after written request by the Fund or your financial advisor, the Fund will redeem an appropriate number of your escrowed


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Class A Shares to meet the required payment. By establishing a Letter of Intent, you irrevocably appoint the Fund’s transfer agent as attorney to give instructions to redeem any or all of your escrowed shares, with full power of substitution in the premises.
 
You or your financial intermediary must notify the Fund’s transfer agent whenever you make a purchase of Fund shares that you wish to be covered under the Letter of Intent option.
 
For purposes of determining whether you qualify for a reduced sales charge as described under Rights of Accumulation and Letter of Intent, you may include together with your own purchases those made by your spouse (or equivalent if recognized under local law) and your children under 21 years of age, whether these purchases are made through a taxable or non-taxable account. You may also include purchases made by a corporation, partnership or sole proprietorship which is 100% owned, either alone or in combination, by any of the foregoing. In addition, a trustee or other fiduciary can count all shares purchased for a single trust, estate or other single fiduciary account that has multiple accounts (including one or more employee benefit plans of the same employer).
 
Elimination of Sales Charge on Class A Shares
 
Class A Shares of the Fund may be purchased at net asset value without a sales charge, and may be purchased by the following categories of investors:
 
  •  investors purchasing $100,000 or more;
 
  •  officers, trustees and former trustees of the Fund;
 
  •  bona fide, full-time and retired employees of the Manager, and subsidiaries thereof, or their immediate family members (immediate family members are defined as their spouses, parents, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse, and a spouse’s siblings);
 
  •  any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members;
 
  •  bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity;
 
  •  investors purchasing on a periodic fee, asset-based fee or no transaction fee basis through a broker-dealer sponsored mutual fund purchase program;
 
  •  clients of investment advisers, financial planners or other financial intermediaries that charge periodic or asset-based fees for their services;
 
  •  employer-sponsored retirement plans except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; and
 
  •  with respect to purchases by employer-sponsored retirement plans with at least 25 employees and that either (a) make an initial purchase aggregating $100,000 or more; or (b) execute a Letter of Intent to purchase in the aggregate $100,000 or more of fund shares.
 
Any Class A Shares purchased pursuant to a special sales charge waiver must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by the Fund. You or your financial professional must notify the Fund’s transfer agent whenever you make a purchase of Class A Shares of the Fund that you wish to be covered under these special sales charge waivers. All purchases under the special sales charge waivers will be subject to minimum purchase requirements as established by the Fund.
 
If you are eligible to purchase either Class A Shares or Institutional Shares without a sales charge at net asset value, you should be aware of the differences between these two classes of shares. Class A Shares are subject to an annual service fee to compensate financial intermediaries for providing you with ongoing account services. Institutional Shares are not subject to a distribution or service fee and, consequently, holders of


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Institutional Shares may not receive the same types or levels of services from financial intermediaries. In choosing between Class A Shares and Institutional Shares, you should weigh the benefits of the services to be provided by financial intermediaries against the annual service fee imposed upon the Class A Shares.
 
The reduced sales charge programs may be modified or discontinued by the Fund at any time. For more information about the purchase of Class A Shares or the reduced sales charge program, or to obtain the required application forms, call the Fund at 1-866-876-9946.
 
Acquisition of Certain Investment Companies
 
Class A Shares may be offered at net asset value in connection with the acquisition of the assets of, or merger or consolidation with, a personal holding company or a public or private investment company.
 
Institutional Share Purchase Eligibility
 
Institutional Shares are available for purchases of $100,000 or more and for purchases using dividends and capital gains distributions on Institutional Shares. Institutional Shares also are available for the following categories of investors:
 
  •  officers, trustees and former trustees of the Fund and their immediate family members or trustees/directors of any fund sponsored by the Manager, any parent company of the Manager and subsidiaries thereof and their immediate family members (immediate family members are defined as their spouses, parents, children, grandparents, grandchildren, parents-in-law, sons- and daughters-in-law, siblings, a sibling’s spouse, and a spouse’s siblings);
 
  •  bona fide, full-time and retired employees of the Manager, and subsidiaries thereof, or their immediate family members;
 
  •  any person who, for at least the last 90 days, has been an officer, director or bona fide employee of any financial intermediary, or their immediate family members;
 
(Any shares purchased by investors falling within any of the first three categories listed above must be acquired for investment purposes and on the condition that they will not be transferred or resold except through redemption by the Fund.)
 
  •  bank or broker-affiliated trust departments investing funds over which they exercise exclusive discretionary investment authority and that are held in a fiduciary, agency, advisory, custodial or similar capacity;
 
  •  investors purchasing on a periodic fee or asset-based fee program which is sponsored by a registered broker-dealer or other financial institution that has entered into an agreement with the Manager;
 
  •  fee-paying clients of a registered investment advisor (“RIA”) who initially invests for clients an aggregate of at least $100,000 in the Fund through a fund “supermarket” or other mutual fund trading platform sponsored by a broker-dealer or trust company of which the RIA is not an affiliated or associated person and which has entered into an agreement with the Manager;
 
  •  employer-sponsored retirement plans except SEPs, SAR-SEPs, SIMPLE IRAs and KEOGH plans; and
 
  •  other affiliated funds whose investment policies allow investments in other investment companies.
 
Reinstatement Privilege
 
If you redeemed Class A Shares of the Fund that were subject to a sales charge or a CDSC, you have up to one year to reinvest all or part of the full amount of the redemption in the same class of shares of the Fund at net asset value. This reinstatement privilege can be exercised only once for any redemption, and reinvestment will be made at the net asset value next calculated after reinstatement of the appropriate class of Fund shares. If you reinstate shares that were subject to a CDSC, your holding period as of the redemption date also will be reinstated for purposes of calculating a CDSC and the CDSC paid at redemption will be


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refunded. The federal income tax consequences of any capital gain realized on a redemption will not be affected by reinstatement, but a capital loss may be disallowed in whole or in part depending on the timing, the amount of the reinvestment and the fund from which the redemption occurred.
 
Suspension of Right of Redemption
 
The Fund may suspend the right of redemption of Fund shares or delay payment more than seven days (a) during any period when the NYSE is closed (other than customary weekend and holiday closings), (b) when trading in the markets the Fund normally utilizes is restricted, or an emergency exists as determined by the Commission so that trading of the Fund’s investments or determination of its net asset value is not reasonably practicable, or (c) for any other periods that the Commission by order may permit for protection of Fund shareholders.
 
Redemption In-Kind
 
The Fund has reserved the right to redeem in-kind (that is, to pay redemption requests in cash and portfolio securities, or wholly in portfolio securities), although the Fund has no present intention to redeem in-kind. The Fund voluntarily has committed to pay in cash all requests for redemption by any shareholder, limited as to each shareholder during any 90-day period to the lesser of $250,000 or 1% of the net asset value of the Fund at the beginning of the 90-day period.
 
Frequent Trading Policy
 
The Fund’s Frequent Trading Policy is as follows:
 
The Fund is intended as long-term investments and not as short-term trading vehicles. At the same time, the Fund recognizes the need of investors to periodically make purchases and redemptions of Fund shares when rebalancing their portfolios and as their financial needs or circumstances change. The Fund has adopted the following Frequent Trading Policy that seeks to balance these needs against the potential for higher operating costs, portfolio management disruption and other inefficiencies that can be caused by excessive trading of Fund shares.
 
1. Definition of Round Trip
 
A Round Trip trade is the purchase and subsequent redemption of Fund shares, including by exchange. Each side of a Round Trip trade may be comprised of either a single transaction or a series of closely-spaced transactions.
 
2. Round Trip Trade Limitations
 
The Fund limits the frequency of Round Trip trades that may be placed in the Fund. Subject to certain exceptions noted below, the Fund limits an investor to two Round Trips per trailing 12-month period and may also restrict the trading privileges of an investor who makes a Round Trip within a 30-day period if the purchase and redemption are of substantially similar dollar amounts and represent at least 25% of the value of the investor’s account.
 
3. Enforcement
 
Trades placed in violation of the foregoing policies are subject to rejection or cancellation by the Fund. The Fund may also bar an investor (and/or the investor’s financial advisor) who has violated these policies from opening new accounts with the Fund and may restrict the investor’s existing account(s) to redemptions only. The Fund reserves the right, in its sole discretion, to (a) interpret the terms and application of these policies, (b) waive unintentional or minor violations (including transactions below certain dollar thresholds) if the Fund determines that doing so does not harm the interests of Fund shareholders, and (c) exclude certain classes of redemptions from the application of the trading restrictions set forth above.
 
The Fund reserves the right to impose restrictions on purchases or exchanges that are more restrictive than those stated above if they determine, in their sole discretion, that a proposed transaction or series of


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transactions involve market timing or excessive trading that is likely to be detrimental to the Fund. The Fund may also modify or suspend the Frequent Trading Policy without notice during periods of market stress or other unusual circumstances.
 
The ability of the Fund to implement the Frequent Trading Policy for omnibus accounts at certain financial intermediaries may be dependent on receiving from those intermediaries sufficient shareholder information to permit monitoring of trade activity and enforcement of the Fund’s Frequent Trading Policy. In addition, the Fund may rely on a financial intermediary’s policy to restrict market timing and excessive trading if the Fund believes that the policy is reasonably designed to prevent market timing that is detrimental to the Fund. Such policy may be more or less restrictive than the Fund’s Policy. The Fund cannot ensure that these financial intermediaries will in all cases apply the Fund’s policy or their own policies, as the case may be, to accounts under their control.
 
Exclusions from the Frequent Trading Policy
 
As stated above, certain redemptions are eligible for exclusion from the Frequent Trading Policy, including: (i) redemptions or exchanges by shareholders investing through the fee-based platforms of certain financial intermediaries (where the intermediary charges an asset-based or comprehensive “wrap” fee for its services) that are effected by the financial intermediaries in connection with systematic portfolio rebalancing; (ii) when there is a verified trade error correction, which occurs when a dealer firm sends a trade to correct an earlier trade made in error and then the firm sends an explanation to the Fund confirming that the trade is actually an error correction; (iii) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (iv) in the event of the death of the shareholder (including a registered joint owner); (v) redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an account’s net asset value depending on the frequency of the plan as designated by the shareholder; (vi) redemptions of shares that were purchased through a systematic investment program; (vii) involuntary redemptions caused by operation of law; (viii) redemptions in connection with a payment of account or plan fees; (ix) redemption or exchanges by any “funds of funds” advised by the Manager; and (x) redemptions in connection with the exercise of the Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the applicable board has determined may have material adverse consequences to the shareholders of the Fund.
 
In addition, the following redemptions of shares by an employer-sponsored qualified defined contribution retirement plan are excluded from the Frequent Trading Policy: (i) partial or complete redemptions in connection with a distribution without penalty under Section 72(t) of the Internal Revenue Code of 1986, as amended (the “Code”) from a retirement plan: (a) upon attaining age 59 1/2; (b) as part of a series of substantially equal periodic payments, or (c) upon separation from service and attaining age 55; (ii) partial or complete redemptions in connection with a qualifying loan or hardship withdrawal; (iii) complete redemptions in connection with termination of employment, plan termination, transfer to another employer’s plan or IRA or changes in a plan’s recordkeeper; and (iv) redemptions resulting from the return of an excess contribution. Also, the following redemptions of shares held in an IRA account are excluded from the application of the Frequent Trading Policy: (i) redemptions made pursuant to an IRA systematic withdrawal based on the shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 591/2; and (ii) redemptions to satisfy required minimum distributions after age 701/2 from an IRA account.
 
Redemption Fee Policy
 
The Fund will assess a 2% fee on the proceeds of Fund shares redeemed or exchanged within 60 days of acquisition (i.e., through purchase or exchange). The redemption fee will be retained from redemption or exchange proceeds and paid directly to the Fund. The fee is intended to offset the trading costs and Fund operating expenses associated with frequent trading. When an investor redeems or exchanges Fund shares subject to the redemption fee, the Fund will first redeem any shares that are not subject to the redemption fee,


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and then redeem the shares owned for the longest period of time, unless asked to redeem shares in a different order. The Fund reserves the right, in its sole discretion, to waive any redemption fee charged to shareholders.
 
The redemption fee may be waived under the following circumstances: (i) redemptions or exchanges by shareholders investing through the fee-based platforms of certain financial intermediaries (where the intermediary charges an asset-based or comprehensive “wrap” fee for its services) in instances where the Fund reasonably believes either that the intermediary has internal policies and procedures in place to effectively discourage inappropriate trading activity or that the redemptions were effected for reasons other than the desire to profit from short-term trading in Fund shares; (ii) when there is a verified trade error correction, which occurs when a dealer firm sends a trade to correct an earlier trade made in error and then the firm sends an explanation to the Fund confirming that the trade is actually an error correction; (iii) in the event of total disability (as evidenced by a determination by the federal Social Security Administration) of the shareholder (including a registered joint owner) occurring after the purchase of the shares being redeemed; (iv) in the event of the death of the shareholder (including a registered joint owner); (v) for redemptions made pursuant to a systematic withdrawal plan, up to 1% monthly, 3% quarterly, 6% semiannually or 12% annually of an account’s net asset value depending on the frequency of the plan as designated by the shareholder; (vi) involuntary redemptions caused by operation of law; (vii) redemptions in connection with a payment of account or plan fees; (viii) redemptions in connection with the exercise of the Fund’s right to redeem all shares in an account that does not maintain a certain minimum balance or that the applicable board has determined may have material adverse consequences to the shareholders of the Fund; (ix) redemptions or exchanges by any “funds of funds” advised by the Manager; and (x) redemptions or exchanges by shareholders investing through qualified retirement plans such as 401(k) plans only if the plan sponsor or administrator certifies that the plan does not have the operational capability to assess the fee.
 
In addition, the redemption fee will be waived in connection with the following redemptions of shares held by an employer-sponsored qualified defined contribution retirement plan: (i) partial or complete redemptions in connection with a distribution without penalty under Section 72(t) of the Code, from a retirement plan: (a) upon attaining age 591/2, (b) as part of a series of substantially equal periodic payments, or (c) upon separation from service and attaining age 55; (ii) partial or complete redemptions in connection with a qualifying loan or hardship withdrawal; (iii) complete redemptions in connection with termination of employment, plan termination or transfer to another employer’s plan or IRA; and (iv) redemptions resulting from the return of an excess contribution. The redemption fee will also be waived in connection with the following redemptions of shares held in an IRA account: (i) for redemptions made pursuant to an IRA systematic withdrawal based on the shareholder’s life expectancy including, but not limited to, substantially equal periodic payments described in Code Section 72(t)(A)(iv) prior to age 591/2; and (ii) for redemptions to satisfy required minimum distributions after age 701/2 from an IRA account.
 
The Fund reserves the right to modify or eliminate redemption fee waivers at any time.
 
Pricing of Shares
 
Determination of Net Asset Value
 
The net asset value for each class of shares of the Fund is generally calculated as of the close of regular trading hours on the NYSE (currently 4:00 p.m. Eastern Time) on each business day the NYSE is open.
 
Valuation of securities held by the Fund is as follows:
 
Equity Investments.  Equity securities traded on a recognized securities exchange (e.g., NYSE), separate trading boards of a securities exchange or through a market system that provides contemporaneous transaction pricing information (an “Exchange”) are valued via independent pricing services generally at the Exchange closing price or if an Exchange closing price is not available, the last traded price on that Exchange prior to the time as of which the assets or liabilities are valued, however, under certain circumstances other means of determining current market value may be used. If an equity security is traded on more than one Exchange, the current market value of the security where it is primarily traded generally will be used. In the event that there are no sales involving an equity security held by the Fund


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on a day on which the Fund values such security, the last bid (long positions) or ask (short positions) price, if available, will be used as the value of such security. If the Fund holds both long and short positions in the same security, the last bid price will be applied to securities held long and the last ask price will be applied to securities sold short. If no bid or ask price is available on a day on which the Fund values such security, the prior day’s price will be used, unless the Manager determines that such prior day’s price no longer reflects the fair value of the security, in which case such asset would be treated as a fair value asset.
 
Fixed Income Investments.  Fixed income securities for which market quotations are readily available are generally valued using such securities’ most recent bid prices provided directly from one or more broker-dealers, market makers, or independent third-party pricing services which may use matrix pricing and valuation models to derive values, each in accordance with valuation procedures approved by the Fund’s Board. The amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Manager determines that such method does not represent fair value. Loan participation notes are generally valued at the mean of the last available bid prices from one or more brokers or dealers as obtained from independent third-party pricing services. Certain fixed income investments including asset-backed and mortgage-related securities may be valued based on valuation models that consider the estimated cash flows of each tranche of the entity, establish a benchmark yield and develop an estimated tranche specific spread to the benchmark yield based on the unique attributes of the tranche. Fixed income securities for which market quotations are not readily available may be valued by third-party pricing services that make a valuation determination by securing transaction data (e.g., recent representative bids), credit quality information, perceived market movements, news, and other relevant information and by other methods, which may include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.
 
Options, Futures, Swaps and Other Derivatives.  Exchange-traded equity options for which market quotations are readily available are valued at the mean of the last bid and ask prices as quoted on the Exchange or the board of trade on which such options are traded. In the event that there is no mean price available for an exchange traded equity option held by the Fund on a day on which the Fund values such option, the last bid (long positions) or ask (short positions) price, if available, will be used as the value of such option. If no bid or ask price is available on a day on which the Fund values such option, the prior day’s price will be used, unless the Manager determines that such prior day’s price no longer reflects the fair value of the option in which case such option will be treated as a fair value asset. OTC options may be valued using a mathematical model which incorporates a number of market data factors. Financial futures contracts and options thereon, which are traded on exchanges, are valued at their last sale price or settle price as of the close of such exchanges. Swap agreements and other derivatives are generally valued daily based upon quotations from market makers or by a pricing service in accordance with the valuation procedures approved by the Board.
 
Underlying Funds.  Shares of underlying open-end funds are valued at net asset value. Shares of underlying exchange-traded closed-end funds or other exchange-traded funds will be valued at their most recent closing price.
 
General Valuation Information
 
In determining the market value of portfolio investments, the Fund may employ independent third party pricing services, which may use, without limitation, a matrix or formula method that takes into consideration market indexes, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund’s books at their face value.
 
Prices obtained from independent third party pricing services, broker-dealers or market makers to value the Fund’s securities and other assets and liabilities are based on information available at the time the Fund values its assets and liabilities. In the event that a pricing service quotation is revised or updated subsequent to


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the day on which the Fund valued such security, the revised pricing service quotation generally will be applied prospectively. Such determination shall be made considering pertinent facts and circumstances surrounding such revision.
 
In the event that application of the methods of valuation discussed above result in a price for a security which is deemed not to be representative of the fair market value of such security, the security will be valued by, under the direction of or in accordance with a method specified by the Board as reflecting fair value. All other assets and liabilities (including securities for which market quotations are not readily available) held by the Fund (including restricted securities) are valued at fair value as determined in good faith by the Fund’s Board or by the Manager (its delegate). Any assets and liabilities which are denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange.
 
Certain of the securities acquired by the Fund may be traded on foreign exchanges or over-the-counter markets on days on which the Fund’s net asset value is not calculated. In such cases, the net asset value of the Fund’s shares may be significantly affected on days when investors can neither purchase nor redeem shares of the Fund.
 
Fair Value
 
When market quotations are not readily available or are believed by the Manager to be unreliable, the Fund’s investments are valued at fair value (“Fair Value Assets”). Fair Value Assets are valued by the Manager in accordance with procedures approved by the Board. The Manager may conclude that a market quotation is not readily available or is unreliable if a security or other asset or liability does not have a price source due to its complete lack of trading, if the Manager believes a market quotation from a broker-dealer or other source is unreliable (e.g., where it varies significantly from a recent trade, or no longer reflects the fair value of the security or other asset or liability subsequent to the most recent market quotation), where the security or other asset or liability is only thinly traded or due to the occurrence of a significant event subsequent to the most recent market quotation. For this purpose, a “significant event” is deemed to occur if the Manager determines, in its business judgment prior to or at the time of pricing the Fund’s assets or liabilities, that it is likely that the event will cause a material change to the last exchange closing price or closing market price of one or more assets or liabilities held by the Fund. On any date the NYSE is open and the primary exchange on which a foreign asset or liability is traded is closed, such asset or liability will be valued using the prior day’s price, provided that the Manager is not aware of any significant event or other information that would cause such price to no longer reflect the fair value of the asset or liability, in which case such asset or liability would be treated as a Fair Value Asset. For certain foreign securities, a third-party vendor supplies evaluated, systematic fair value pricing based upon the movement of a proprietary multi-factor model after the relevant foreign markets have closed. This systematic fair value pricing methodology is designed to correlate the prices of foreign securities following the close of the local markets to the price that might have prevailed as of the Fund’s pricing time.
 
