AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 29, 1998
Securities Act File No. 33-14527
Investment Company Act File No. 811-07871
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. 1 /X/
Post-Effective Amendment No. /_/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 1 /X/
(Check appropriate box or boxes)
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NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
(Exact name of Registrant as specified in charter)
100 Wall Street
New York, NY 10005
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code
RICHARD W. INGRAM, PRESIDENT
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
60 STATE STREET, SUITE 1300
BOSTON, MASSACHUSETTS 02109
(Name and Address of Agent for Service)
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Copies to:
COUNSEL FOR THE REGISTRANT:
MARGERY K. NEALE, ESQ.
SHEREFF, FRIEDMAN, HOFFMAN & GOODMAN, LLP
919 THIRD AVENUE, NEW YORK, NEW YORK 10022
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Approximate Date of Proposed Public Offering:
As soon as practicable after the effective date of the Registration Statement
The Registrant hereby amends this Registration Statement 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 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 said Section 8(a),
may determine.
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<PAGE>
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
(as required by Rule 481(a))
<TABLE>
<CAPTION>
N-1A Item No. Location in Prospectus
<S> <C> <C> <C>
Part A
Item 1. Cover Page...........................................Cover Page
Item 2. Synopsis.............................................Summary of Expenses
Item 3. Condensed Financial Information......................Inapplicable
Item 4. General Description of Registrant....................A Profile of the Portfolios;
The Portfolios in Detail--
Matching Your Investment
Needs to the Portfolios; --
Investment Policies and
Restrictions; Other
Information
Item 5. Management of the Fund...............................Operating Expenses and Fees
- Management and Related
Expenses
Item 5A. Management's Discussion of Fund
Performance.........................................Inapplicable
Item 6. Capital Stock and Other Securities...................Other Information
Item 7. Purchase of Securities Being Offered.................Purchases and Redemptions--
How to Buy Shares
Item 8. Redemption or Repurchase.............................Purchases and Redemptions--
How to Sell Shares
Item 9. Pending Legal Proceedings............................Inapplicable
Part B
Item 10. Cover Page...........................................Cover Page
Item 11. Table of Contents....................................Cover Page
Item 12. General Information and History......................General Information
Item 13. Investment Objectives and Policies...................Investment Policies and
Restrictions
Item 14. Management of the Fund...............................Directors and Executive
Officers; The Investment
Manager
Item 15. Control Persons and Principal Holders
of Securities.......................................Not Applicable
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Item 16. Investment Advisory and Other Services...............The Investment Manager;
Investment Management,
Distribution and Other
Services
Item 17. Brokerage Allocation and other Practices.............Portfolio Transactions
Item 18. Capital Stock and Other Securities...................General Information
Shareholder Rights
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered............................Share Price Calculation;
Additional Purchase and
Redemption Information
Item 20. Tax Status...........................................Dividends and Taxes
Item 21. Underwriters.........................................Investment Management,
Distribution and Other
Services
Item 22. Calculation of Performance Data......................Performance
Item 23. Financial Statements.................................Not Applicable
</TABLE>
Part C
Information required to be included is set forth under the appropriate Item, so
numbered, in Part C to this Registration Statement.
3
<PAGE>
KENNEDY CABOT
CASH MANAGEMENT PORTFOLIOS
TABLE OF CONTENTS
A PROFILE OF THE PORTFOLIOS..................................................
SUMMARY OF EXPENSES..........................................................
THE PORTFOLIOS IN DETAIL.....................................................
PURCHASES AND REDEMPTIONS....................................................
OPERATING EXPENSES AND FEES..................................................
OTHER INFORMATION............................................................
APPENDIX.....................................................................
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
KENNEDY CABOT CASH
MANAGEMENT PORTFOLIOS
9470 Wilshire Boulevard * Beverly Hills, California 90212
KENNEDY CABOT
CASH MANAGEMENT
PORTFOLIOS
............................................................
Three portfolios to choose from:
Kennedy Cabot Money Market Portfolio
Kennedy Cabot U.S. Government Portfolio
Kennedy Cabot Municipal Portfolio
............................................................
_____, 1998
4
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
KENNEDY CABOT CASH MANAGEMENT PORTFOLIOS
______, 1998
This Prospectus describes the Kennedy Cabot Cash Management Portfolios, three
money market portfolios (each a "Portfolio" and collectively the "Portfolios")
designed for investors who seek current income consistent with the preservation
of capital, liquidity and a stable price of $1.00 per share. The three
Portfolios are: Kennedy Cabot Money Market Portfolio (the "Money Market
Portfolio"), Kennedy Cabot U.S. Government Portfolio (the "U.S. Government
Portfolio") and Kennedy Cabot Municipal Portfolio (the "Municipal Portfolio").
Each Portfolio is a diversified investment portfolio of National Investors Cash
Management Fund, Inc. (the "Company"), an open-end, management investment
company known as a mutual fund. Each Portfolio invests in high quality money
market instruments.
This Prospectus contains information about the Portfolios which a prospective
investor should know before investing and should be retained for future
reference. A Statement of Additional Information relating to the Portfolios
dated _______ 1998 (the "SAI") has been filed with the Securities and Exchange
Commission ("SEC") and is incorporated herein by reference. The SAI is available
upon request and without charge by writing the Portfolios at 9470 Wilshire
Boulevard, Beverly Hills, California 90212 or by contacting Kennedy Cabot
("Kennedy Cabot") at (800) 252-0090. The SEC maintains a Web site
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information regarding the Company.
AN INVESTMENT IN A PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY, AND IS NOT A DEPOSIT OR OBLIGATION OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. THERE CAN BE NO ASSURANCE THAT ANY PORTFOLIO WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
5
<PAGE>
KENNEDY CABOT
CASH MANAGEMENT PORTFOLIOS
A PROFILE OF THE PORTFOLIOS
WHO MAY WANT TO INVEST
Each of the Portfolios - the Money Market Portfolio, the U.S. Government
Portfolio and the Municipal Portfolio - is a money market portfolio designed for
investors who would like to earn income at current money market rates in a
liquid investment that preserves capital. Because of their emphasis on liquidity
and preservation of capital, each Portfolio may be used as a high quality money
market investment for an investor's short-term cash requirements.
INVESTMENT OBJECTIVES OF EACH PORTFOLIO
Each of the Portfolios seeks maximum current income to the extent consistent
with liquidity and preservation of capital and a stable price of $1.00 per
share. The Money Market Portfolio has the flexibility to invest in a broad range
of high quality money market securities in pursuit of its objective. The U.S.
Government Portfolio offers an added measure of safety by investing exclusively
in obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Municipal Portfolio offers investors federally tax-exempt
income by investing primarily in municipal securities. The rates of income each
Portfolio earns will vary from day to day and generally reflect short-term
interest rates. See "The Portfolios in Detail--Investment Policies and
Restrictions." There can be no assurance that any Portfolio will be able to
maintain a stable net asset value ("NAV") of $1.00 per share.
BENEFITS AND FEATURES TO KENNEDY CABOT CUSTOMERS
If you are a customer of Kennedy Cabot, you will enjoy the benefits of having
free credit balances in your Kennedy Cabot brokerage account swept daily into