The Manager may submit its recommendations regarding the valuation and/or valuation methodologies for Fair Value Assets to a special pricing committee authorized by the Board that must contain at least two Trustees (a “Special Pricing Committee”). Special Pricing Committees may accept, modify or reject any recommendations. In addition, the Fund’s accounting agent or administrator periodically endeavors to confirm the prices it receives from all third party pricing services, index providers and broker-dealers, and, with the assistance of the Manager, to regularly evaluate the values assigned to the securities and other assets and liabilities held by the Fund. The pricing of all Fair Value Assets is subsequently reported to and ratified by the Board or a Committee thereof.
 
When determining the price for a Fair Value Asset, Special Pricing Committees shall seek to determine the price that the Fund might reasonably expect to receive from the current sale of that asset or liability in an arm’s-length transaction. The price generally may not be determined based on what the Fund might reasonably expect to receive for selling an asset or liability at a later time or if it holds the asset or liability to maturity. Fair value determinations shall be based upon all available factors that the Special Pricing Committees deem


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relevant at the time of the determination, and may be based on analytical values determined by the Manager using proprietary or third party valuation models.
 
Fair value represents a good faith approximation of the value of an asset or liability. The fair value of one or more assets or liabilities may not, in retrospect, be the price at which those assets or liabilities could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
 
The Fund’s annual audited financial statements, which are prepared in accordance with generally accepted accounting principles (“GAAP”), follow the requirements for valuation set forth in Accounting Standards Codification Topic 820 (formerly FAS 157), “Fair Value Measurements” (“Topic 820”), which defines and establishes a framework for measuring fair value under GAAP and expands financial statement disclosure requirements relating to fair value measurements.
 
Generally, Topic 820 and other accounting rules applicable to mutual funds and various assets in which they invest are evolving. Such changes may adversely affect the Fund. For example, the evolution of rules governing the determination of the fair market value of assets or liabilities to the extent such rules become more stringent would tend to increase the cost and/or reduce the availability of third-party determinations of fair market value. This may in turn increase the costs associated with selling assets or affect their liquidity due to the Fund’s inability to obtain a third-party determination of fair market value.
 
Computation of Offering Price Per Share
 
An illustration of the computation of the public offering price of the Class A Shares of the Fund is provided below. The values in the following illustration are provided as examples and are not based on the actual value of the Fund’s Class A Shares’ net assets and number of Class A Shares outstanding.
 
         
    Class A Shares
 
Net Assets
  $ 50,000,000  
Number of Shares Outstanding
  $ 5,000,000  
Net Asset Value Per Share (net assets divided by number of shares outstanding)
  $ 10.00  
Sales Charge (for Class A Shares: 5.00% of offering price; 5.26% of net asset value per share)(1)
  $ 0.53  
Offering Price
  $ 10.53  
 
 
(1) Assumes maximum sales charge applicable.
 
The offering price for the Fund’s Institutional Shares is equal to the share class’s net asset value computed as set forth above for Class A Shares, but will not be subject to a sales charge.
 
Dividends and Taxes
 
Dividends
 
The Fund intends to distribute substantially all of its net investment income, if any. Dividends from such net investment income are paid as set out in the Fund’s prospectus. The Fund will also distribute all net realized capital gains, if any, as set out in the Prospectus. From time to time, the Fund may declare a special distribution at or about the end of the calendar year in order to comply with federal tax requirements that certain percentages of its ordinary income and capital gains be distributed during the year. If in any fiscal year the Fund has net income from certain foreign currency transactions, such income will be distributed at least annually.
 
Dividends are taxable to shareholders, as discussed below, whether they are reinvested in shares of the Fund or received in cash. The per share dividends on Class A Shares will be lower than the per share dividends on Institutional Shares as a result of the service fees applicable to Class A Shares.


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Tax Matters
 
The following is a summary of certain material U.S. federal income tax considerations regarding the purchase, ownership and disposition of shares of the Fund. This summary does not address all of the potential U.S. federal income tax consequences that may be applicable to the Fund or to all categories of investors, some of which may be subject to special tax rules. Current and prospective shareholders are urged to consult their own tax adviser with respect to the specific federal, state, local and foreign tax consequences of investing in the fund. The summary is based on the laws in effect on the date of this Statement of Additional Information and existing judicial and administrative interpretations thereof, all of which are subject to change, possibly with retroactive effect.
 
The Fund that is a series of a regulated investment companies (“RIC”) under the Code that consists of multiple series is treated as a separate corporation for federal income tax purposes, and therefore is considered to be a separate entity in determining its treatment under the rules for RICs. Losses in one series of a RIC do not offset gains in another, and the requirements (other than certain organizational requirements) for qualifying for RIC status will be determined at the level of the individual series. In the following discussion, the term “Fund” means each individual series, if applicable.
 
The Fund intends to continue to qualify for the special tax treatment afforded to RICs under the Code. As long as the Fund so qualifies, the Fund (but not its shareholders) will not be subject to federal income tax on the part of its investment company taxable income and net realized capital gains that it distributes to its shareholders in years in which it distributes at least 90% of its investment company taxable income (i.e., income other than its net realized long-term capital gain over its net realized short-term capital loss), plus or minus certain adjustments, and 90% of its net tax-exempt interest income, if any, for the year. To qualify as a RIC, the Fund must meet certain requirements regarding the source of its income and the composition and diversification of its assets.
 
To qualify, among other requirements, the Fund will limit its investments so that, at the close of each quarter of the taxable year, (i) at least 50% of the market value of the Fund’s assets is represented by cash, securities of other regulated investment companies, U.S. government securities and other securities, with such other securities limited, in respect of any one issuer, to an amount not greater than 5% of the Fund’s assets and not greater than 10% of the outstanding voting securities of such issuer and (ii) not more than 25% of the value of the Fund’s assets is invested in the securities (other than U.S. government securities or securities of other regulated investment companies) of any one issuer, any two or more issuers of which 20% or more of the voting stock is held by the Fund and that are determined to be engaged in the same or similar trades or businesses or related trades or businesses or in the securities of one or more qualified publicly traded partnerships (i.e., partnerships that are traded on an established securities market or tradable on a secondary market, other than partnerships that derive 90% of their income from interest, dividends, capital gains and other traditionally permitted mutual fund income). Foreign government securities (unlike U.S. government securities) are not exempt from the diversification requirements of the Code and the securities of each foreign government issuer are considered to be obligations of a single issuer. These tax-related limitations may be changed by the Board to the extent necessary to comply with changes to the federal tax requirements.
 
The Fund intends to distribute substantially all of its income and gains. If, in any taxable year, the Fund fails to qualify as a RIC under the Code, the Fund would be taxed in the same manner as an ordinary corporation and all distributions from earnings and profits (as determined under U.S. federal income tax principles) to its shareholders would be taxable as ordinary dividend income eligible for the maximum 15% tax rate for non-corporate shareholders (for taxable years beginning prior to January 1, 2013) and the dividends-received deduction for corporate shareholders. However, distributions to shareholders would not be deductible by the Fund in computing its taxable income. Moreover, if the Fund fails to qualify as a RIC in any year, it must pay out its earnings and profits accumulated in that year in order to qualify again as a RIC. If the Fund fails to qualify as a RIC for a period greater than two taxable years, the Fund may be required to recognize any net built-in gains with respect to certain of its assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if the Fund had been liquidated) if it qualifies as a RIC in a subsequent year.


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The Code requires a RIC to pay a nondeductible 4% excise tax to the extent the RIC does not distribute, by the end of each calendar year, 98% of its ordinary income, determined on a calendar year basis, and 98.2% of its capital gain net income, determined, in general, as if the RIC’s taxable year ended on October 31, plus certain undistributed amounts from the previous years. While the Fund intends to distribute its income and capital gains in the manner necessary to avoid imposition of the 4% excise tax, there can be no assurance that a sufficient amount of the Fund’s taxable income and capital gains will be distributed to avoid entirely the imposition of the tax. In such event, the Fund will be liable for the tax only on the amount by which it does not meet the foregoing distribution requirements.
 
Dividends paid by the Fund from its ordinary income or from an excess of net short-term capital gain over net long-term capital loss (together referred to as “ordinary income dividends”) are taxable to shareholders as ordinary income. Distributions made from an excess of net long-term capital gain over net short-term capital loss (including gains or losses from certain transactions in futures and options) (“capital gain dividends”) are taxable to shareholders as long-term capital gains, regardless of the length of time the shareholder has owned Fund shares. Distributions paid by the Fund that are reported as exempt-interest dividends will not be subject to regular federal income tax. Certain dividend income and long-term capital gains are eligible for taxation at a reduced rate that applies to non-corporate shareholders for taxable years beginning prior to 2011. Under these rules, the portion of ordinary income dividends constituting “qualified dividend income” when paid by a RIC to non-corporate shareholders may be taxable to such shareholders at long-term capital gain rates. However, to the extent the Fund’s distributions are derived from income on debt securities, certain types of preferred stock treated as debt for federal income tax purposes and short-term capital gains, such distributions will not constitute “qualified dividend income.” In addition, dividend income will not be treated as qualified dividend income unless the Fund satisfies certain holding period requirements in respect of the stock of such corporations and has not hedged its position in the stock in certain ways. Qualified dividend income does not include any dividends received from tax exempt corporations. Also, dividends received by the Fund from a real estate investment trust (a “REIT”) or another RIC generally are qualified dividend income only to the extent the dividend distributions are made out of qualified dividend income received by such REIT or other RIC. In the case of securities lending transactions, payments in lieu of dividends are not qualified dividend income. If a shareholder elects to treat Fund dividends as investment income for purposes of the limitation on the deductibility of investment interest, such dividends would not be qualified dividend income. The Fund’s net capital gain (the excess of net long-term capital gains over net short-term capital losses) is not subject to the 90% distribution requirement for taxation as a RIC, described above. If the Fund retains net capital gain, it is subject to tax on that gain, and may report the retained amount as undistributed capital gain in a notice to its shareholders, who will be required to include in income, as long-term capital gain, their proportionate shares of such undistributed net capital gain, will be deemed to have paid and may claim as a credit against their federal income tax liability (and as a refund to the extent it exceeds that liability) their proportionate shares of the tax paid by the Fund on that gain, and may increase the basis of their shares in the Fund by the excess of the amount included in income over the amount allowed as a credit against their taxes.
 
Distributions in excess of the Fund’s earnings and profits will first reduce the adjusted tax basis of a holder’s shares and after such adjusted tax basis is reduced to zero, will constitute capital gains to such holder (assuming the shares are held as a capital asset). Any loss upon the sale or exchange of Fund shares held for six months or less will be treated as long-term capital loss to the extent of any capital gain dividends received by the shareholder.
 
Beginning in 2013, a 3.8 percent Medicare contribution tax will be imposed on net investment income, including interest, dividends, and capital gain, of U.S. individuals with income exceeding $200,000 (or $250,000 if married filing jointly), and of estates and trusts.
 
Under current law, the Fund serves to block unrelated business taxable income (“UBTI”) from being realized by its tax-exempt shareholders. Notwithstanding the foregoing, a tax-exempt shareholder could realize UBTI by virtue of its investment in the Fund if shares in the Fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b). Certain types of income received by the Fund from REITs, real estate mortgage investment conduits, taxable mortgage pools or other


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investments may cause the Fund to designate some or all of its distributions as excess inclusion income. To Fund shareholders such excess inclusion income may (1) constitute taxable income, as UBTI for those shareholders who would otherwise be tax-exempt such as individual retirement accounts, 401(k) accounts, Keogh plans, pension plans and certain charitable entities; (2) not be offset by otherwise allowable deductions for tax purposes; (3) not be eligible for reduced U.S. withholding for non-U.S. shareholders even from tax treaty countries; and (4) cause the Fund to be subject to tax if certain “disqualified organizations” as defined by the Code are Fund shareholders.
 
If a charitable remainder annuity trust or charitable remainder unitrust (each as defined in Code Section 664) has UBTI for a tax year, a 100% excise tax on the UBTI is imposed on the trust.
 
Ordinary income and capital gain dividends are taxable to shareholders even if they are reinvested in additional shares of the Fund. Distributions by the Fund, whether from ordinary income or capital gains, generally will not be eligible for the dividends received deduction allowed to corporations under the Code. If the Fund pays a dividend in January that was declared in the previous October, November or December to shareholders of record on a specified date in one of such months, then such dividend will be treated for tax purposes as being paid by the Fund and received by its shareholders on December 31 of the year in which the dividend was declared.
 
A loss realized on a sale of shares of the Fund will be disallowed if such shares are acquired (whether through the automatic reinvestment of dividends or otherwise) within a 61-day period beginning 30 days before and ending 30 days after the date on which the shares are sold or exchanged. In such case, the basis of the shares acquired will be adjusted to reflect the disallowed loss.
 
The Fund’s investment in foreign currencies or foreign currency denominated or referenced debt securities, certain asset-backed securities and contingent payment and inflation-indexed debt instruments also may increase or accelerate the Fund’s recognition of income, including the recognition of taxable income in excess of cash generated by such investments.
 
Dividends paid by the Fund to non-U.S. shareholders are generally subject to withholding tax at a 30% rate or a reduced rate specified by an applicable income tax treaty to the extent derived from investment income and short-term capital gains. Dividends paid by the Fund from net tax-exempt income or long-term capital gains are generally not subject to such withholding tax. In order to obtain a reduced rate of withholding, a non-U.S. shareholder will be required to provide an IRS Form W-8BEN certifying its entitlement to benefits under a treaty. The withholding tax does not apply to regular dividends paid to a non-U.S. shareholder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. shareholder’s conduct of a trade or business within the U.S. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the non-U.S. shareholder were a U.S. shareholder. A non-U.S. corporation receiving effectively connected dividends may also be subject to additional “branch profits tax” imposed at a rate of 30% (or lower treaty rate). A non-U.S. shareholder who fails to provide an IRS Form W-8BEN or other applicable form may be subject to back-up withholding at the appropriate rate.
 
For taxable years beginning before January 1, 2012, distributions that the Fund reports as “short-term capital gain dividends” or “long-term capital gain dividends” will not be treated as such to a recipient foreign shareholder if the distribution is attributable to gain received from the sale or exchange of U.S. real property or an interest in a U.S. real property holding corporation and the Fund’s direct or indirect interests in U.S. real property exceeded certain levels. Instead, if the foreign shareholder has not owned more than 5% of the outstanding shares of the Fund at any time during the one year period ending on the date of distribution, such distributions will be subject to 30% withholding by the Fund and will be treated as ordinary dividends to the foreign shareholder; if the foreign shareholder owned more than 5% of the outstanding shares of the Fund at any time during the one year period ending on the date of the distribution, such distribution will be treated as real property gain subject to 35% withholding tax and could subject the foreign shareholder to U.S. filing requirements. Additionally, if the Fund’s direct or indirect interests in U.S. real property were to exceed certain levels, a foreign shareholder realizing gains upon redemption from the Fund on or before December 31, 2011 could be subject to the 35% withholding tax and U.S. filing requirements unless more than 50% of the Fund’s


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shares were owned by U.S. persons at such time or unless the foreign person had not held more than 5% of the Fund’s outstanding shares throughout either such person’s holding period for the redeemed shares or, if shorter, the previous five years.
 
In addition, the same rules apply with respect to distributions to a foreign shareholder from the Fund and redemptions of a foreign shareholder’s interest in the Fund attributable to a REIT’s distribution to the Fund of gain from the sale or exchange of U.S. real property or an interest in a U.S. real property holding corporation, if the Fund’s direct or indirect interests in U.S. real property were to exceed certain levels. The rule with respect to distributions and redemptions attributable to a REIT’s distribution to the Fund will not expire for taxable years beginning on or after January 1, 2012.
 
The rules laid out in the previous two paragraphs, other than the withholding rules, will apply notwithstanding the Fund’s participation in a wash sale transaction or its payment of a substitute dividend.
 
Provided that 50% or more of the value of the Fund’s stock is held by U.S. shareholders, distributions of U.S. real property interests (including securities in a U.S. real property holding corporation, unless such corporation is regularly traded on an established securities market and the Fund has held 5% or less of the outstanding shares of the corporation during the five-year period ending on the date of distribution) occurring on or before December 31, 2011, in redemption of a foreign shareholder’s shares of the Fund will cause the Fund to recognize gain. If the Fund is required to recognize gain, the amount of gain recognized will equal to the fair market value of such interests over the Fund’s adjusted bases to the extent of the greatest foreign ownership percentage of the Fund during the five-year period ending on the date of redemption.
 
For taxable years beginning before January 1, 2012, properly reported dividends are generally exempt from U.S. federal withholding tax where they (i) are paid in respect of the Fund’s “qualified net interest income” (generally, the Fund’s U.S. source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which the Fund is at least a 10% shareholder, reduced by expenses that are allocable to such income) or (ii) are paid in respect of the Fund’s “qualified short-term capital gains” (generally, the excess of the Fund’s net short-term capital gain over the Fund’s long-term capital loss for such taxable year). However, depending on its circumstances, the Fund may report all, some or none of its potentially eligible dividends as such qualified net interest income or as qualified short-term capital gains and/or treat such dividends, in whole or in part, as ineligible for this exemption from withholding. In order to qualify for this exemption from withholding, a non-U.S. shareholder will need to comply with applicable certification requirements relating to its non-U.S. status (including, in general, furnishing an IRS Form W-8BEN or substitute Form). In the case of shares held through an intermediary, the intermediary may withhold even if the Fund reports the payment as qualified net interest income or qualified short-term capital gain. Non-U.S. shareholders should contact their intermediaries with respect to the application of these rules to their accounts.
 
Under certain provisions of the Code, some shareholders may be subject to a withholding tax on ordinary income dividends, capital gain dividends and redemption payments (“backup withholding”). Generally, shareholders subject to backup withholding will be non-corporate shareholders for whom no certified taxpayer identification number is on file with the Fund or who, to the Fund’s knowledge, have furnished an incorrect number. When establishing an account, an investor must certify under penalty of perjury that such number is correct and that such investor is not otherwise subject to backup withholding. Backup withholding is not an additional tax. Any amount withheld generally may be allowed as a refund or a credit against a shareholder’s federal income tax liability, provided that the required information is timely forwarded to the IRS.
 
If a shareholder recognizes a loss with respect to the Fund’s shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder in any single taxable year (or a greater amount in any combination of taxable years), the shareholder must file a disclosure statement on Form 8886 with the IRS. Direct shareholders of portfolio securities are in many cases exempted. That a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholder should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.


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Dividends and interest received by the Fund may give rise to withholding and other taxes imposed by foreign countries. Tax conventions between certain foreign countries and the U.S. may reduce or eliminate such taxes. Shareholders of a Fund more than 50% by value of the assets of which at the close of a taxable year are foreign securities may be able to claim U.S. foreign tax credits with respect to such foreign taxes paid by the Fund, subject to certain requirements and limitations contained in the Code. For example, certain retirement accounts and certain tax-exempt organizations cannot claim foreign tax credits on investments in foreign securities held in the Fund. In addition, a foreign tax credit may be claimed with respect to withholding tax on payments with respect to a security only if the holder of the security meets certain holding period requirements. Both the shareholder and the Fund must meet these holding period requirements, and if the Fund fails to do so, it will not be able to “pass through” to shareholders the ability to claim a credit or a deduction for the related foreign taxes paid by the Fund. Further, to the extent that the Fund engages in securities lending with respect to a security paying income subject to foreign taxes, it may not be able to pass through to its shareholders the ability to take a foreign tax credit for those taxes. If the Fund satisfies the applicable requirements, the Fund will be eligible to file an election with the IRS pursuant to which shareholders of the Fund will be required to include their proportionate shares of such foreign taxes in their U.S. income tax returns as gross income, treat such proportionate shares as taxes paid by them, and deduct such proportionate shares in computing their taxable incomes or, alternatively, use them as foreign tax credits against their U.S. income taxes. No deductions for foreign taxes, however, may be claimed by noncorporate shareholders who do not itemize deductions. A shareholder that is a nonresident alien individual or a foreign corporation may be subject to U.S. withholding tax on the income resulting from the Fund’s election described in this paragraph but may not be able to claim a credit or deduction against such U.S. tax for the foreign taxes treated as having been paid by such shareholder. The Fund will report annually to its shareholders the amount per share of such foreign taxes and other information needed to claim the foreign tax credit.
 
Certain transactions entered into by the Fund are subject to special tax rules of the Code that may, among other things, (a) affect the character of gains and losses realized, (b) disallow, suspend or otherwise limit the allowance of certain losses or deductions, and (c) accelerate the recognition of income without a corresponding receipt of cash (with which to make the necessary distributions to satisfy distribution requirements applicable to RICs). Operation of these rules could, therefore, affect the character, amount and timing of distributions to shareholders. Special tax rules also may require the Fund to mark to market certain types of positions in its portfolio (i.e., treat them as sold on the last day of the taxable year), and may result in the recognition of income without a corresponding receipt of cash. The Fund when engaging in transactions affected by these provisions intends to monitor their transactions, make appropriate tax elections and make appropriate entries in their books and records to lessen the effect of these tax rules and avoid any possible disqualification from the special treatment afforded RICs under the Code.
 
If the Fund purchases shares of an investment company (or similar investment entity) organized under foreign law, the Fund will generally be treated as owning shares in a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes. The Fund may be subject to U.S. federal income tax, and interest charges (at the rate applicable to tax underpayments) on tax liability treated as having been deferred with respect to certain distributions from such a company and on gain from the disposition of the shares of such a company (collectively referred to as “excess distributions”), even if such excess distributions are paid by the Fund as a dividend to its shareholders. However, the Fund may elect to “mark to market” at the end of each taxable year shares that it holds in PFICs. The election is made separately for each PFIC held and, once made, would be effective for all subsequent taxable years, unless revoked with consent from the IRS. Under this election, the Fund would recognize as ordinary income any increase in the value of its shares as of the close of the taxable year over their adjusted tax basis and as ordinary loss any decrease in such value, but only to the extent of previously recognized “mark-to-market” gains. By making the mark-to-market election, the Fund could avoid imposition of the interest charge with respect to excess distributions from PFICs, but in any particular year might be required to recognize income in excess of the distributions it received from PFICs.
 
If the Fund were to invest in a PFIC and elect to treat the PFIC as a “qualified electing fund” under the Code, in lieu of the foregoing requirements, the Fund would be required to include in income each year a portion of the ordinary earnings and net capital gains of the qualified electing fund, even if not distributed to


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the Fund, and such amounts would be subject to the 90% and excise tax distribution requirements described above. In order to make this election, the Fund would be required to obtain certain annual information from the PFICs in which it invests, which may be difficult or impossible to obtain.
 
The Fund’s investment in so-called “section 1256 contracts,” such as regulated futures contracts, most foreign currency forward contracts traded in the interbank market and options on most stock indices, are subject to special tax rules. All section 1256 contracts held by the fund at the end of its taxable year are required to be marked to their market value, and any unrealized gain or loss on those positions will be included in the Fund’s income as if each position had been sold for its fair market value at the end of the taxable year. The resulting gain or loss will be combined with any gain or loss realized by the fund from positions in section 1256 contracts closed during the taxable year. Provided such positions were held as capital assets and were neither part of a “hedging transaction” nor part of a “straddle,” 60% of the resulting net gain or loss will be treated as long-term capital gain or loss, and 40% of such net gain or loss will be treated as short-term capital gain or loss, regardless of the period of time the positions were actually held by the Fund.
 
In general, gain or loss on a short sale is recognized when the Fund closes the sale by delivering the borrowed property to the lender, not when the borrowed property is sold. Gain or loss from a short sale is generally considered as capital gain or loss to the extent that the property used to close the short sale constitutes a capital asset in the fund’s hands. Except with respect to certain situations where the property used by the Fund to close a short sale has a long-term holding period on the date of the short sale, special rules would generally treat the gains on short sales as short-term capital gains. These rules may also terminate the running of the holding period of “substantially identical property” held by the Fund. Moreover, a loss on a short sale will be treated as a long-term capital loss if, on the date of the short sale, “substantially identical property” has been held by the Fund for more than one year. In general, the Fund will not be permitted to deduct payments made to reimburse the lender of securities for dividends paid on borrowed stock if the short sale is closed on or before the 45th day after the short sale is entered into.
 
Under Section 988 of the Code, gains or losses attributable to fluctuations in exchange rates between the time the Fund accrues income or receivables or expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such income or pays such liabilities are generally treated as ordinary income or ordinary loss. In general, gains (and losses) realized on debt instruments will be treated as Section 988 gain (or loss) to the extent attributable to changes in exchange rates between the U.S. dollar and the currencies in which the instruments are denominated. Similarly, gains or losses on foreign currency, foreign currency forward contracts and certain foreign currency options or futures contracts, to the extent attributable to fluctuations in exchange rates between the acquisition and disposition dates, are also treated as ordinary income or loss unless the Fund were to elect otherwise.
 
If the Fund holds (directly or indirectly) one or more “tax credit bonds” (defined below) on one or more specified dates during the Fund’s taxable year, and the Fund satisfies the minimum distribution requirement, the Fund may elect for U.S. federal income tax purposes to pass through to shareholders tax credits otherwise allowable to the Fund for that year with respect to such bonds. A tax credit bond is defined in the Code as a “qualified tax credit bond” (which includes a qualified forestry conservation bond, a new clean renewable energy bond, a qualified energy conservation bond, or a qualified zone academy bond, each of which must meet certain requirements specified in the Code), a “build America bond” (which includes certain qualified bonds issued before January 1, 2011) or certain other specified bonds. If the Fund were to make an election, a shareholder of the Fund would be required to include in income and would be entitled to claim as a tax credit an amount equal to a proportionate share of such credits. Certain limitations may apply on the extent to which the credit may be claimed.
 
The foregoing general discussion of federal income tax consequences is based on the Code and the regulations issued thereunder as in effect on the date of this Statement of Additional Information. Future legislative or administrative changes or court decisions may significantly change the conclusions expressed in this discussion, and any such changes or decisions may have a retroactive effect.
 
An investment in the Fund may have consequences under state, local or foreign tax law, about which investors should consult their tax advisors.


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Independent Registered Public Accounting Firm
 
The Audit Committee of the Fund, which is comprised of all of the Fund’s non-interested Trustees, has selected an independent registered public accounting firm for that Fund that audits the Fund’s financial statements. Please see the inside back cover page of your Fund’s Prospectus for information on your Fund’s independent registered public accounting firm.
 
Financial Statements
 
The financial statements of the Fund as of January 24, 2011 included in this Registration Statement in reliance of the report of the Fund’s independent registered public accounting firm is given on the authority of that firm, as experts in accounting and auditing.


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DEL REY MONARCH FUND
 
Statement of Assets and Liabilities
January 24, 2011
 
         
Assets:
Cash
  $ 100,000  
Receivable from Fund’s manager for reimbursement of organizational costs (See Note 2)
    200,000  
Deferred offering costs (See Note 2)
    283,000  
         
Total Assets
  $ 583,000  
         
 
Liabilities
Accrued offering costs (See Note 2)
  $ 283,000  
Accrued organizational expenses (See Note 2)
    200,000  
         
Total Liabilities
  $ 483,000  
         
Net Assets:
  $ 100,000  
         
 
         
Institutional Class capital shares outstanding, $0.001 par value, unlimited shares authorized
    6,666.667  
         
Net asset value, offering price and redemption price per share
  $ 15.00  
 
The accompanying notes are an integral part of these financial statements.


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DEL REY MONARCH FUND
 
Statement of Operations
For the period from June 18, 2010 (formation date) to January 24, 2011
 
         
Income
  $  
Expenses
       
Organizational expenses — Professional fees (Note 2)
    200,000  
Total expenses before reimbursement
    200,000  
         
Expenses reimbursed by the Fund’s manager, subject to future recoupment (Note 3)
    (200,000 )
Net expenses after reimbursement
    0  
         
Net Income
  $ 0  
         
 
The accompanying notes are an integral part of these financial statements.


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DEL REY MONARCH FUND
 
NOTES TO FINANCIAL STATEMENTS
As of January 24, 2011 and for the period from June 18, 2010 (formation date) to January 24, 2011
 
1.   Organization
 
del Rey Monarch Fund (the “Fund”) was formed on January 14, 2011 as a series of del Rey Global Investors Funds, a Delaware statutory trust formed on June 18, 2010. The Fund is classified as a diversified open-end investment company as defined under the Investment Company Act of 1940. The Fund currently intends to offer Class A and Institutional class shares. As of January 24, 2011, the Fund did not have any operations other than those actions relating to organizational matters, including the sale of 6,666.667 shares of Institutional shares for $100,000 cash in the amount of $15.00 per share.
 
The Fund’s investment objective is to seek long-term capital appreciation. The Fund’s principal investment strategy is to invest primarily in equity securities of issuers located in a number of different countries outside of the United States. The Fund seeks to invest in intrinsically undervalued non-U.S. companies with strong and/or improving business fundamentals. The Fund seeks to invest in approximately 35-60 companies whose capitalizations are generally over $1 billion and represent strong risk/return characteristics.
 
2.   Significant Accounting Policies
 
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
 
(a)   Investment Valuation
 
The following is a description of the valuation policies adopted by the Fund as approved by the Board of Trustees:
 
Determination of Net Asset Value
 
The net asset value for each class of shares of the Fund is generally calculated as of the close of regular trading hours on the NYSE (currently 4:00 p.m. Eastern Time) on each business day the NYSE is open.
 
General Valuation Information
 
In determining the market value of portfolio investments, the Fund may employ independent third party pricing services, which may use, without limitation, a matrix or formula method that takes into consideration market indexes, matrices, yield curves and other specific adjustments. This may result in the securities being valued at a price different from the price that would have been determined had the matrix or formula method not been used. All cash, receivables and current payables are carried on the Fund’s books at their face value.
 
Prices obtained from independent third party pricing services, broker-dealers or market makers to value the Fund’s securities and other assets and liabilities are based on information available at the time the Fund values its assets and liabilities. In the event that a pricing service quotation is revised or updated subsequent to the day on which the Fund valued such security, the revised pricing service quotation generally will be applied prospectively. Such determination shall be made considering pertinent facts and circumstances surrounding such revision.
 
In the event that application of the methods of valuation discussed above result in a price for a security which is deemed not to be representative of the fair market value of such security, the security will be valued by, under the direction of or in accordance with a method specified by the Board as reflecting fair value. All other assets and liabilities (including securities for which market quotations are not readily available) held by the Fund (including restricted securities) are valued at fair value as determined in good faith by the Fund’s


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DEL REY MONARCH FUND
 
NOTES TO FINANCIAL STATEMENTS — (Continued)
 
Board or by the Manager (its delegate). Any assets and liabilities which are denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange.
 
Certain of the securities acquired by the Fund may be traded on foreign exchanges or over-the-counter markets on days on which the Fund’s net asset value is not calculated. In such cases, the net asset value of the Fund’s shares may be significantly affected on days when investors can neither purchase nor redeem shares of the Fund.
 
Fair Value
 
When market quotations are not readily available or are believed by the Manager to be unreliable, the Fund’s investments are valued at fair value (“Fair Value Assets”). Fair Value Assets are valued by the Manager in accordance with procedures approved by the Board.
 
Fair value represents a good faith approximation of the value of an asset or liability. The fair value of one or more assets or liabilities may not, in retrospect, be the price at which those assets or liabilities could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
 
(b)   Organization and Offering Costs
 
Organization costs consist of costs, consisting of professional fees, incurred to establish the Fund and enable it legally to do business. The Fund expenses organization costs as incurred. These expenses were advanced by del Rey Global Investors, LLC (the “Manager”), and the Manager has agreed to reimburse the Fund for these expenses, subject to potential recovery (see Note 3).
 
Offering costs are accounted for as deferred costs until operations begin. Offering costs include legal fees regarding the preparation of the initial registration statement. Offering costs will be amortized to expense over twelve months on a straight-line basis.
 
(c)   Federal Income Taxes
 
No provision for federal income taxes has been made since the Fund’s policy is to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute, each year, substantially all of its taxable income and capital gains to its shareholders.
 
The Fund may periodically make reclassifications among certain capital accounts to reflect differences between financial reporting and federal income tax basis distributions. The reclassifications are reported in order to reflect the tax treatment for certain permanent differences that exist between income tax regulations and GAAP.
 
(d)   Use of Estimates
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
 
(e)   Distribution to Shareholders
 
The Fund will distribute net investment income, if any, and net realized capital gain, if any, at least annually. Income dividends and capital gain distributions are determined in accordance with federal income


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DEL REY MONARCH FUND
 
NOTES TO FINANCIAL STATEMENTS — (Continued)
 
tax regulations. The Fund may also pay a special distribution at the end of the calendar year to comply with federal tax requirements.
 
3.   Manager
 
The Fund has entered into an investment advisory agreement (the “Management Agreement”) with the Manager, under which the Manager receives for its services to the Fund a fee of 0.90% of the Fund’s average net assets.
 
The Manager has agreed to cap net expenses (excluding (i) interest, taxes, brokerage fees and commissions, and extraordinary charges, including, but not limited to, litigation costs; (ii) expenses incurred indirectly by the Fund as a result of investments in other investment companies and pooled investment vehicles; and (iii) other expenses attributable to, and incurred as a result of, the Fund’s investments) to 1.40% for Class A shares and 1.15% for Institutional shares until March 1, 2012. To achieve this expense cap, the Manager has agreed to waive and/or reimburse fees or expenses if the Fund’s operating expenses exceed a certain limit. The agreement may be terminated upon 90 days’ notice by a majority of the non-interested trustees of the Fund or by a vote of a majority of the outstanding voting securities of the Fund.
 
With respect to this contractual agreement, if during the Fund’s fiscal year the operating expenses of a share class, that at any time during the prior two fiscal years received a waiver or reimbursement from the Manager, are less than the expense limit for that share class, the share class is required to repay the Manager up to the amount of fees waived or expenses reimbursed during those prior two fiscal years under the agreement, provided that: (1) the Fund has more than $50 million in assets and (2) the Manager or an affiliate serves as the Fund’s manager.
 
As of January 24, 2011, waived amounts subject to future recoupment were $200,000.
 
4.   Other Fees and Transactions with Related Parties
 
Administrative, Transfer agent, and Custodial services — The Fund has administrative, transfer agent and custodial services agreements with The Northern Trust Company (“Northern Trust”). Under these agreements, the Fund compensates Northern Trust for services including processing the accounting transactions, shareholder recordkeeping and transaction processing, and safeguarding of Fund assets and processing of cash receipts.
 
Affiliated officers and trustees — Officers and certain trustees of the Fund are or may be considered to be affiliated with the Fund. No affiliated officers or trustees will receive any compensation directly from the Fund.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Shareholders and Board of Trustees of
del Rey Global Investors Funds — del Rey Monarch Fund:
 
We have audited the accompanying statement of assets and liabilities of del Rey Global Investors Funds — del Rey Monarch Fund (the “Fund”) as of January 24, 2011 and the related statement of operations for the period from June 18, 2010 (formation date) to January 24, 2011. These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the statement of assets and liabilities is free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of assets and liabilities, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of del Rey Global Investors Funds — del Rey Monarch Fund as of January 24, 2011 and the results of its operations for the period from June 18, 2010 (formation date) to January 24, 2011, in conformity with accounting principles generally accepted in the United States of America.
 
/s/  Deloitte & Touche LLP
 
Los Angeles, California
January 28, 2011


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PART C. OTHER INFORMATION
Item 28. Exhibits.
             
Exhibit    
Number   Description
(a)   (1)    
Certificate of Trust of del Ray Global Investors Funds (the “Registrant”), dated June 18, 2010, is incorporated herein by reference to Exhibit (a)(1) of Registrant’s filing of its Registration Statement on Form N-1A on July 6, 2010.
    (2)    
Amended and Restated Trust Agreement of the Registrant is incorporated herein by reference to Exhibit (a)(2) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(b)        
By-Laws of the Registrant is incorporated herein by reference to Exhibit (b) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(c)        
Article V and Sections 4.1, 6.2 and 7.6 of the Amended and Restated Trust Agreement of the Registrant incorporated herein by reference to Exhibit (a)(2), and Article II of the Bylaws incorporated herein by reference to Exhibit (b), of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(d)   (1)    
Investment Management Agreement between the Registrant and del Rey Global Investors, LLC (the “Manager”) dated January 14, 2011 is incorporated herein by reference to Exhibit (d)(1) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (2)    
Fee Waiver/Expense Reimbursement Agreement between the Registrant and the Manager dated January 24, 2011 is incorporated herein by reference to Exhibit (d)(2) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(e)   (1)    
Form of Distribution Agreement between Registrant and Foreside Fund Services, LLC (the “Distributor”) is incorporated herein by reference to Exhibit (e)(1) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (2)    
Form of Selling Group Member Agreement.(a)
    (3)    
Form of Dealer Agreement.(a)
(f)        
None.
(g)        
Custody Agreement between the Registrant and The Northern Trust Company dated January 24, 2011 is incorporated herein by reference to Exhibit (g) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(h)   (1)    
Transfer Agency and Service Agreement between the Registrant and The Northern Trust Company dated January 24, 2011 is incorporated herein by reference to Exhibit (h)(1) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (2)    
Fund Administration and Accounting Agreement between the Registrant and The Northern Trust Company dated January 24, 2011 is incorporated herein by reference to Exhibit (h)(2) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (3)    
Distribution Services Agreement between the Manager and the Distributor dated January 27, 2011.(a)
    (4)    
Fund CCO Agreement between the Registrant and Foreside Compliance Services, LLC dated January 27, 2011.(a)
(i)        
Opinion of Morris, Nichols, Arsht & Tunnell LLP, special Delaware counsel for the Registrant.(a)
(j)        
Consent of Deloitte & Touche LLP, independent registered public accounting firm for the Registrant.(a)
(k)        
None.
(l)        
Initial Share Purchase Agreement between the Registrant and the Manager dated January 24, 2011 is incorporated herein by reference to Exhibit (l) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(m)        
Form of Distribution and Service Plan is incorporated herein by reference to Exhibit (m) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(n)        
Form of Plan pursuant to Rule 18f-3 is incorporated herein by reference to Exhibit (n) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(p)   (1)    
Code of Ethics of the Registrant is incorporated herein by reference to Exhibit (p)(1) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (2)    
Code of Ethics of the Manager is incorporated herein by reference to Exhibit (p)(2) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
(q)   (1)    
Power of Attorney for David G. Chrencik is incorporated herein by reference to Exhibit (q)(1) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (2)    
Power of Attorney for Roger Hartley is incorporated herein by reference to Exhibit (q)(2) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
    (3)    
Power of Attorney for Guy Talarico is incorporated herein by reference to Exhibit (q)(3) of Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement filed on Form N-1A on January 26, 2011.
 
(a)   Filed herewith.

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Item 29. Persons Controlled by or Under Common Control with Registrant.
     Immediately prior to this offering, del Rey Global Investors, LLC, a Delaware limited liability company, will own shares of the Registrant, representing 100% of the common stock outstanding. Following the completion of this offering, del Rey Global Investors, LLC’s share ownership is expected to represent less than 1% of the common stock outstanding.
Item 30. Indemnification.
     Reference is made to Article VII of the Registrant’s Amended and Restated Trust Agreement (the “Trust Agreement”) and Section 3817 of the Delaware Statutory Trust Act (Title 12 of the Delaware Code). Pursuant to its organizational documents and the applicable provisions of certain agreements, the trustees, officers, employees and agents of the Trust will be indemnified to the maximum extent permitted by Delaware law, and the Investment Company Act of 1940, as amended (the “Investment Company Act”).
     Section 7.2 of the Trust Agreement provides:
     Limitation of Liability. A Trustee shall be liable to the Trust and to any Shareholder solely for his or her own willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of the office of Trustee, and shall not be liable for errors of judgment or mistakes of fact or law. The Trustees shall not be responsible or liable in any event for any neglect or wrongdoing of any officer, agent, employee, Manager, advisor, sub-adviser or Principal Underwriter of the Trust.
     All Persons extending credit to, contracting with or having any claim against the Trust or the Trustees shall look only to the assets of the Series that such Person extended credit to, contracted with or has a claim against, and neither the Trustees nor the Shareholders, nor any of the Trust’s officers, employees or agents, whether past, present or future, shall be personally liable therefor.
     Every note, bond, contract, instrument, certificate or undertaking and every other act or thing whatsoever executed or done by or on behalf of the Trust or the Trustees by any of them in connection with the Trust shall conclusively be deemed to have been executed or done only in or with respect to his or their capacity as Trustee or Trustees, and such Trustee or Trustees shall not be personally liable thereon. At the Trustees’ discretion, any note, bond, contract, instrument, certificate or undertaking made or issued by the Trustees or by any officer or officers may give notice that the Certificate of Trust is on file in the Office of the Secretary of State of the State of Delaware and that a limitation on liability of Series exists and such note, bond, contract, instrument, certificate or undertaking may, if the Trustees so determine, recite that the same was executed or made on behalf of the Trust by a Trustee or Trustees in such capacity and not individually or by an officer or officers in such capacity and not individually and that the obligations of such instrument are not binding upon any of them or the Shareholders individually but are binding only on the assets and property of the Trust or a Series thereof, and may contain such further recital as such Person or Persons may deem appropriate. The omission of any such notice or recital shall in no way operate to bind any Trustees, officers or Shareholders individually.
     Section 7.3 of the Trust Agreement further provides:
     Trustee’s Good Faith Action, Expert Advice, No Bond or Surety. The exercise in good faith by the Trustees of their powers and discretions hereunder shall be binding upon everyone interested. The Trustees may take advice of counsel or other experts with respect to the meaning and operation of this Agreement and shall be under no liability for any act or omission in accordance with such advice; provided the Trustees shall be under no liability for failing to

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follow such advice. The Trustees shall not be required to give any bond as such nor any surety if a bond is obtained.
     Section 7.4 of the Trust Agreement further provides:
     Insurance. The Trustees shall be entitled and empowered to the fullest extent permitted by law to purchase with Trust assets insurance for liability and for all expenses reasonably incurred or paid or expected to be paid by a Trustee, officer, employee or agent of the Trust in connection with any claim, action, suit or proceeding in which he or she becomes involved by virtue of his or her capacity or former capacity with the Trust.
     Section 7.5 of the Trust Agreement further provides:
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 or employee of the Trust or is or was serving at the request of the Trust as a trustee, director, officer, employee or agent of another organization in which the Trust has any interest as a shareholder, creditor or otherwise (“Covered Person”) shall be indemnified by the Trust and each Series to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in the settlement thereof.
     (ii) as used herein, the words “claim,” “action,” “suit” or “proceeding” shall apply to all claims, actions, suits or proceedings (civil, criminal, investigative 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 whatsoever.
(b) To the extent required under the 1940 Act, but only to such extent, 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 or her office or (B) not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Trust; or
     (ii) in the event of a settlement, 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 or her office: (A) by the court or other body approving the settlement; (B) 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 (C) 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 in connection with the preparation and presentation of a defense to any claim, action, suit or proceeding of the character described in subsection (a) of this Section 7.5 shall be paid by the Trust and each

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Series from time to time prior to final disposition thereof upon receipt of an undertaking by or on behalf of such Covered Person that such amount will be paid over by him or her to the Trust or applicable Series if it is ultimately determined that he or she is not entitled to indemnification under this Section; provided, however, that any such advancement will be made in accordance with any conditions required by the Commission. The advancement of any expenses pursuant to this Section 7.5(d) shall under no circumstances be considered a “loan” under the Sarbanes-Oxley Act of 2002, as amended from time to time, or for any other reason.
(e) Any repeal or modification of this Article VII or adoption or modification of any other provision of this Agreement 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 or right to advancement of expenses available to any Covered Person with respect to any act or omission which occurred prior to such repeal, modification or adoption.
(f) Notwithstanding any other provision in this Agreement to the contrary, any liability and/or expense against which any Covered Person is indemnified under this Section 7.5 and any advancement of expenses that any Covered Person is entitled to be paid under Section 7.5(d) shall be deemed to be joint and several obligations of the Trust and each Series, and the assets of the Trust and each Series shall be subject to the claims of any Covered Person therefor under this Article VII; provided that any such liability, expense or obligation may be allocated and charged by the Trustees between or among the Trust and/or any one or more Series (and Classes thereof) in such manner as the Trustees in their sole discretion deem fair and equitable.
     In Section 7 of the Distribution Agreement relating to the securities being offered hereby, the Registrant agrees to indemnify the Distributor and each person, if any, who controls the Distributor within the meaning of the Securities Act of 1933, as amended, (the “Securities Act”) against certain types of civil liabilities arising in connection with the Registration Statement or the Prospectus and Statement of Additional Information.
     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to Trustees, officers and controlling persons of the Registrant and the principal underwriter pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Trustee, officer or controlling person of the Registrant and the principal underwriter in connection with the successful defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person or the principal underwriter in connection with the shares being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
Item 31. Business and Other Connections of the Manager.
     Information as to the members and officers of del Rey Global Investors, LLC, is included in its Form ADV as filed with the SEC (File No. 801-71069), and is incorporated herein by reference.

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Item 32. Principal Underwriters.
(a) Foreside Fund Services, LLC (“the Distributor”) acts as principal underwriter for the del Rey Monarch Fund. The Distributor also serves as principal underwriter for the following investment companies registered under the Investment Company Act of 1940, as amended:
1)   American Beacon Funds
 
2)   American Beacon Mileage Funds
 
3)   American Beacon Select Funds
 
4)   Henderson Global Funds
 
5)   Bridgeway Funds, Inc.
 
6)   Century Capital Management Trust
 
7)   Sound Shore Fund, Inc.
 
8)   Forum Funds
 
9)   Central Park Group Multi-Event Fund
 
10)   PMC Funds, Series of the Trust for Professional Managers
 
11)   Nomura Partners Funds, Inc.
 
12)   Wintergreen Fund, Inc.
 
13)   RevenueShares ETF Trust
 
14)   Direxion Shares ETF Trust
 
15)   Javelin Exchange-Traded Trust
 
16)   AdvisorShares Trust
 
17)   Liberty Street Horizon Fund, Series of the Investment Managers Series Trust
 
18)   DundeeWealth Funds
 
19)   U.S. One Trust
 
20)   Turner Funds
 
21)   Center Coast MLP Focus Fund, series of the Investment Managers Series Trust
(b) The following are officers and directors of Foreside Fund Services, LLC, the Registrant’s underwriter. Their main business address is Three Canal Plaza, Suite 100, Portland, Maine 04101.
             
        Position with   Position with
Name   Address   Underwriter   Registrant
Mark S. Redman
  690 Taylor Road, Suite 150, Gahanna, OH 43230   President and Manager   None
 
           
Richard J. Berthy
  Three Canal Plaza, Suite 100, Portland, ME 04101   Vice President, Treasurer and Manager   None
 
           
Jennifer E. Hoopes
  Three Canal Plaza, Suite 100, Portland, ME 04101   Secretary   None
 
           
Nanette K. Chern
  Three Canal Plaza, Suite 100, Portland, ME 04101   Vice President and Chief Compliance Officer   None
 
           
Mark A. Fairbanks
  Three Canal Plaza, Suite 100, Portland, ME 04101   Vice President and Director of Compliance   None
(c) Not applicable

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Item 33. Location of Accounts and Records.
     All accounts, books and other documents required to be maintained by Section 31(a) of the Investment Company Act and the rules thereunder are maintained at the offices of:
(a) Registrant, 6701 Center Drive West, Suite 655, Los Angeles, CA 90045.
(b) Distributor, 690 Taylor Road, Suite 150, Gahanna, OH 43230 and Three Canal Plaza, Suite 100, Portland, ME 04101.
(c) del Rey Global Investors, LLC, 6701 Center Drive West, Suite 655, Los Angeles, CA 90045.
(d) Administrator, The Northern Trust Company, 50 South LaSalle Street, Chicago, IL 60675.
Item 34. Management Services.
     Other than as set out under the caption “Fund Management” in the Prospectus constituting Part A of the Registration Statement and under caption “Investment Manager” in the Statement of Additional Information constituting Part B of the Registration Statement for the Registrant, the Registrant is not a party to any management-related service contract.
Item 35. Undertakings.
Not applicable.

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SIGNATURES
     Pursuant to the requirements of the Investment Company Act of 1940, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, and the State of California, on the 28th day of January, 2011.
         
    del Rey Monarch Fund
 
 
  By:   /s/ Paul J. Hechmer   
         Paul J. Hechmer   
         Chief Executive Officer   
 
     Pursuant to the requirements of the Securities Act, this registration statement has been signed below by the following persons in the capacities and on the date indicated:
         
SIGNATURE   TITLE   DATE
/s/ Paul J. Hechmer
 
Paul J. Hechmer
  Chief Executive Officer 
(principal executive officer)
  January 28, 2011
 
       
/s/ Gerald W. Wheeler
 
Gerald W. Wheeler
  Chief Financial Officer, Chairman 
(principal financial officer)
  January 28, 2011
 
       
/s/ David G. Chrencik
 
David G. Chrencik
  Trustee    January 28, 2011
 
       
/s/ Roger Hartley
 
Roger Hartley
  Trustee    January 28, 2011
 
       
/s/ Guy Talarico
 
Guy Talarico
  Trustee    January 28, 2011


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Exhibit   Exhibit Name
(e)(2)  
Form of Selling Group Member Agreement
(e)(3)  
Form of Dealer Agreement
(h)(3)  
Distribution Services Agreement between del Rey Global Investors, LLC and Foreside Fund Services, LLC dated January 27, 2011
(h)(4)  
Fund CCO Agreement between del Rey Global Investors Funds and Foreside Compliance Services, LLC dated January 27, 2011
(i)  
Opinion of Morris, Nichols, Arsht & Tunnell LLP
(j)  
Consent of Deloitte & Touche LLP

 

EX-99.E.2 2 x89252exv99wew2.htm EX-99.E.2 exv99wew2
SELLING GROUP MEMBER AGREEMENT
         
Re:
  del Rey Monarch Fund, a series of   Date: ____________________
 
  del Rey Global Investors Funds    
Ladies and Gentlemen:
As the distributor of the shares (“Shares”) of each investment company series (each, a “Fund”) of the trust referenced above and covered hereunder (collectively, “Trust”), which may be amended by us from time to time, Foreside Fund Services, LLC (“Distributor”) hereby invites you to participate in the selling group on the following terms and conditions. In this letter, the terms “we,” “us,” and similar words refer to the Distributor, and the terms “you,” “your,” and similar words refer to the intermediary executing this agreement, including its associated persons.
1. Selling Group Member. You hereby represent that you are properly qualified under all applicable federal, state and local laws to engage in the business and transactions described in this agreement. In addition, you agree to comply with the rules of the Financial Industry Regulatory Authority (“FINRA”) as if they were applicable to you in connection with your activities under this agreement. You agree that it is your responsibility to determine the suitability of any Fund Shares as investments for your customers, and that we have no responsibility for such determination. You further agree to maintain all records required by Applicable Laws (as defined below) or that are otherwise reasonably requested by us relating to your transactions in Fund Shares. Further, you represent that no consent, approval or other authorization of or by, or filing or registration with, any court, administrative or regulatory agency or other governmental authority is required to be obtained by you in connection with the your performance of the transactions contemplated by this agreement. You agree that you will at all times comply with (i) the provisions of this Selling Group Member Agreement related to compliance with all applicable rules and regulations; and (ii) the terms of each registration statement and prospectus for the Funds.
2. Qualification of Shares. The Fund will make available to you a list of the states or other jurisdictions in which Fund Shares are registered for sale or are otherwise qualified for sale, which may be revised by the Fund from time to time. You will make offers of Shares to your customers only in those states, and you will ensure that you (including your associated persons) are appropriately licensed and qualified to offer and sell Shares in any state or other jurisdiction that requires such licensing or qualification in connection with your activities.
3. Orders. All orders you submit for transactions in Fund Shares shall reflect orders received from your customers or shall be for your account for your own bona fide investment, and you will date and time-stamp your customer orders and forward them promptly each day and in any event prior to the time required by the applicable Fund prospectus (the “Prospectus,” which for purposes of this agreement includes the Statement of Additional Information incorporated therein). As agent for your customers, you shall not withhold placing customers’ orders for any Shares so as to profit yourself or your customer as a result of such withholding. You are hereby authorized to: (i) place your orders directly with the relevant Fund for the purchase of Shares and (ii) tender Shares directly to the Fund for redemption, in each case subject to the terms and conditions set forth in the Prospectus and any operating procedures and policies established by us or the Fund (directly or through its Transfer Agent) from time to time. All purchase orders you submit are subject to acceptance or rejection, and we reserve the right to suspend or limit the sale of Shares. You are not authorized to make any representations concerning Shares of any Fund except such representations as are contained in the Prospectus and in such supplemental written information that

 


 

the Fund or the Distributor (acting on behalf of the Fund) may provide to you with respect to a Fund. All orders that are accepted for the purchase of Shares shall be executed at the next determined public offering price per share (i.e., the net asset value per share plus the applicable sales load, if any) and all orders for the redemption of Shares shall be executed at the next determined net asset value per share and subject to any applicable redemption fee, in each case as described in the Prospectus.
4. Compliance with Applicable Laws; Distribution of Prospectus and Reports; Confirmations. In connection with its respective activities hereunder, each party agrees to abide by the Conduct Rules of FINRA and all other rules of self-regulatory organizations of which the relevant party is a member, as well as all laws, rules and regulations, including federal and state securities laws, that are applicable to the relevant party (and its associated persons) from time to time in connection with its activities hereunder (“Applicable Laws”). You are authorized to distribute to your customers the current Prospectus, as well as any supplemental sales material received from the Fund or the Distributor (acting on behalf of the Fund) (on the terms and for the period specified by us or stated in such material). You are not authorized to distribute, furnish or display any other sales or promotional material relating to a Fund without our prior written approval, but you may identify the Funds in a listing of mutual funds available through you to your customers. Unless otherwise mutually agreed in writing, you shall deliver or cause to be delivered to each customer who purchases shares of any Funds from or through you, copies of all annual and interim reports, proxy solicitation materials, and any other information and materials relating to such Funds and prepared by or on behalf of the Funds or us. If required by Rule 10b-10 under the Securities Exchange Act or other Applicable Laws, you shall send or cause to be sent confirmations or other reports to your customers containing such information as may be required by Applicable Laws.
5. Sales Charges and Concessions. [not applicable].
6. Transactions in Fund Shares. With respect to all orders you place for the purchase of Fund Shares, unless otherwise agreed, settlement shall be made with the Fund within three (3) business days after acceptance of the order. If payment is not so received or made, the transaction may be cancelled. In this event or in the event that you cancel the trade for any reason, you agree to be responsible for any loss resulting to the Funds or to us from your failure to make payments as aforesaid. You shall not be entitled to any gains generated thereby. You also assume responsibility for any loss to a Fund caused by any order placed by you on an “as-of” basis subsequent to the trade date for the order, and will immediately pay such loss to the Fund upon notification or demand. Such orders shall be acceptable only as permitted by the Fund and shall be subject to the Fund’s policies pertaining thereto, which may include receipt of an executed Letter of Indemnity in a form acceptable to the Fund and /or to us prior to the Fund’s acceptance of any such order.
7. Accuracy of Orders; Customer Signatures. You shall be responsible for the accuracy, timeliness and completeness of any orders transmitted by you on behalf of your customers by any means, including wire or telephone. In addition, you agree to guarantee the signatures of your customers when such guarantee is required by the Fund and you agree to indemnify and hold harmless all persons, including us and the Funds’ transfer agent, from and against any and all loss, cost, damage or expense suffered or incurred in reliance upon such signature guarantee.
8. Indemnification. You agree to indemnify and hold harmless us and our respective officers, directors, agents and employees, and each Fund, and their respective officers, directors, agents and employees, and control persons (as defined in section 15 of the Securities Act of 1933 (the “Securities Act”) or section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from and against any claims, liabilities, expenses (including reasonable attorneys’ fees) and losses resulting from (i)

2


 

any failure by you to comply with Applicable Laws in connection with activities performed under this agreement; (ii) any unauthorized representation made by you concerning an investment in Fund Shares; or (iii) any action taken or omitted to be taken by you in breach of the terms of this Agreement.
     We agree to indemnify and hold harmless you and your officers, directors, agents and employees from and against any claims, liabilities, expenses (including reasonable attorneys fees) and losses resulting from (i) any failure by us to comply with Applicable Laws in connection with our activities as Distributor under this agreement, or (ii) any untrue statement of a material fact set forth in a Fund’s Prospectus or supplemental sales material provided to you by us (and used by you on the terms and for the period specified by us or stated in such material), or omission to state a material fact required to be stated therein to make the statements therein not misleading.
9. Multi-Class Distribution Arrangements. You understand and acknowledge that the Funds may offer Shares in multiple classes, and you represent and warrant that you have established compliance procedures designed to ensure that your customers are made aware of the terms of each available class of Fund Shares, to ensure that each customer is offered only Shares that are suitable investments for him or her, and to ensure proper supervision of your representatives in recommending and offering the Shares of multiple classes to your customers.
10. Anti-Money Laundering Compliance. Each party to this agreement acknowledges that it is a financial institution subject to the USA PATRIOT Act of 2001 and the Bank Secrecy Act (collectively, the “AML Acts”), which require, among other things, that financial institutions adopt compliance programs to guard against money laundering. Each party represents and warrants that it is in compliance and will continue to comply with the AML Acts and applicable rules thereunder (“AML Laws”), including NASD Conduct Rule 3011, in all relevant respects. You agree to cooperate with us to satisfy AML due diligence policies of the Fund and Distributor, which may include annual compliance certifications and periodic due diligence reviews and/or other requests deemed necessary or appropriate by us or the Fund to ensure compliance with AML Laws. You also agree to provide for screening its own new and existing customers against the Office of Foreign Asset Control (“OFAC”) list and any other government list that is or becomes required under the AML Acts.
11. Privacy. The parties agree that any Non-Public Personal Information, as the term is defined in Regulation S-P (“Reg S-P”) of the Securities and Exchange Commission, that may be disclosed hereunder is disclosed for the specific purpose of permitting the other party to perform the services set forth in this agreement. Each party agrees that, with respect to such information, it will comply with Reg S-P and that it will not disclose any Non-Public Personal Information received in connection with this agreement to any other party, except to the extent required to carry out the services set forth in this agreement or as otherwise permitted by law.
12. Service Fees. Subject to and in accordance with the terms of each Prospectus and the Distribution and Service Plan, if any, adopted by resolution of the Board pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the “1940 Act”), we may pay financial institutions with which we have entered into an agreement in substantially the form annexed hereto as Appendix A or such other form as may be approved from time to time by the Funds’ Board (the “Fee Agreement”) such fees as may be determined in accordance with such Fee Agreement, for shareholder or administrative services, as described therein. You hereby represent that you are permitted under applicable laws to receive all payments for shareholder services contemplated herein.

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13. Order Processing. You represent that you have reviewed your policies and procedures to ensure that they are adequate with respect to preventing violations of law and Prospectus requirements related to timely order-taking and market timing activity, in that such policies and procedures (i) prevent the submission of any order received after the deadline for submission of orders in each day that are eligible for pricing at that day’s net asset value per share (“NAV”); and (ii) prevent the purchase of Fund Shares by an individual or entity whose stated objectives are not consistent with the stated policies of a Fund in protecting the best interests of longer-term investors, particularly where such investor may be seeking market timing or arbitrage opportunities through such purchase. You represent that you will be responsible for the collection and payment to the Fund of any Redemption Fees based upon the terms outlined in the Fund’s Prospectus
14. Amendments. This agreement may be amended from time to time by the following procedure. We will mail a copy of the amendment to you at your address shown below. If you do not object to the amendment within fifteen (15) days after its receipt, the amendment will become a part of this agreement. Your objection must be in writing and be received by us within such fifteen (15) days. All amendments shall be in writing and except as provided above shall be executed by both parties.
15. Termination. This agreement shall inure to the benefit of the successors and assigns of either party hereto, provided, however, that you may not assign this agreement without our prior written consent. This agreement may be terminated by either party, without penalty, upon ten days’ prior written notice to the other party. Any unfulfilled obligations hereunder, and all obligations of indemnification, shall survive the termination of this agreement.
16. Notices. All notices and communications to us shall be sent to us at Three Canal Plaza, Suite 100, Portland, ME 04101, Attn: Legal/Compliance, or at such other address as we may designate in writing. All notices and other communication to you shall be sent you at the address set forth below or at such other address as you may designate in writing. All notices required or permitted to be given pursuant to this agreement shall be given in writing and delivered by personal delivery, by postage prepaid mail, electronic mail, or by facsimile or similar means of same-day delivery, with a confirming copy by mail.
17. Authorization. Each party represents to the other that all requisite corporate proceedings have been undertaken to authorize it to enter into and perform under this agreement as contemplated herein, and that the individual that has signed this agreement below on its behalf is a duly elected officer that has been empowered to act for and on behalf of such party with respect to the execution of this agreement.
18. Directed Brokerage Prohibitions. The Distributor and Selling Group Member agree that neither of them shall direct Fund portfolio securities transactions or related remuneration to satisfy any compensation obligations under this Agreement. The Distributor also agrees that it will not directly or indirectly compensate the Selling Group Member executing this agreement in contravention of Rule 12b-1(h) of the 1940 Act.
19. Shareholder Information. The Selling Group Member executing this agreement agrees to comply with the requirements set forth on Appendix B attached hereto regarding the provision of shareholder information pursuant to Rule 22c-2 of the 1940 Act.
20. Third Party Beneficiaries. The Distributor and Selling Group Member expressly agree that in addition to the signatories to this agreement, each Fund is a third party beneficiary to this agreement with respect to matters relating to it or its shares, with legal and equitable rights to seek enforcement of

4


 

those provisions to which it is the intended beneficiary including but not limited to the indemnity provided by Section 8.
21. Miscellaneous. This agreement supersedes any other agreement between the parties with respect to the offer and sale of Fund Shares and other matters covered herein. The invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. This agreement may be executed in any number of counterparts, which together shall constitute one instrument. This agreement shall be governed by and construed in accordance with the laws of the state of Delaware without regard to conflict of laws principles, and shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
*          *          *          *

5


 

If the foregoing corresponds with your understanding of our agreement, please sign this document and the accompanying copies thereof in the appropriate space below and return the same to us, whereupon this agreement shall be binding upon each of us.
Foreside Fund Services, LLC
          By:  
 
 
          Insert Name:  
 
 
          Title:  
 
 
Agreed to and accepted:
______________________   [Insert Intermediary Name]
By:  
 
 
Print Name:  
 
 
Title:  
 
 
Address of Intermediary:
 
 
Operations Contact:
Name:  
 
 
Phone:  
 
 
Email:  
 
 

6


 

Appendix A
FORESIDE FUND SERVICES, LLC
SERVICE FEE AGREEMENT
         
Re:
  del Rey Monarch Fund, a series of   Date: ____________________
 
  del Rey Global Investors Funds    
Ladies and Gentlemen:
This Fee Agreement (“Agreement”) confirms our understanding and agreement with respect to Rule 12b-1 payments to be made to you in accordance with the Selling Group Member Agreement between you and us (the “Selling Group Member Agreement”), which entitles you to serve as a selling group member of certain Funds for which we serve as Distributor. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Selling Group Member Agreement.
1. From time to time during the term of this Agreement, we may make payments to you pursuant to one or more distribution and service plans (the “Plans”) adopted by certain of the Funds pursuant to Rule 12b-1 of the Investment Company Act of 1940 (the “1940 Act”). You agree to furnish sales and marketing services and/or shareholder services to your customers who invest in and own Fund Shares, including, but not limited to, answering routine inquiries regarding the Funds, processing shareholder transactions, and providing any other shareholder services not otherwise provided by a Fund’s transfer agent. With respect to such payments to you, we shall have only the obligation to make payments to you after, for as long as, and to the extent that, we receive from the Fund an amount equivalent to the amount payable to you. The Fund reserves the right, without prior notice, to suspend or eliminate the payment of such Rule 12b-1 Plan payments or other compensation by amendment, sticker or supplement to the then-current Prospectus of the Fund or other written notice to you.
2. Any such fee payments shall reflect the amounts described in the Fund’s Prospectus. Payments will be based on the average daily net assets of Fund Shares which are owned by those customers of yours whose records, as maintained by the Funds or the transfer agent, designate your firm as the customer’s intermediary of record. No such fee payments will be payable to you with respect to shares purchased by or through you and redeemed by the Funds within seven business days after the date of confirmation of such purchase. You represent that you are eligible to receive any such payments made to you under the Plans.
3. You agree that all activities conducted under this Agreement will be conducted in accordance with the Plans, as well as all applicable state and federal laws, including the 1940 Act, the Exchange Act, the Securities Act and any applicable rules of FINRA.
4. Upon request, on a quarterly basis, you shall furnish us with a written report describing the amounts payable to you pursuant to this Agreement and the purpose for which such amounts were expended. We shall provide quarterly reports to the Funds’ Board of amounts expended pursuant to the Plans and the purposes for which such expenditures were made. You shall furnish us with such other information as shall reasonably be requested by us in connection with our reports to the Board with respect to the fees paid to you pursuant to this Agreement.

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5. This Agreement shall continue in effect until terminated in the manner prescribed below or as provided in the Plans or in Rule 12b-1. This Agreement may be terminated, with respect to one or more Funds, without penalty, by either of us, upon ten days’ prior written notice to the other party. In addition, this Agreement will be terminated with respect to any Fund upon a termination of the relevant Plan or the Selling Group Member Agreement, if a Fund closes to new investments, or if our Distribution Agreement with the Funds terminates.
6. This Agreement may be amended by us from time to time by the following procedure. We will mail a copy of the amendment to you at your address shown below. If you do not object to the amendment within fifteen (15) days after its receipt, the amendment will become a part of this Agreement. Your objection must be in writing and be received by us within such fifteen days.
7. This Agreement shall become effective as of the date when it is executed and dated by us below. This Agreement and all the rights and obligations of the parties hereunder shall be governed by and construed under the laws of the state of Delaware, without regard to conflict of laws principles.
8. All notices and other communications shall be given as provided in the Selling Group Member Agreement.
If the foregoing is acceptable to you, please sign this Agreement in the space provided below and return the same to us.

Foreside Fund Services, LLC
By:  
 
Insert Name:  
 
Title:  
 
Agreed to and Accepted
Name and Address of Intermediary:
 
 
 
By:  
 
Insert Name:  
 
Title:  
 


8


 

APPENDIX B
Information Regarding the Provision of Shareholder Information Pursuant to Rule 22c-2
(a). Agreement to Provide Information. Intermediary agrees to provide the Fund, upon request, the taxpayer identification number (“TIN”), if known, (or in the case of a non U.S. shareholder, if the TIN is unavailable, the International Taxpayer Identification Number or other government issued identifier) of any or all Shareholder(s) who have purchased, redeemed, transferred, or exchanged fund shares held through an account with Intermediary and the amount, date, name or other identifier of any investment professional(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account maintained by the Intermediary during the period covered by the request.
i. Period Covered by Request. Requests must set forth a specific period, not to exceed 90 days from the date of the request, for which transaction information is sought. The Fund may request transaction information older than 90 days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.
ii. Form and Timing of Response. Intermediary agrees to transmit the requested information that is on its books and records to the Fund or its designee promptly, but in any event not later than five business days, after receipt of a request. If the requested information is not on the Intermediary’s books and records, Intermediary agrees to use best efforts to: (x) provide or arrange to provide to the Fund the requested information from shareholders who hold an account with an indirect intermediary, including a determination on whether any specific person about whom Intermediary has received information, is itself a financial intermediary; or (y) if directed by the Fund, restrict or prohibit further purchases or exchanges of Fund Shares by a shareholder who has been identified by the Fund as having engaged in transactions of Fund shares (directly or indirectly) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding securities issued by the Fund. In such instance, Intermediary agrees to inform the Fund whether it plans to perform (x) or (y). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, an “indirect intermediary” has the same meaning as in SEC Rule 22c-2 under the Investment Company Act.
iii. Limitations on Use of Information. The Fund agrees not to use the information received for marketing or any other similar purpose without the prior written consent of the Intermediary.
(b) Agreement to Restrict Trading. Intermediary agrees to execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of Fund shares by a Shareholder who has been identified by the Fund as having engaged in transactions of the Fund’s Shares (directly or indirectly through the Intermediary’s account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding Shares issued by the Fund.
i. Form of Instructions. Instructions must include the TIN, if known, and the specific

9


 

restriction(s) to be executed. If the TIN is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which the instruction relates.
ii. Timing of Response. Intermediary agrees to execute instructions as soon as reasonably practicable, but not later than five business days after receipt of the instructions by the Intermediary.
iii. Confirmation by Intermediary. Intermediary must provide written confirmation to the Fund that instructions have been executed. Intermediary agrees to provide confirmation as soon as reasonably practicable, but not later than ten business days after the instructions have been executed.
(c)   Definitions. For purposes of this Appendix B:
i. The term “Fund” includes the fund’s investment adviser, principal underwriter and transfer agent. The term does not include any “excepted funds” as defined in SEC Rule 22c-2(b) under the Investment Company Act of 1940.1
ii. The term “Shares” means the interests of Shareholders corresponding to the redeemable securities of record issued by the Fund under the Investment Company Act of 1940 that are held by the Intermediary.
iii. The term “Shareholder” means the beneficial owner of Shares, whether the Shares are held directly or by the Intermediary in nominee name or, alternatively, for use with retirement plan recordkeepers, the term means the Plan participant notwithstanding that the Plan may be deemed to be the beneficial owner of Shares.
iv. The term “written” includes electronic writings and facsimile transmissions.
v. The term “Intermediary” shall mean a “financial intermediary” as defined in SEC rule 22c-2.
 
1   As defined in SEC Rule 22c-2(b), the term “excepted fund” means any: (1) money market fund; (2) fund that issues securities that are listed on a national exchange; and (3) fund that affirmatively permits short-term trading of its securities, if its prospectus clearly and prominently discloses that the fund permits short-term trading of its securities and that such trading may result in additional costs for the fund.

10

EX-99.E.3 3 x89252exv99wew3.htm EX-99.E.3 exv99wew3
FORESIDE FUND SERVICES, LLC
DEALER AGREEMENT
             
Re:
  del Rey Monarch Fund, a series of
del Rey Global Investors Funds
  Date:   ____________________
Ladies and Gentlemen:
As the distributor of the shares (“Shares”) of each investment company series (each, a “Fund”) of the trust referenced above and covered hereunder (collectively, “Trust”), which may be amended by us from time to time, Foreside Fund Services, LLC (“Distributor”) hereby invites you to participate in the selling group on the following terms and conditions. In this letter, the terms “we,” “us,” and similar words refer to the Distributor, and the terms “you,” “your,” and similar words refer to the dealer executing this agreement, including its associated persons.
1. Dealer. You hereby represent that you are a broker-dealer properly registered and qualified under all applicable federal, state and local laws to engage in the business and transactions described in this agreement, and that you are a member in good standing of the Financial Industry Regulatory Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). You agree that it is your responsibility to determine the suitability of any Fund Shares as investments for your customers, and that we have no responsibility for such determination. You further agree to maintain all records required by Applicable Laws (as defined below) or that are otherwise reasonably requested by us relating to your transactions in Fund Shares. In addition, you agree to notify us immediately in the event your status as a member of FINRA or SIPC changes. Further, you represent that no consent, approval or other authorization of or by, or filing or registration with, any court, administrative or regulatory agency or other governmental authority is required to be obtained by you in connection with the your performance of the transactions contemplated by this agreement. You agree that you will at all times comply with (i) the provisions of this Dealer Agreement related to compliance with all applicable rules and regulations; and (ii) the terms of each registration statement and prospectus for the Fund.
2. Qualification of Shares. The Fund will make available to you a list of the states or other jurisdictions in which Fund Shares are registered for sale or are otherwise qualified for sale, which may be revised by the Fund from time to time. You will make offers of Shares to your customers only in those states, and you will ensure that you (including your associated persons) are appropriately licensed and qualified to offer and sell Shares in any state or other jurisdiction that requires such licensing or qualification in connection with your activities.
3. Orders. All orders you submit for transactions in Fund Shares shall reflect orders received from your customers or shall be for your account for your own bona fide investment, and you will date and time-stamp your customer orders and forward them promptly each day and in any event prior to the time required by the applicable Fund prospectus (the “Prospectus,” which for purposes of this agreement includes the Statement of Additional Information incorporated therein). As agent for your customers, you shall not withhold placing customers’ orders for any Shares so as to profit yourself or your customer as a result of such withholding. You are hereby authorized to: (i) place your orders directly with the relevant Fund for the purchase of Shares and (ii) tender Shares directly to the Fund for redemption, in each case subject to the terms and conditions set forth in the Prospectus and any operating procedures and policies established by us or the Fund (directly or through its Transfer Agent) from time to time. All purchase orders you submit are subject to acceptance or rejection, and we reserve the right to suspend or limit the sale of Shares. You are not authorized to make any representations concerning Shares of any Fund except

 


 

such representations as are contained in the Prospectus and in such supplemental written information that the Fund or the Distributor (acting on behalf of the Fund) may provide to you with respect to a Fund. All orders that are accepted for the purchase of Shares shall be executed at the next determined public offering price per share (i.e., the net asset value per share plus the applicable sales load, if any) and all orders for the redemption of Shares shall be executed at the next determined net asset value per share and subject to any applicable redemption fee or contingent deferred sales load, in each case as described in the Prospectus.
4. Compliance with Applicable Laws; Distribution of Prospectus and Reports; Confirmations. In connection with its respective activities hereunder, each party agrees to abide by the Conduct Rules of FINRA and all other rules of self-regulatory organizations of which the relevant party is a member, as well as all laws, rules and regulations, including federal and state securities laws, that are applicable to the relevant party (and its associated persons) from time to time in connection with its activities hereunder (“Applicable Laws”). You are authorized to distribute to your customers the current Prospectus, as well as any supplemental sales material received from the Fund or the Distributor (acting on behalf of the Fund) (on the terms and for the period specified by us or stated in such material). You are not authorized to distribute, furnish or display any other sales or promotional material relating to a Fund without our prior written approval, but you may identify the Funds in a listing of mutual funds available through you to your customers. Unless otherwise mutually agreed in writing, you shall deliver or cause to be delivered to each customer who purchases shares of any Funds from or through you, copies of all annual and interim reports, proxy solicitation materials, and any other information and materials relating to such Funds and prepared by or on behalf of the Funds or us. If required by Rule 10b-10 under the Securities Exchange Act or other Applicable Laws, you shall send or cause to be sent confirmations or other reports to your customers containing such information as may be required by Applicable Laws.
5. Sales Charges and Concessions. On each purchase of Shares by you (but not including the reinvestment of any dividends or distributions), you shall be entitled to receive such dealer allowances, concessions, sales charges or other compensation, if any, as may be set forth in the Prospectus. Sales charge reductions and discounts may be available as provided in the Prospectus. To obtain any such reductions, the Fund or its transfer agent must be notified promptly when a transaction or transactions would qualify for the reduced charge and you must submit information that is sufficient (in the discretion of the Fund) to substantiate qualification therefor. The foregoing shall include advising us of any Letter of Intent signed by your customer or of any Right of Accumulation available to such customer. If you fail to so advise the Fund, you will be liable for the return of any commissions plus interest thereon. Rights of accumulation (including rights under a Letter of Intent) are available, if at all, only as set forth in the Prospectus, and you authorize any adjustment to your account (and will be liable for any refund) to the extent any allowance, discount or concession is made and the conditions therefor are not fulfilled. Each price is always subject to confirmation, and will be based upon the net asset value next determined after receipt of an order that is in good form. If any Shares purchased are tendered for redemption or repurchased by the Fund for any reason within seven business days after confirmation of the purchase order for such Shares, you agree to promptly refund the full sales load or other concession and you will forfeit the right to receive any compensation allowable or payable to you on such Shares. The Fund reserves the right to waive sales charges. You represent to us that you are eligible to receive any such sales charges and concessions paid to you by us under this section.
6. Transactions in Fund Shares. With respect to all orders you place for the purchase of Fund Shares, unless otherwise agreed, settlement shall be made with the Fund within three (3) business days after acceptance of the order. If payment is not so received or made, the transaction may be cancelled. In this event or in the event that you cancel the trade for any reason, you agree to be responsible for any loss

2


 

resulting to the Funds or to us from your failure to make payments as aforesaid. You shall not be entitled to any gains generated thereby. You also assume responsibility for any loss to a Fund caused by any order placed by you on an “as-of” basis subsequent to the trade date for the order, and will immediately pay such loss to the Fund upon notification or demand. Such orders shall be acceptable only as permitted by the Fund and shall be subject to the Fund’s policies pertaining thereto, which may include receipt of an executed Letter of Indemnity in a form acceptable to the Fund and /or to us prior to the Fund’s acceptance of any such order.
7. Accuracy of Orders; Customer Signatures. You shall be responsible for the accuracy, timeliness and completeness of any orders transmitted by you on behalf of your customers by any means, including wire or telephone. In addition, you agree to guarantee the signatures of your customers when such guarantee is required by the Fund and you agree to indemnify and hold harmless all persons, including us and the Funds’ transfer agent, from and against any and all loss, cost, damage or expense suffered or incurred in reliance upon such signature guarantee.
8. Indemnification. You agree to indemnify and hold harmless us and our respective officers, directors, agents and employees, and each Fund, and their respective officers, directors, agents and employees, and control persons (as defined in section 15 of the Securities Act of 1933 (the “Securities Act”) or section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), from and against any claims, liabilities, expenses (including reasonable attorneys’ fees) and losses resulting from (i) any failure by you to comply with Applicable Laws in connection with activities performed under this agreement, (ii) any unauthorized representation made by you concerning an investment in Fund Shares or (iii) any action taken or omitted to be taken by you in breach of the terms of this Agreement.
     We agree to indemnify and hold harmless you and your officers, directors, agents and employees from and against any claims, liabilities, expenses (including reasonable attorneys fees) and losses resulting from (i) any failure by us to comply with Applicable Laws in connection with our activities as Distributor under this agreement; (ii) any untrue statement of a material fact set forth in a Fund’s Prospectus or supplemental sales material provided to you by us (and used by you on the terms and for the period specified by us or stated in such material), or omission to state a material fact required to be stated therein to make the statements therein not misleading.
9. Multi-Class Distribution Arrangements. You understand and acknowledge that the Funds may offer Shares in multiple classes, and you represent and warrant that you have established compliance procedures designed to ensure that your customers are made aware of the terms of each available class of Fund Shares, to ensure that each customer is offered only Shares that are suitable investments for him or her, to ensure that each customer is availed of the opportunity to obtain sales charge break points as detailed in the Prospectus, and to ensure proper supervision of your representatives in recommending and offering the Shares of multiple classes to your customers.
10. Anti-Money Laundering Compliance. Each party to this agreement acknowledges that it is a financial institution subject to the USA PATRIOT Act of 2001 and the Bank Secrecy Act (collectively, the “AML Acts”), which require, among other things, that financial institutions adopt compliance programs to guard against money laundering. Each party represents and warrants that it is in compliance and will continue to comply with the AML Acts and applicable rules thereunder (“AML Laws”), including NASD Conduct Rule 3011, in all relevant respects. You agree to cooperate with us to satisfy AML due diligence policies of the Fund and Distributor, which may include annual compliance certifications and periodic due diligence reviews and/or other requests deemed necessary or appropriate by us or the Fund to ensure compliance with AML Laws. Dealer also agrees to provide for screening its

3


 

own new and existing customers against the Office of Foreign Asset Control (“OFAC”) list and any other government list that is or becomes required under the AML Acts.
11. Privacy. The parties agree that any Non-public Personal Information, as the term is defined in Regulation S-P (“Reg S-P”) of the Securities and Exchange Commission, that may be disclosed hereunder is disclosed for the specific purpose of permitting the other party to perform the services set forth in this agreement. Each party agrees that, with respect to such information, it will comply with Reg S-P and that it will not disclose any Non-Public Personal Information received in connection with this agreement to any other party, except to the extent required to carry out the services set forth in this agreement or as otherwise permitted by law.
12. Distribution and/or Service Fees. Subject to and in accordance with the terms of each Prospectus and the Distribution and Service Plan, if any, adopted by resolution of the Board pursuant to Rule 12b-1 under the Investment Company Act of 1940 (the “1940 Act”), we may pay financial institutions with which we have entered into an agreement in substantially the form annexed hereto as Appendix A or such other form as may be approved from time to time by the Funds’ Board (the “Fee Agreement”) such fees as may be determined in accordance with such Fee Agreement, for distribution, shareholder or administrative services, as described therein.
13. Order Processing. In accordance with NASD Notice to Members 03-50 (reminding members of their responsibility to ensure that they have in place policies and procedures reasonably designed to detect and prevent the occurrence of mutual fund transactions that would violate Rule 22c-1 under the 1940 Act, NASD Conduct Rule 2110 and other applicable rules and regulations), you represent that you have reviewed your policies and procedures to ensure that they are adequate with respect to preventing violations of law and prospectus requirements related to timely order-taking and market timing activity, in that such policies and procedures (i) prevent the submission of any order received after the deadline for submission of orders in each day that are eligible for pricing at that day’s net asset value per share (“NAV”); and (ii) prevent the purchase of Fund Shares by an individual or entity whose stated objectives are not consistent with the stated policies of a Fund in protecting the best interests of longer-term investors, particularly where such investor may be seeking market timing or arbitrage opportunities through such purchase. You represent that you will be responsible for the collection and payment to the Fund of any Redemption Fees based upon the terms outlined in the Fund’s Prospectus.
14. Amendments. This agreement may be amended from time to time by the following procedure. We will mail a copy of the amendment to you at your address shown below or as registered as your main office from time to time with FINRA. If you do not object to the amendment within fifteen (15) days after its receipt, the amendment will become a part of this agreement. Your objection must be in writing and be received by us within such fifteen (15) days. All amendments shall be in writing and except as provided above shall be executed by both parties.
15. Termination. This agreement shall inure to the benefit of the successors and assigns of either party hereto, provided, however, that you may not assign this agreement without our prior written consent. This agreement may be terminated by either party, without penalty, upon ten days’ prior written notice to the other party. Any unfulfilled obligations hereunder, and all obligations of indemnification, shall survive the termination of this agreement.
16. Notices. All notices and communications to us shall be sent to us at Three Canal Plaza, Suite 100, Portland, ME 04101, Attn: Legal/Compliance, or at such other address as we may designate in writing. All notices and other communication to you shall be sent you at the address set forth below or at

4


 

such other address as you may designate in writing. All notices required or permitted to be given pursuant to this agreement shall be given in writing and delivered by personal delivery, by postage prepaid mail, electronic mail, or by facsimile or similar means of same-day delivery, with a confirming copy by mail.
17. Authorization. Each party represents to the other that all requisite corporate proceedings have been undertaken to authorize it to enter into and perform under this agreement as contemplated herein, and that the individual that has signed this agreement below on its behalf is a duly elected officer that has been empowered to act for and on behalf of such party with respect to the execution of this agreement.
18. Directed Brokerage Prohibitions. The Distributor and Dealer agree that neither of them shall direct Fund portfolio securities transactions or related remuneration to satisfy any compensation obligations under this Agreement. The Distributor also agrees that it will not directly or indirectly compensate the dealer executing this agreement in contravention of Rule 12b-1(h) of the 1940 Act.
19. Shareholder Information. The Dealer executing this agreement agrees to comply with the requirements set forth on Appendix B attached hereto regarding the provision of shareholder information pursuant to Rule 22c-2 of the 1940 Act.
20. Third Party Beneficiaries. The Distributor and Dealer expressly agree that in addition to the signatories to this agreement, each Fund is a third party beneficiary to this agreement with respect to matters relating to it or its shares, with legal and equitable rights to seek enforcement of those provisions to which it is the intended beneficiary including but not limited to the indemnity provided by Section 8.
21. Miscellaneous. This agreement supersedes any other agreement between the parties with respect to the offer and sale of Fund Shares and other matters covered herein. The invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of any other term or provision hereof. This agreement may be executed in any number of counterparts, which together shall constitute one instrument. This agreement shall be governed by and construed in accordance with the laws of the state of Delaware without regard to conflict of laws principles, and shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
[The Balance of this Page is Intentionally Left Blank]

* * * *

5


 

If the foregoing corresponds with your understanding of our agreement, please sign this document and the accompanying copies thereof in the appropriate space below and return the same to us, whereupon this agreement shall be binding upon each of us.
Foreside Fund Services, LLC
     By:
 
     Insert Name:
 
     Title:
 
Agreed to and accepted:
_____________________________ [Insert Dealer Name]
By:
 
Print Name:
 
Title:
 
Address of Dealer:
 
 
Operations Contact:
Name:
 
Phone:
 
Email:
 

6


 

Appendix A
FORESIDE FUND SERVICES, LLC
DISTRIBUTION/SERVICE FEE AGREEMENT
             
Re:
  del Rey Monarch Fund, a series of
del Rey Global Investors Funds
  Date:   ____________________
Ladies and Gentlemen:
This Fee Agreement (“Agreement”) confirms our understanding and agreement with respect to Rule 12b-1 payments to be made to you in accordance with the Dealer Agreement between you and us (the “Dealer Agreement”), which entitles you to serve as a selected dealer of certain Funds for which we serve as Distributor. Capitalized terms used but not defined herein shall have the respective meanings set forth in the Dealer Agreement.
1. From time to time during the term of this Agreement, we may make payments to you pursuant to one or more distribution and service plans (the “Plans”) adopted by certain of the Funds pursuant to Rule 12b-1 of the Investment Company Act of 1940 (the “1940 Act”). You agree to furnish sales and marketing services and/or shareholder services to your customers who invest in and own Fund Shares, including, but not limited to, answering routine inquiries regarding the Funds, processing shareholder transactions, and providing any other shareholder services not otherwise provided by a Fund’s transfer agent. With respect to such payments to you, we shall have only the obligation to make payments to you after, for as long as, and to the extent that, we receive from the Fund an amount equivalent to the amount payable to you. The Fund reserves the right, without prior notice, to suspend or eliminate the payment of such Rule 12b-1 Plan payments or other dealer compensation by amendment, sticker or supplement to the then-current Prospectus of the Fund or other written notice to you.
2. Any such fee payments shall reflect the amounts described in the Fund’s Prospectus. Payments will be based on the average daily net assets of Fund Shares which are owned by those customers of yours whose records, as maintained by the Funds or the transfer agent, designate your firm as the customer’s dealer of record. No such fee payments will be payable to you with respect to shares purchased by or through you and redeemed by the Funds within seven business days after the date of confirmation of such purchase. You represent that you are eligible to receive any such payments made to you under the Plans.
3. You agree that all activities conducted under this Agreement will be conducted in accordance with the Plans, as well as all applicable state and federal laws, including the 1940 Act, the Exchange Act, the Securities Act and any applicable rules of FINRA.
4. Upon request, on a quarterly basis, you shall furnish us with a written report describing the amounts payable to you pursuant to this Agreement and the purpose for which such amounts were expended. We shall provide quarterly reports to the Funds’ Board of amounts expended pursuant to the Plans and the purposes for which such expenditures were made. You shall furnish us with such other information as shall reasonably be requested by us in connection with our reports to the Board with respect to the fees paid to you pursuant to this Agreement.
5. This Agreement shall continue in effect until terminated in the manner prescribed below or as provided

7


 

in the Plans or in Rule 12b-1. This Agreement may be terminated, with respect to one or more Funds, without penalty, by either of us, upon ten days’ prior written notice to the other party. In addition, this Agreement will be terminated with respect to any Fund upon a termination of the relevant Plan or the Dealer Agreement, if a Fund closes to new investments, or if our Distribution Agreement with the Funds terminates.
6. This Agreement may be amended by us from time to time by the following procedure. We will mail a copy of the amendment to you at your address shown below or as registered from time to time with FINRA. If you do not object to the amendment within fifteen (15) days after its receipt, the amendment will become a part of this Agreement. Your objection must be in writing and be received by us within such fifteen days.
7. This Agreement shall become effective as of the date when it is executed and dated by us below. This Agreement and all the rights and obligations of the parties hereunder shall be governed by and construed under the laws of the state of Delaware, without regard to conflict of laws principles.
8. All notices and other communications shall be given as provided in the Dealer Agreement.
If the foregoing is acceptable to you, please sign this Agreement in the space provided below and
return the same to us.

Foreside Fund Services, LLC
By:  
 
Insert Name:  
 
Title:  
 
Agreed to and Accepted
Name and Address of Dealer firm:
 
 
 
By:  
 
Insert Name:  
 
Title:  
 


8


 

APPENDIX B
Information Regarding the Provision of Shareholder Information Pursuant to Rule 22c-2
(a). Agreement to Provide Information. Dealer agrees to provide the Fund, upon request, the taxpayer identification number (“TIN”), if known, (or in the case of a non U.S. shareholder, if the TIN is unavailable, the International Taxpayer Identification Number or other government issued identifier) of any or all Shareholder(s) who have purchased, redeemed, transferred, or exchanged fund shares held through an account with Dealer and the amount, date, name or other identifier of any investment professional(s) associated with the Shareholder(s) or account (if known), and transaction type (purchase, redemption, transfer, or exchange) of every purchase, redemption, transfer, or exchange of Shares held through an account maintained by the Dealer during the period covered by the request.
i. Period Covered by Request. Requests must set forth a specific period, not to exceed 90 days from the date of the request, for which transaction information is sought. The Fund may request transaction information older than 90 days from the date of the request as it deems necessary to investigate compliance with policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding shares issued by the Fund.
ii. Form and Timing of Response. Dealer agrees to transmit the requested information that is on its books and records to the Fund or its designee promptly, but in any event not later than five business days, after receipt of a request. If the requested information is not on the Dealer’s books and records, Dealer agrees to use best efforts to: (x) provide or arrange to provide to the Fund the requested information from shareholders who hold an account with an indirect intermediary, including a determination on whether any specific person about whom Dealer has received information, is itself a financial intermediary; or (y) if directed by the Fund, restrict or prohibit further purchases or exchanges of Fund Shares by a shareholder who has been identified by the Fund as having engaged in transactions of Fund shares (directly or indirectly) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding securities issued by the Fund. In such instance, Dealer agrees to inform the Fund whether it plans to perform (x) or (y). Responses required by this paragraph must be communicated in writing and in a format mutually agreed upon by the parties. To the extent practicable, the format for any transaction information provided to the Fund should be consistent with the NSCC Standardized Data Reporting Format. For purposes of this provision, an “indirect intermediary” has the same meaning as in SEC Rule 22c-2 under the Investment Company Act.
iii. Limitations on Use of Information. The Fund agrees not to use the information received for marketing or any other similar purpose without the prior written consent of the Dealer.
(b) Agreement to Restrict Trading. Dealer agrees to execute written instructions from the Fund to restrict or prohibit further purchases or exchanges of Fund shares by a Shareholder who has been identified by the Fund as having engaged in transactions of the Fund’s Shares (directly or indirectly through the Dealer’s account) that violate policies established by the Fund for the purpose of eliminating or reducing any dilution of the value of the outstanding Shares issued by the Fund.
i. Form of Instructions. Instructions must include the TIN, if known, and the specific restriction(s) to be executed. If the TIN is not known, the instructions must include an equivalent identifying number of the Shareholder(s) or account(s) or other agreed upon information to which

9


 

the instruction relates.
ii. Timing of Response. Dealer agrees to execute instructions as soon as reasonably practicable, but not later than five business days after receipt of the instructions by the Dealer.
iii. Confirmation by Dealer. Dealer must provide written confirmation to the Fund that instructions have been executed. Dealer agrees to provide confirmation as soon as reasonably practicable, but not later than ten business days after the instructions have been executed.
(c) Definitions. For purposes of this Appendix B:
i. The term “Fund” includes the fund’s investment adviser, principal underwriter and transfer agent. The term does not include any “excepted funds” as defined in SEC Rule 22c-2(b) under the Investment Company Act of 1940.1
ii. The term “Shares” means the interests of Shareholders corresponding to the redeemable securities of record issued by the Fund under the Investment Company Act of 1940 that are held by the Dealer.
iii. The term “Shareholder” means the beneficial owner of Shares, whether the Shares are held directly or by the Dealer in nominee name or, alternatively, for use with retirement plan recordkeepers, the term means the Plan participant notwithstanding that the Plan may be deemed to be the beneficial owner of Shares.
iv. The term “written” includes electronic writings and facsimile transmissions.
v. The term “Dealer” shall mean a “financial intermediary” as defined in SEC rule 22c-2.
 
1 As defined in SEC Rule 22c-2(b), the term “excepted fund” means any: (1) money market fund; (2) fund that issues securities that are listed on a national exchange; and (3) fund that affirmatively permits short-term trading of its securities, if its prospectus clearly and prominently discloses that the fund permits short-term trading of its securities and that such trading may result in additional costs for the fund.

10

EX-99.H.3 4 x89252exv99whw3.htm EX-99.H.3 exv99whw3
Exhibit (h)(3)
DISTRIBUTION SERVICES AGREEMENT
     AGREEMENT made this 27th day of January, 2011, by and between del Rey Global Investors, LLC, a Delaware limited liability company (the “Adviser”), and Foreside Fund Services, LLC, a Delaware limited liability company (the “Distributor”).
     WHEREAS, pursuant to a distribution agreement by and between the Distributor and del Rey Global Investors Funds (the “Trust”) dated as of January 27, 2011 (the “Distribution Agreement”), the Distributor acts as the principal underwriter and distributor of shares of certain series (the “Funds”) of the Trust, as listed in Exhibit A to the Distribution Agreement; and
     WHEREAS, the Adviser serves as investment adviser for the Funds, open-end investment companies registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended; and
     WHEREAS, in consideration of the Distributor’s agreement to provide certain sales and marketing services as described in the Distribution Agreement, the Adviser has agreed to compensate the Distributor to the extent that the Funds are not authorized to so compensate the Distributor.
     NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein and other good and valuable consideration the receipt of which is hereby acknowledged, the Adviser and the Distributor hereby agree as follows:
1. Services.
     The Distributor will provide the Funds with the marketing and sales support services set forth in the Distribution Agreement. Capitalized terms in this Agreement not otherwise defined have the meaning attributed to such terms in the Distribution Agreement.
2. Compensation and Expenses.
     (a) In accordance with the Distribution Agreement, the Distributor shall be entitled to receive the compensation set forth in Exhibit B to the Distribution Agreement.
     (b) The Adviser agrees that, if the Funds are not authorized to pay, or if there are insufficient funds available pursuant to the Funds’ distribution plans under Rule 12b-1 (the “Plans”) to pay, the Distributor the full amount of compensation to which the Distributor is entitled to under the Distribution Agreement, the Adviser shall compensate the Distributor to the extent that the Funds are not so authorized or there are insufficient funds under the Plans to pay the Distributor.
     (c) The Adviser further agrees that (i) it shall pay the Set-Up Fee upon execution of this Agreement and (ii) if for any reason a Fund does not close the offering of its shares after a subscription period or a Fund’s Registration Statement either does not become effective or the Fund does not offer and sell its shares to the public after its Registration Statement becomes

 


 

effective, the Adviser shall pay all reasonable out-of pocket expenses of the Distributor as outlined on Exhibit B to the Distribution Agreement.
     (d) The Distributor agrees that all Residual 12b-1 Fees (as defined below) received by the Distributor from the Funds pursuant to the Plans shall be used solely for distribution and/or shareholder servicing expenses as provided in the Plans and no Residual 12b-1 Fees shall be retained by the Distributor for its own benefit. Distributor shall pay Selling Agents (as defined in the Plans) the applicable amount of fees under the Plans. Distributor shall also reimburse the Adviser and other parties for appropriate expenses upon receipt from such parties of an invoice detailing the expense. For the avoidance of doubt, the Distributor shall make such reimbursements only after it has received Residual 12b-1 Fees from the Funds in an amount equal to the requested reimbursement. For purposes of this paragraph, Residual 12b-1 Fees shall mean 12b-1 fees paid to the Distributor pursuant to the Plans, other than (i) 12b-1 fees paid to the Distributor as Fees Under a 12b-1 Plan as provided in Exhibit B to the Distribution Agreement and (ii) 12b-1 fees paid to the Distributor which the Distributor has an obligation to pay to the Selling Agents.
     (e) The Distributor agrees that all Residual Sales Charges (as defined below) received by the Distributor shall be used solely for distribution and/or shareholder servicing expenses and no Residual Sales Charges shall be retained by the Distributor for its own benefit. Distributor shall reimburse the Adviser and other parties for appropriate expenses upon receipt from such parties of an invoice detailing the expense. For the avoidance of doubt, the Distributor shall make such reimbursements only after it has received Residual Sales Charges in an amount equal to the requested reimbursement. For purposes of this paragraph, Residual Sales Charges shall mean any initial or contingent sales charges paid to or received by the Distributor that are not reallowed to Selling Agents. Adviser agrees to cause the Funds to make appropriate disclosures in the Funds’ Registration Statement or Prospectus, as applicable, noting that the Adviser may receive such sales charges.
3. Term and Termination.
     (a) This Agreement will become effective upon the date first set forth above, will continue in effect throughout the term of the Distribution Agreement, and will terminate automatically upon any termination of the Distribution Agreement; provided, however, that, notwithstanding such termination of the Distribution Agreement, the Adviser will continue to pay to the Distributor all fees to which the Distributor is entitled pursuant to the Distribution Agreement provided that the Funds are not able to pay, and have not paid, for services performed through such termination date.
     This Agreement shall terminate automatically in the event the Adviser no longer serves as investment adviser to the Funds, provided that prior to or on such termination date, the Adviser pays to the Distributor all compensation due hereunder as of such termination date. The Adviser shall provide the Distributor with advance written notice of such termination, unless Adviser did not received advance notice of termination from the applicable Funds.

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4. Representations, Warranties and Covenants.
     (a) The Adviser hereby represents, warrants and covenants to the Distributor that:
          (i) this Agreement has been duly authorized, executed and delivered by the Adviser and, when executed and delivered, will constitute a valid and legally binding obligation of the Adviser, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties;
          (ii) the contractual advisory fees that the Adviser charges the Funds do not contain any component for the purpose of paying for fund distribution by a Fund; and
          (iii) The Adviser will pay, or cause one of its affiliates to pay, to financial intermediaries, or will reimburse the Distributor in advance in full for the payment to financial intermediaries of, any and all upfront commissions due on load-waived sales of Shares, as set forth in the Registration Statement, including the Prospectus, filed with the SEC and in effect at the time of sale of such Shares; and
          (iv) this Agreement has been disclosed to the Board of Trustees of the Funds (the “Board”), and the Adviser has provided all such information to the Board as has been requested by the Board in connection with the Board’s review or approval of the arrangements contemplated under the Distribution Agreement and the Plans; and
          (v) it is conducting its business in compliance in all material respects with all applicable laws and regulations, both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, operating agreement or any contract binding it or affecting its property which would prohibit its execution or performance of this Agreement.
     (b) The Distributor hereby represents and warrants to the Adviser that:
          (i) it is duly organized and existing in good standing under the laws of the jurisdiction of its organization, with full power to carry on its business as now conducted, to enter into this Agreement and to perform its obligations hereunder;
          (ii) it is a broker-dealer registered with the SEC under Section 15 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and a member in good standing of the Financial Industry Regulatory Authority (“FINRA”), and the Distributor shall use best efforts to as promptly as possible notify the Adviser should the Distributor no longer be a broker-dealer registered with the SEC under Section 15 of the 1934 Act or a member in good standing of FINRA, or should the Distributor become aware that the SEC or FINRA has taken steps to terminate the Distributor’s registration with the SEC or FINRA has commenced formal proceedings to downgrade Distributor’s status as a member in good standing, during the term of this Agreement;

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          (iii) all registered representatives of the Distributor that may be involved in the distribution of the Funds pursuant to the Distribution Agreement have all required licenses or other authorizations from FINRA or any other applicable U.S. self-regulatory organization or other organization with licensing authority over the registered representatives;
          (iv) prior to entering into this Agreement, the Distributor will have obtained any consent, approval, waiver, registration or other authorization of or by, or made all requisite filings with, any court, administrative or regulatory agency or other governmental authority, or any self-regulatory organization that is required to be obtained by the Distributor in connection with the execution, delivery or performance by the Distributor or the consummation by the Distributor, of the transactions contemplated by this Agreement;
          (v) this Agreement has been duly authorized, executed and delivered by the Distributor and, when executed and delivered, will constitute a valid and legally binding obligation of the Distributor, enforceable in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties;
          (vi) it is conducting its business in compliance in all material respects with all applicable laws and regulations, both state and federal, and has obtained all regulatory approvals necessary to carry on its business as now conducted; there is no statute, rule, regulation, order or judgment binding on it and no provision of its charter, operating agreement or any contract binding it or affecting its property which would prohibit its execution or performance of this Agreement;
          (vii) it has the financial resources available to it necessary for the performance of its services and obligations to each Fund as contemplated in the Registration Statement relating to each such Fund and this Agreement;
          (viii) in connection with all matters relating to this Agreement, it will comply with the applicable requirements of the 1933 Act, the 1934 Act, the 1940 Act, the regulations of FINRA and all other applicable federal or state laws and regulations;
          (ix) it will promptly notify the Adviser of the commencement of any litigation or proceedings against the Distributor or any of its managers, officers or directors in connection with the issue and sale of any of the Shares.
5. Confidentiality.
     During the term of this Agreement, the Distributor and the Adviser may have access to confidential information relating to matters such as either party’s business, trade secrets, systems, procedures, manuals, products, contracts, personnel, and clients. As used in this Agreement, “Confidential Information” means information belonging to the Distributor or the Adviser which is of value to such party and the disclosure of which could result in a competitive or other disadvantage to the non-disclosing party, including, without limitation, financial information, business practices and policies, know-how, trade secrets, market or sales information or plans, customer lists, business plans, and all provisions of this Agreement.

-4-


 

Confidential Information includes information developed by either party in the course of engaging in the activities provided for in this Agreement, unless: (i) the information is or becomes publicly known without breach of this Agreement, (ii) the information is disclosed to the other party by a third party not under an obligation of confidentiality to the party whose Confidential Information is at issue of which the party receiving the information should reasonably be aware, or (iii) the information is independently developed by a party from information received by a third party not under an obligation of confidentiality to the party whose Confidential Information is at issue on a non-confidential basis without reference to the other party’s Confidential Information. Each party will protect the other’s Confidential Information with at least the same degree of care it uses with respect to its own Confidential Information, and will not use the other party’s Confidential Information other than in connection with its duties and obligations hereunder. Each party hereby agrees not to disclose any Confidential Information other than to those of its officers, directors, employees, advisors and representatives (collectively, “Representatives”) with a need to know the information contained therein; provided that such Representatives shall be subject to the terms of this Agreement. Each party hereby acknowledges that it may receive material non-public information regarding securities in connection with this Agreement or the Distribution Agreement and agrees that it is aware, and that it will advise its Representatives, that the United States securities laws prohibit any person who has received material, non-public information concerning securities from purchasing or selling the securities of any issuer, or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. Notwithstanding the foregoing, a party may disclose the other’s Confidential Information if (i) required by law, regulation or legal process or if requested by any regulatory agency with jurisdiction over the Distributor, the Fund or the Adviser; (ii) it is advised by counsel that it may incur liability for failure to make such disclosure; or (iii) requested to by the other party; provided that in the event of (i) or (ii) the disclosing party shall give the other party reasonable prior notice of such disclosure to the extent reasonably practicable and shall reasonably cooperate with the other party (at such other party’s expense) in any efforts to prevent such disclosure.
     In the event of any unauthorized use or disclosure by a party of any Confidential Information of the other party, the disclosing party shall promptly (i) notify the other party of the unauthorized use or disclosure; (ii) take all reasonable actions to limit the adverse effect on the other party of such unauthorized use or disclosure; and (iii) take all reasonable action to protect against a recurrence of the unauthorized use or disclosure.
6. Indemnification.
     (a) The Adviser shall indemnify and hold harmless the Distributor, its affiliates and each of their respective employees, agents, directors and officers (collectively, the “Distributor Parties”) from and against, any and all claims, demands, actions and suits, and from and against any and all judgments, liabilities, losses, damages, costs, charges and reasonable counsel fees incurred by the Distributor Parties in connection therewith (collectively, “Losses”) arising out of or related to (i) the Adviser’s breach of any of its material obligations, representations, warranties or covenants contained in this Agreement or (ii) the Adviser’s failure to comply in all material respects with any applicable securities laws or regulations, except to the extent that Losses result from the willful misfeasance, willful default, willful misconduct, bad faith, fraud,

-5-


 

or gross negligence on the Distributor’s part or the part of its agents or employees, in the performance of or from reckless disregard by the Distributor or its agents or employees of the obligations and duties hereunder.
     (b) The Distributor shall indemnify and hold harmless the Adviser, its affiliates and each of their respective employees, agents, directors and officers (collectively, the “Adviser Parties”) from and against, any and all claims, demands, actions and suits, and from and against any and all judgments, liabilities, losses, damages, costs, charges and reasonable counsel fees incurred by the Adviser Parties in connection therewith (collectively, “Losses”) arising out of or related to (i) the Distributor’s breach of any of its material obligations, representations, warranties or covenants contained in this Agreement or (ii) the Distributor’s failure to comply in all material respects with any applicable securities laws or regulations; except to the extent that Losses result from the willful misfeasance, willful default, willful misconduct, bad faith, fraud or gross negligence on the Adviser’s part or the part of its agents or employees, in the performance of or from reckless disregard by the Adviser or its agents or employees of the obligations and duties hereunder. For the avoidance of doubt, should the Adviser be indemnified under the Distribution Agreement for any Losses pursuant to this Agreement, this indemnity shall be of no additional force or effect.
7. Notices.
     Any notice required or permitted to be given by any party to the others shall be in writing and shall be deemed to have been given on the date delivered personally or by courier service or 3 days after sent by registered or certified mail, postage prepaid, return receipt requested or on the date sent and confirmed received by facsimile transmission to the other party’s address as set forth below:
Notices to the Distributor shall be sent to:
Foreside Fund Services, LLC
Attn: Legal/Compliance
Three Canal Plaza, Suite 100
Portland, ME 04101
Phone: 207-553-7110
Fax: 207-553-7151
Notices to the Adviser shall be sent to:
Gerald W. Wheeler
del Rey Global Investors, LLC
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
Phone: 310-649-1230
Fax: 310-649-4230

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8. Assignment.
     This Agreement and the rights and duties hereunder shall not be assignable with respect to a Fund by either of the parties hereto except by the specific written consent of the other party. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto and their respective successors and permitted assigns.
9. Governing Law.
     This Agreement shall be construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law principles thereof.
10. Miscellaneous.
     (a) The captions in this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect.
     (b) This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior communications, understandings and agreements relating to the subject matter hereof, whether oral or written.
     (c) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if this Agreement did not contain such part, term or provision.
     (d) Any provision of this Agreement which may be determined by competent authority to be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
     (e) This Agreement may be executed in counterparts, each of which shall be an original but all of which, taken together, shall constitute one and the same agreement.
     (f) The terms of this Agreement shall not be waived, altered, modified, amended or supplemented in any manner whatsoever except by a written instrument signed by the Distributor and the Adviser.
* * * *

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written.
             
del Rey Global Investors, LLC   Foreside Fund Services, LLC
 
           
By:
  /s/ Gerald W. Wheeler   By:   /s/ Richard J. Berthy
 
           
Name: Gerald W. Wheeler   Name: Richard J. Berthy
Title: Chief Operating Officer   Title: Vice President

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EX-99.H.4 5 x89252exv99whw4.htm EX-99.H.4 exv99whw4
Exhibit (h)(4)
FUND CCO AGREEMENT
     AGREEMENT made as of January 27, 2011 by and between del Rey Global Investors Funds, a Delaware statutory trust (the “Fund Company”), with its principal office and place of business at 6701 Center Drive West, Suite 655, Los Angeles, California 90045, and Foreside Compliance Services, LLC, a Delaware limited liability company, with its principal office and place of business at Three Canal Plaza, Portland, Maine 04101 (“Foreside”).
     WHEREAS, the Fund Company is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and has created and issued shares in one or more series (each such series a “Fund” and collectively, the “Funds”); and
     WHEREAS, the Fund Company desires that Foreside perform certain compliance services and Foreside is willing to provide those services on the terms and conditions set forth in this Agreement;
     NOW, THEREFORE, for and in consideration of the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt of which is hereby acknowledged, the Fund Company and Foreside hereby agree as follows:
     SECTION 1. PROVISION OF CCO; DELIVERY OF DOCUMENTS
     (a) Foreside hereby agrees to provide a Chief Compliance Officer (“CCO”), as described in Rule 38a-1 of the 1940 Act (“Rule 38a-1”) to the Fund Company for the period and on the terms and conditions set forth in this Agreement.
     (b) In connection therewith, the Fund Company has delivered to Foreside copies of, and shall promptly furnish Foreside with all amendments of or supplements to: (i) the Fund Company’s Declaration of Trust and Bylaws (collectively, as amended from time to time, “Organizational Documents”); (ii) the Fund Company’s current Registration Statement, as amended or supplemented, filed with the U.S. Securities and Exchange Commission (“SEC”) pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and/or the 1940 Act (the “Registration Statement”) relating to each Fund; (iii) the current Prospectus and Statement of Additional Information (collectively, as currently in effect and as amended or supplemented, the “Prospectus”) in place for each of the Funds; (iv) each plan of distribution or similar document under Rule 12b-1 under the 1940 Act and each current shareholder service plan or similar document, that in each case has been adopted by the Fund Company’s Board of Trustees (the “Board”) with respect to any or all of its Funds; (v) copies of the Fund Company’s current annual and semi-annual reports to shareholders; and (vi) all compliance and risk management policies, programs and procedures adopted by the Fund Company with respect to the Funds. The Fund Company shall deliver to Foreside a certified copy of the resolution of the Board appointing the CCO and authorizing the execution and delivery of this Agreement.

 


 

     SECTION 2. DUTIES OF FORESIDE AND CCO
     (a) Foreside shall make available a person who is qualified to serve as a CCO under Rule 38a-1, is competent and knowledgeable regarding the Federal securities laws and has the requisite knowledge and experience to administer the Fund Company’s compliance program under Rule 38a-1 to act as the Fund Company’s CCO. Foreside hereby acknowledges that the Fund Company is relying on Foreside to provide a CCO with such competence, qualifications, knowledge and experience. The election of any such person to act as the Fund Company’s CCO shall be subject to the approval of the Board. Foreside’s responsibility for the activities of the CCO are limited to the extent that the Board shall make all decisions regarding the designation and termination of the CCO and shall review and approve the compensation of the CCO as provided by Rule 38a-1.
     (b) With respect to the Fund Company and each Fund (whether currently in existence or created in the future), the CCO shall:
(i) report directly to the Board;
(ii) review and administer the Fund Company’s compliance program policies and procedures and review and oversee those policies and procedures of the adviser, administrator, principal underwriter, custodian and transfer agent (collectively, “Service Providers”) that relate to the Fund Company or its Funds;
(iii) diligently administer the CCO’s oversight responsibility by taking steps to assure himself/herself that each Service Provider has implemented effective compliance policies and procedures administered by competent personnel;
(iv) be familiar with each Service Provider’s operations and understand those aspects of each Service Provider’s operations that expose the Fund or Fund Company to compliance risks;
(v) maintain an active working relationship with each Service Provider’s compliance personnel;
(vi) conduct periodic reviews of the Fund Company’s compliance program and incorporate any new or changed regulations, best practice recommendations or other guidelines that may be appropriate;
(vii) review, no less frequently than annually, the adequacy of the policies and procedures of the Fund Company, each Fund and their respective Service Providers and the effectiveness of their implementation and advise the Board of any changes deemed necessary by the CCO;
(viii) design testing methods for the compliance program policies and procedures of the Fund Company and the Funds;

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(ix) perform and document periodic testing of certain key control procedures (as appropriate to the circumstances), including reviewing reports, investigating exceptions, and making inquiries of Fund Company management and Service Providers;
(x) conduct no less than annual periodic site visits to the adviser and other Service Providers, and more frequently as deemed necessary by the Board or the applicable Fund, including following up with the particular Service Provider as to the resolution or status of any compliance issues identified and provide updates to the Board no less frequently than quarterly;
(xi) provide the Board with the Fund certifications required by Rule 17j-1 under the 1940 Act;
(xii) prepare CCO Reports for the Board and attend Board meetings quarterly and as requested;
(xiii) keep the Board apprised of significant compliance events at the Fund, the Fund Company or their Service Providers and advise the Board of changes deemed necessary by the CCO in the Fund Company’s compliance program;
(xiv) promptly bring to the Board’s attention any serious compliance issues; and
(xv) no less than quarterly, meet separately, in person to the extent required by the Board, with those members of the Board that are not “interested persons” of the Fund Company.
     (c) Foreside may provide other services and assistance relating to the affairs of the Fund Company as the Fund Company may, from time to time, request subject to mutually acceptable compensation and implementation agreements.
     (d) Foreside shall maintain records relating to its services, such as compliance policies and procedures, relevant Board presentations, annual reviews, and other records, as are required to be maintained under the 1940 Act and Rule 38a-1 thereunder (collectively, the “Records”). Such Records with respect to the Fund Company and each Fund shall be maintained in the manner and for the periods as are required under such laws and regulations. The Fund Company, or the Fund Company’s authorized representatives, shall have access to the Records at all times during Foreside’s normal business hours. Upon the reasonable request of the Fund Company, copies of any of the Records shall be provided promptly by Foreside to the Fund Company or its authorized representatives at the Fund Company’s expense. The Records shall be the property of the Fund Company and each Fund, as applicable, and shall be promptly surrendered upon the termination of the Agreement or otherwise on written request. Records shall be surrendered in usable machine-readable form. Foreside shall not have the right to retain copies of such records without the Fund Company and the respective Fund’s prior written consent, except that Foreside may retain all records that it is required to maintain pursuant to applicable legal and regulatory requirements without obtaining the consent of any Fund or the

3


 

Fund Company. Any records retained by Foreside shall be subject to observance of its confidentiality obligations under this Agreement.
     (e) Nothing contained herein shall be construed to require Foreside to perform any service that could cause Foreside to be deemed an investment adviser for purposes of the 1940 Act or the Investment Advisers Act of 1940, as amended, or that could cause any Fund to act in contravention of such Fund’s Prospectus or any provision of the 1940 Act. Further, while Foreside will provide consulting and other services under this Agreement to assist the Fund Company and the Funds with respect to their respective obligations under and compliance with various laws and regulations, Fund Company understands and agrees that Foreside is not a law firm and that nothing contained herein shall be construed to create an attorney-client relationship between Foreside and Fund Company or to require Foreside to render legal advice or otherwise engage in the practice of law in any jurisdiction. All references to any law in this Agreement shall be deemed to include reference to the applicable rules and regulations promulgated under authority of the law and all official interpretations of such law or rules or regulations.
     (f) In order for Foreside or the CCO to perform the services required by this Section 2, the Fund Company shall (1) instruct all Service Providers to furnish any and all information relating to the Funds or the services the Service Provider provides to the Funds within their possession to Foreside as reasonably requested by Foreside, and assist Foreside in obtaining any such information as reasonably necessary and (2) deliver, or cause to be delivered, to Foreside upon Foreside’s reasonable request any other documents within the Fund Company’s possession that would be necessary to enable Foreside to perform the services described in this Agreement.
     SECTION 3. STANDARD OF CARE; LIMITATION OF LIABILITY; INDEMNIFICATION
     (a) Foreside shall be under no duty to take any action except as specifically set forth herein or as may be specifically agreed to by Foreside in writing. Foreside shall use its best judgment and efforts in rendering the services described in this Agreement and shall not be liable to the Fund Company, any Fund or any of the Funds’ shareholders for any action or inaction of Foreside or the CCO relating to any event whatsoever in the absence of willful misfeasance, willful default, willful misconduct, bad faith, fraud or gross negligence on the part of Foreside or the CCO or any of their respective agents or employees or the reckless disregard by Foreside, the CCO or any of their respective agents or employees of the duties and obligations set forth in this Agreement (collectively, “Disabling Conduct”). Further, neither Foreside nor the CCO shall be liable to the Fund Company, any Fund or any of the Funds’ shareholders for any action taken, or failure to act, in good faith reliance upon: (i) the advice and opinion of Fund Company counsel; and/or (ii) any certified copy of any resolution of the Board. Neither Foreside nor the CCO shall be under any duty or obligation to inquire into the validity or invalidity or authority or lack thereof of any statement, oral or written instruction, resolution, signature, request, letter of transmittal, certificate, opinion of counsel, instrument, report, notice, consent, order, or any other document or instrument which Foreside or the CCO reasonably believe in good faith to be genuine.

4


 

     (b) The Fund Company agrees to indemnify and hold harmless Foreside and its directors, officers, and employees and any person who controls Foreside within the meaning of Section 15 of the Securities Act (any of Foreside, its respective officers, employees and directors or such control persons, for purposes of this paragraph, a “Foreside Indemnitee”) against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith) arising out of or based upon (i) Foreside providing services to the Funds in accordance with this Agreement or (ii) the breach of any obligation, representation or warranty under this Agreement by the Fund Company on behalf of such Fund.
     In no case (i) is the indemnity of the Fund Company in favor of any Foreside Indemnitee to be deemed to protect the Foreside Indemnitee against any liability to which the Foreside Indemnitee would otherwise be subject by reason of willful misfeasance, willful default, willful misconduct, bad faith, fraud or gross negligence on the part of the Foreside Indemnitee or its agents or employees or by reason of the reckless disregard by the Foreside Indemnitee or its agents or employees of the duties and obligations under this Agreement, or (ii) is the Fund Company or any Fund to be liable with respect to any claim made against any Foreside Indemnitee unless the Foreside Indemnitee notifies the Fund Company in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim are served upon the Foreside Indemnitee (or after the Foreside Indemnitee receives notice of service on any designated agent).
     Failure to notify the Fund Company of any claim shall not relieve the Fund Company from any liability that it may have to any Foreside Indemnitee against whom such action is brought unless failure or delay to so notify the Fund Company prejudices the Fund Company’s ability to defend against such claim. The Fund Company shall be entitled to participate at its own expense in the defense, or, if it so elects, to assume the defense of any suit brought to enforce any claims, but if the Fund Company elects to assume the defense, the defense shall be conducted by counsel chosen by it and reasonably satisfactory to the Foreside Indemnitee in the suit. In the event the Fund Company elects to assume the defense of any suit and retain counsel, the Foreside Indemnitee shall bear the fees and expenses of any additional counsel retained by them. If the Fund Company does not elect to assume the defense of any suit, it will reimburse the Foreside Indemnitee in the suit for the reasonable fees and expenses of any counsel retained by them; provided that the Fund Company shall not be liable for the fees and expenses of more than one counsel. The Fund Company shall not be liable for any settlement of any such suit entered into without its prior written consent, which consent shall not be unreasonably withheld.
     (c) Foreside agrees to indemnify and hold harmless the Fund Company, each Fund, and each of their respective Trustees, officers and employees and any person who controls the Fund Company or a Fund within the meaning of Section 15 of the Securities Act (for purposes of this paragraph, the Fund Company, Funds, and each of their respective Trustees, officers, employees and their controlling persons are collectively referred to as the “Fund Indemnitees”) against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss, liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith) arising out of or based upon (i) the breach of any duty, obligation, representation or warranty under this Agreement by Foreside and/or the CCO,

5


 

or (ii) Foreside’s and/or the CCO’s failure to comply in any material respect with applicable securities laws.
     In no case (i) is the indemnity of Foreside in favor of any Fund Indemnitee to be deemed to protect any Fund Indemnitee against any liability to which such Fund Indemnitee would otherwise be subject by reason of willful misfeasance, willful default, willful misconduct, bad faith, fraud or gross negligence on the part of the Fund Indemnitee or its agents or employees or by reason of the reckless disregard by the Fund Indemnitee or its agents or employees of the duties and obligations under this Agreement, or (ii) is Foreside to be liable with respect to any claim made against any Fund Indemnitee unless the Fund Indemnitee notifies Foreside in writing of the claim within a reasonable time after the summons or other first written notification giving information of the nature of the claim are served upon the Fund Indemnitee (or after the Fund Indemnitee has received notice of service on any designated agent).
     Failure to notify Foreside of any claim shall not relieve Foreside from any liability that it may have to the Fund Indemnitee against whom such action is brought unless failure or delay to so notify Foreside prejudices Foreside’s ability to defend against such claim. Foreside shall be entitled to participate at its own expense in the defense or, if it so elects, to assume the defense of any suit brought to enforce any claims, but if Foreside elects to assume the defense, the defense shall be conducted by counsel chosen by it and reasonably satisfactory to the Fund Indemnitee in the suit. In the event that Foreside elects to assume the defense of any suit and retain counsel, the Fund Indemnitee shall bear the fees and expenses of any additional counsel retained by them. If Foreside does not elect to assume the defense of any suit, it will reimburse the Fund Indemnitee in the suit for the reasonable fees and expenses of any counsel retained by them; provided that the Foreside shall not be liable for the fees and expenses of more than one counsel. Foreside shall not be liable for any settlement of any such suit entered into without its prior written consent, which consent shall not be unreasonably withheld.
     (d) No indemnified party shall settle any claim against it for which it intends to seek indemnification from the indemnifying party, under the terms of Section 3(b) or 3(c) above, without prior written notice to and consent from the indemnifying party, which consent shall not be unreasonably withheld. No indemnified or indemnifying party shall settle any claim unless the settlement contains a full release of liability with respect to the other party in respect of such action.
     (e) The Fund Company, and not Foreside, shall be solely responsible for approval of the designation of the CCO, as well as for removing the CCO, as the case may be, from his or her responsibilities related to the Funds in accordance with Rule 38a-1.
     (f) The Fund Company agrees that Foreside, its employees, officers and directors shall not be liable to the Fund Company for any actions, damages, claims, liabilities, costs, expenses or losses in any way arising out of or relating to the services described in this Agreement for an aggregate amount in excess of the fees paid by the Fund Company to Foreside in performing services hereunder, provided that such actions, damages, claims, liabilities, costs, expenses or losses are not the result of, or arise out of, the willful misfeasance, willful default, willful misconduct, bad faith, fraud or gross negligence on the part of Foreside or the CCO or

6


 

any of their respective agents or employees or the reckless disregard by Foreside, the CCO or any of their respective agents or employees of the duties and obligations set forth in this Agreement. The provisions of this paragraph shall apply regardless of the form of action, damage, claim, liability, cost, expense or loss, whether in contract, statute, tort (including, without limitation, negligence) or otherwise.
     In no event shall either party or their respective employees, officers and directors be liable for any consequential or special losses or damages suffered by the other party, whether or not the likelihood of such losses or damages was known by the party.
     (g) Foreside shall not be liable for the errors of other service providers to the Fund Company or their systems.
     SECTION 4. REPRESENTATIONS AND WARRANTIES
     (a) Foreside covenants, represents and warrants to the Fund Company and each Fund that:
(i) it is a limited liability company duly organized and in good standing under the laws of the State of Delaware;
(ii) it is duly qualified to carry on its business in the State of Maine;
(iii) it is empowered under applicable laws and by its operating agreement to enter into this Agreement and perform its duties under this Agreement;
(iv) all requisite corporate proceedings have been taken to authorize it to enter into this Agreement and perform its duties under this Agreement;
(v) it has access to the necessary facilities, equipment, and personnel with the requisite knowledge and experience to assist the CCO in the performance of his or her duties and obligations under this Agreement;
(vi) this Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of Foreside, enforceable against Foreside in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties;
(vii) it shall make available a person who is competent and knowledgeable regarding the federal securities laws and is otherwise reasonably qualified to act as a CCO and who will, in the exercise of his or her duties to the Fund Company and the Funds, act in good faith and in a manner reasonably believed by him or her to be in the best interests of the Funds and comply with all Fund Company and Fund compliance policies and procedures, including any applicable code of ethics;

7


 

(viii) it shall compensate the CCO fairly, subject to the Board’s right under any applicable regulation (e.g., Rule 38a-1) to approve the designation, termination and level of compensation of the CCO. In addition, it shall not retaliate against the CCO should the CCO inform a Fund, Fund Company management, the Board or any Board member of a compliance failure or take aggressive action to ensure compliance with the federal securities laws by the Fund Company, a Fund or a Service Provider;
(ix) it shall report to the Board promptly if it learns of CCO Disabling Conduct or in the event the CCO is terminated as a CCO by another fund company or if the CCO is terminated by Foreside or resigns as an employee, officer or director of Foreside; and
(x) it shall report to the Board if at any time the CCO is subject to the disqualifications set forth in Section 15(b)(4) of the Exchange Act or Section 9 of the 1940 Act.
     (b) The Fund Company covenants, represents and warrants to Foreside that:
(i) it is a statutory trust duly organized and in good standing under the laws of the State of Delaware;
(ii) it is empowered under applicable laws and by its Organizational Documents to enter into this Agreement and perform its duties under this Agreement;
(iii) all requisite corporate proceedings have been taken to authorize it to enter into this Agreement and perform its duties under this Agreement;
(iv) it is an open-end management investment company registered under the 1940 Act;
(v) this Agreement, when executed and delivered, will constitute a legal, valid and binding obligation of the Fund Company, enforceable against the Fund Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting the rights and remedies of creditors and secured parties;
(vi) a registration statement under the Securities Act and the 1940 Act has been filed and, to the extent necessary, appropriate State securities law filings will be made with respect to the Funds;
(vii) the CCO is currently covered by the Fund Company’s Directors & Officers Liability Insurance Policy (the “Policy”), and the Fund Company shall use reasonable efforts to cause that such coverage be (a) reinstated should the Policy be cancelled; (b) continued after the CCO ceases to serve as an officer of

8


 

the Fund Company on substantially the same terms as such coverage is provided for all other Fund Company officers after such persons are no longer officers of the Fund Company; and (c) continued in the event the Fund Company merges or terminates, on substantially the same terms as such coverage is provided for all other Fund Company officers (and for a period of no less than six years). The Fund Company shall provide Foreside with proof of current coverage, including a copy of the Policy, and shall notify Foreside immediately should the Policy be cancelled or terminated; and
(viii) the CCO is a named officer in the Fund Company’s corporate resolutions and subject to the provisions of the Fund Company’s Organizational Documents regarding indemnification of its officers.
     SECTION 5. COMPENSATION AND EXPENSES
     (a) In consideration of the compliance services provided by Foreside pursuant to this Agreement, the Fund Company shall pay Foreside the fees and expenses set forth in Appendix A hereto, which fees and expenses shall be allocated to the Funds on a pro rata basis; provided that if a particular expense was incurred on behalf of a Fund, it shall be paid by that Fund.
     All fees payable hereunder shall be accrued daily by each Fund and shall be payable monthly in arrears on the first business day of each calendar month for services performed during the prior calendar month. All reasonable out-of-pocket charges incurred by Foreside shall be paid as incurred. If fees begin to accrue in the middle of a month or if this Agreement terminates before the end of any month, all fees for the period from such mid-month date to the end of that month or from the beginning of that month to the date of termination, as the case may be, shall be prorated according to the proportion that the period bears to the full month in which the effectiveness or termination occurs. Upon the termination of this Agreement, each Fund shall pay to Foreside such compensation as shall be due and payable by such Fund as of the effective date of termination.
     (b) The parties to this Agreement acknowledge that the CCO, as an officer of the Fund Company, is entitled to rely, with respect to questions of law relating to the services provided hereunder only as such questions relate to the Funds or the Fund Company, upon the advice and opinion of Fund Company counsel provided to Fund Company. The costs of any such advice or opinion shall be borne by the Fund Company.
     (c) The CCO is serving solely as an officer of the Fund Company and neither the CCO nor Foreside shall be responsible for, or have any obligation to pay, any of the expenses of the Fund Company or any of its Funds. All expenses of a Fund shall be the sole obligation of such Fund, which shall pay or cause to be paid all Fund expenses.
     (d) Notwithstanding any other provision in this Agreement, no amounts under this Agreement shall be payable or begin to accrue with respect to a Fund, until the earlier of (i) the closing of the Fund’s offering or subscription period and (ii) the offering of the Fund’s shares to the public after the effectiveness of its Registration Statement. If for any reason a Fund does not close the offering of its shares after a subscription period or a Fund’s Registration Statement

9


 

either does not become effective or the Fund does not offer and sell its shares to the public after its Registration Statement becomes effective, neither the Fund Company nor any Fund shall be responsible for the payment of any amounts under this Agreement, including fees, out-of pocket expenses or additional charges of Foreside. Notwithstanding the foregoing, each Fund’s investment adviser may pay any out-of-pocket expenses accrued by Foreside if the Fund Company or any Fund is not obligated to pay such amount pursuant to this Section.
     SECTION 6. EFFECTIVENESS, DURATION, TERMINATION AND ASSIGNMENT
     (a) This Agreement shall become effective on the date indicated above or at such time as Foreside commences providing services under this Agreement, whichever is later (the “Effective Date”). Upon the Effective Date, this Agreement shall constitute the entire agreement between the parties and shall supersede all previous agreements between the parties, whether oral or written.
     (b) This Agreement shall continue in effect until terminated in accordance with the provisions hereof.
     (c) This Agreement may be terminated at any time, without the payment of any penalty (i) by the Board on thirty (30) days’ written notice to Foreside or (ii) by Foreside on sixty (60) days’ written notice to the Fund Company, provided, however, that the Board will have the right and authority to remove the individual designated by Foreside as the Fund Company’s CCO at any time, with or without cause, without payment of any penalty. In this case, Foreside will designate another employee of Foreside, subject to approval of the Board and the disinterested Trustees, to serve as temporary CCO until the earlier of: (i) the designation of a new permanent CCO; or (ii) the termination of this Agreement.
     (d) Should the employment of the individual designated by Foreside to serve as the Fund Company’s CCO end or be terminated for any reason, Foreside will immediately designate another qualified individual, subject to ratification by the Board and the disinterested Trustees, to serve as temporary CCO until the earlier of: (i) the designation, and approval by the Board, of a new permanent CCO; or (ii) the termination of this Agreement.
     (e) The provisions of Sections 3, 6(e), 7, 10 and 11 shall survive any termination of this Agreement.
     (f) This Agreement and the rights and duties under this Agreement shall not be assignable by either Foreside or the Fund Company except by the specific written consent of the other party. All terms and provisions of this Agreement shall be binding upon, inure to the benefit of and be enforceable by the respective successors and permitted assigns of the parties hereto.

10


 

     SECTION 7. CONFIDENTIALITY
     Each party shall comply with the laws and regulations applicable to it in connection with its use of confidential information, including, without limitation, Regulation S-P (if applicable). Foreside agrees to treat all records and other information related to the Fund Company and any Fund as proprietary information of the Fund Company or such Fund and, on behalf of itself and its employees, to keep confidential all such information, except that Foreside may release such other information (a) as approved in writing by the Fund Company or a Fund, which approval shall not be unreasonably withheld and may not be withheld where Foreside is advised by counsel that it may be exposed to civil or criminal contempt proceedings for failure to release the information (provided, however, that Foreside shall seek the approval of the Fund Company or the Fund as promptly as possible so as to enable the Fund Company or the Fund to pursue such legal or other action as it may desire to prevent the release of such information) or (b) when so requested by the Fund Company or a Fund.
     SECTION 8. FORCE MAJEURE
     Neither party shall be responsible or liable for any failure or delay arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control including, without limitation, acts of civil or military authority, national emergencies, fire, mechanical breakdowns, flood or catastrophe, acts of God, insurrection, war, terrorism, riots or failure of the mails, transportation, communication system or power supply. In addition, to the extent Foreside’s obligations hereunder are to oversee or monitor the activities of third parties, Foreside shall not be liable for any failure or delay in the performance of Foreside’s duties caused, directly or indirectly, by the failure or delay of such third parties in performing their respective duties or cooperating reasonably and in a timely manner with Foreside.
     SECTION 9. ACTIVITIES OF FORESIDE
     Except to the extent necessary to perform Foreside’s obligations under this Agreement, nothing herein shall be deemed to limit or restrict Foreside’s right, or the right of any of Foreside’s managers, officers or employees who also may be a director, trustee, officer or employee of the Fund Company (including, without limitation, the CCO), or who are otherwise affiliated persons of the Fund Company, to engage in any other business or to devote time and attention to the management or other aspects of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, trust, firm, individual or association.
     SECTION 10. COOPERATION WITH INDEPENDENT PUBLIC ACCOUNTANTS
     Foreside shall cooperate with the each Fund’s independent public accountants and shall take reasonable action to make all necessary information available to the accountants for the performance of such accountants’ duties.

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     SECTION 11. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
     The Trustees of the Fund Company and the shareholders of the Funds shall not be liable for any obligations of the Fund Company or a Fund under this Agreement, and Foreside agrees that, in asserting any rights or claims under this Agreement, it shall look only to the assets and property of the Fund Company and the Funds.
     SECTION 12. MISCELLANEOUS
     (a) This Agreement shall be governed by, and the provisions of this Agreement shall be construed and interpreted under and in accordance with, the laws of the State of Delaware, without regard to the conflict of laws provisions thereof.
     (b) This Agreement may be executed by the parties hereto in any number of counterparts, and all of the counterparts taken together shall be deemed to constitute one and the same instrument.
     (c) If any part, term or provision of this Agreement is held to be illegal, in conflict with any law or otherwise invalid, the remaining portion or portions shall be considered severable and not be affected, and the rights and obligations of the parties shall be construed and enforced as if the Agreement did not contain the particular part, term or provision held to be illegal or invalid. This Agreement shall be construed as if drafted jointly by both Foreside and Fund Company on behalf of the Funds and no presumptions shall arise favoring any party by virtue of authorship of any provision of this Agreement.
     (d) Section headings in this Agreement are included for convenience only and are not to be used to construe or interpret this Agreement.
     (e) Any notice required or permitted to be given hereunder by either party to the other shall be deemed sufficiently given if in writing and personally delivered or sent by facsimile or registered, certified or overnight mail, postage prepaid, addressed by the party giving such notice to the other party at the address furnished below unless and until changed by Foreside or the Fund Company, as the case may be. Notice shall be given to each party at the following address:
           
           
 
(i) To Foreside:
    (ii) To Fund Company:  
 
 
       
 
Foreside Compliance Services, LLC
    del Rey Global Investors Funds  
 
Three Canal Plaza, Suite 100
    6701 Center Drive West, Suite 655  
 
Portland, ME 04101
    Los Angeles, CA 90045  
 
 
       
 
Phone: (207) 553-7110
       
 
Fax: (207) 553-7151
    Phone: (310) 649-1233  
           
     (f) Invoices for fees and expenses due to Foreside hereunder and as set forth in Appendix A hereto shall be sent by Foreside to the address furnished below unless and until changed by the Fund Company (Fund Company to provide reasonable advance notice of any change of billing address to Foreside):

12


 

del Rey Global Investors Funds
Attn: Gerald W. Wheeler
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
Phone: (310) 649-1233
Email: gwheeler@delreyglobal.com
     (g) Nothing contained in this Agreement is intended to or shall require Foreside, in any capacity hereunder, to perform any functions or duties on any day other than a Fund Company business day. Functions or duties normally scheduled to be performed on any day which is not a Fund Company business day shall be performed on, and as of, the next Fund Company business day, unless otherwise required by law.
     (h) The term “affiliate” and all forms thereof used herein shall have the meanings ascribed thereto in the 1940 Act.

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
         
  DEL REY GLOBAL INVESTORS FUNDS
 
 
  By:   /s/ Gerald W. Wheeler    
    Name:   Gerald W. Wheeler   
    Title:   Chairman and Chief Financial Officer   
 
  FORESIDE COMPLIANCE SERVICES, LLC
 
 
  By:   /s/ William R. Royer    
    William R. Royer, President   
       
 

14

EX-99.I 6 x89252exv99wi.htm EX-99.I exv99wi
[Letterhead of Morris, Nichols, Arsht & Tunnell LLP]
January 27, 2011
del Rey Global Investors Funds
6701 Center Drive West, Suite 655
Los Angeles, CA 90045
     Re:   del Rey Monarch Fund
Ladies and Gentlemen:
     We have acted as special Delaware counsel to del Rey Global Investors Fund, a Delaware statutory trust (the “Trust”), in connection with certain matters relating to the formation of the Trust and the issuance of Class A and Institutional (collectively, the “New Classes” and each, individually, a “New Class”) shares (the “Shares”) of the del Rey Monarch Fund (the “Fund”). Capitalized terms used herein and not otherwise herein defined are used as defined in the Amended and Restated Trust Agreement of the Trust dated as of January 14, 2011 ( the “Governing Instrument”).
     In rendering this opinion, we have examined and relied on copies of the following documents, each in the form provided to us: the Governing Instrument; the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the “State Office”) on June 18, 2010 (the “Certificate”); the Trust Agreement of the Trust dated as of June 18, 2010 (the “Original Governing Instrument”); the First Amendment to the Original Governing Instrument dated as of August 24, 2010; the By-laws of the Trust (the “By-laws”); Registration Statement No. 333-167999 under the Securities Act of 1933 on Form N-1A of the Trust as filed with the Securities and Exchange Commission (the “Commission”) on July 6, 2010 as amended by Pre-Effective Amendment No. 1 thereto as filed with the Commission on November 24, 2010 and by Pre-Effective Amendment No. 2 thereto as filed with the Commission on January 26, 2011 (as so amended, the “Registration Statement”); the Written Consent of the Initial Trustee of the Trust dated as of July 6, 2010; the Action by Written Consent of Sole Trustee of the Trust dated as of January 13, 2011; resolutions prepared for adoption at a meeting of the Trustees of the Trust held on January 14, 2011 relating to, among other things, the issuance of the Shares of the Trust (the “Authorizing Resolutions” and collectively with the Registration Statement, the Governing Instrument, the By-laws and all of the foregoing actions by the Trustees of the Trust,


 

del Ray Global Investors Funds
January 27, 2011
Page 2

the “Governing Documents”); a Certificate of Secretary dated on or about the date hereof; and a certification of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, and the legal capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion: (i) the due formation or organization, valid existence and good standing of each entity (other than the Trust) that is a party to any of the documents reviewed by us under the laws of the jurisdiction of its respective formation or organization; (ii)the due adoption, authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced agreements, instruments, certificates and other documents (including, without limitation, the due adoption of the Authorizing Resolutions by the Trustees prior to the first issuance of Shares pursuant thereto) and of all documents contemplated by the Governing Documents to be executed by investors desiring to become Shareholders; (iii) the payment of consideration for Shares, and the application of such consideration, as provided in the Original Governing Instrument and the Governing Documents, as applicable, the satisfaction of all conditions precedent to the issuance of Shares and compliance with all other terms, conditions and restrictions set forth in the Governing Documents in connection with the issuance of Shares (including, without limitation, the taking of all appropriate action by the Trustees to designate the Fund as a Series of the Trust and to designate the New Classes as Classes of shares of the Fund and the rights and preferences attributable thereto prior to the issuance thereof); (iv) that appropriate notation of the names and addresses of, the number of Shares held by, and the consideration paid by, Shareholders will be maintained in the appropriate registers and other books and records of the Trust in connection with the issuance, redemption or transfer of Shares; (v) that, subsequent to the filing of the Certificate, no event has occurred, or prior to the issuance of the Shares will occur, that would cause a termination, dissolution or reorganization of the Trust under Sections 8.2 or 8.3 of Article VIII of the Governing Instrument or Section 8 of the Original Governing Instrument, as applicable; (vi) that, subsequent to the filing of the Certificate, no event has occurred, or prior to the issuance of the Shares will occur, that would cause a termination, dissolution or reorganization of the Fund or any Class under Sections 8.2 or 8.3 of Article VIII of the Governing Instrument or Section 8 of the Original Governing Instrument, as applicable; (vii) that the Trust became, prior to or within 180 days following the first issuance of beneficial interests therein, a registered investment company under the Investment Company Act of 1940, as amended; (viii) that the activities of the Trust have been and will be conducted in accordance with the terms of the Governing Instrument or the Original Governing Instrument, as applicable, and the Delaware Statutory Trust Act, 12 Del. C. §§ 3801 et seq.; and (ix) that each of the documents examined by us is in full force and effect, expresses the entire understanding of the parties thereto with respect to the subject matter thereof and has not been amended, supplemented or otherwise modified, except as herein referenced. We have not reviewed any documents other than those identified above in connection with this opinion, and we have assumed that there are no other documents that are contrary to or inconsistent with the opinions expressed herein. No opinion is expressed herein with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. Further, we express no opinion on

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del Ray Global Investors Funds
January 27, 2011
Page 3

the sufficiency or accuracy of the Registration Statement, or any other registration or offering documentation relating to the Trust, the Fund or the Shares. As to any facts material to our opinion, other than those assumed, we have relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained.
     Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that:
     1. The Trust is a duly formed and validly existing statutory trust in good standing under the laws of the State of Delaware.
     2. The Shares to be issued and delivered to Shareholders of the Fund, upon issuance, will be legally issued, and, subject to the qualifications below, fully paid and non-assessable.
     With respect to the opinion expressed in paragraph 2 above, we note that, pursuant to Section 4.5 of Article IV of the Governing Instrument, the Trustees have the power to cause each Shareholder, or each Shareholder of any particular Series, to pay directly, in advance or arrears, for charges of the Trust’s custodian or transfer, shareholder servicing or similar agent, an amount fixed from time to time by the Trustees, by setting off such charges due from such Shareholder from declared but unpaid dividends owed such Shareholder and/or by reducing the number of Shares in the account of such Shareholder by that number of full and/or fractional Shares which represents the outstanding amount of such charges due from such Shareholder.
     We hereby consent to the filing of a copy of this opinion with the Commission as an exhibit to an amendment to the Registration Statement. In giving this consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts and our review of the above-referenced documents and on the application of Delaware law as the same exist on the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity (including any Shareholder) with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. This opinion is intended solely for the benefit of the Trust and the Shareholders in connection with the matters contemplated hereby and may not be relied on by any other person or entity or for any other purpose without our prior written consent.

-3-


 

del Ray Global Investors Funds
January 27, 2011
Page 4

Sincerely,
MORRIS, NICHOLS, ARSHT & TUNNELL LLP
/s/ Louis G. Hering
Louis G. Hering

-4-

EX-99.J 7 x89252exv99wj.htm EX-99.J exv99wj
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Pre-Effective Amendment No. 3 to Registration Statement No. 333-167999 on Form N-1A of our report dated January 28, 2011 relating to the financial statements of del Rey Global Investors Funds — del Rey Monarch Fund appearing in the Statement of Additional Information, which is part of such Registration Statement and to the references to us under the headings “Independent Registered Public Accounting Firm” in the Prospectus and in the Statement of Additional Information, which are part of such Registration Statement.
/s/ Deloitte & Touche LLP
Los Angeles, California
January 28, 2011

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(WILLKIE FARR & GALLAGHER LLP)
  1875 K Street, N.W.
Washington, DC 20006-1238
 
   
 
  Tel: 202 303 1000
 
  Fax: 202 303 2000
VIA EDGAR
January 28, 2011
Christian T. Sandoe, Esq.
Senior Counsel
Division of Investment Management
Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
     Re:   del Rey Global Investors Funds
File Nos. 333-167999 & 811-22434
Dear Mr. Sandoe:
     On behalf of del Rey Global Investors Funds, a Delaware Trust (the “Trust”), and its series, the del Rey Monarch Fund (the “Fund”), attached hereto for filing is Pre-Effective Amendment No. 3 to the Trust’s Registration Statement on Form N-1A (the “Registration Statement”), which has been marked to show the changes made from the Trust’s Pre-Effective Amendment No. 2 filed on January 26, 2011. As discussed with the staff of the Securities and Exchange Commission (the “Staff”), the Trust will request, via separate correspondence, acceleration of effectiveness to today, January 28, 2011.
     Should members of the Staff have any questions or comments concerning the Registration Statement, please do not hesitate to contact me at (202) 303-1151 or Maria Gattuso at (212) 728-8294.
         
  Sincerely,
 
 
  /s/ David N. Solander    
  David N. Solander   
     
 
cc:   Gerald W. Wheeler, Esq.
Barry Barbash, Esq.
Maria Gattuso, Esq.
Enclosure
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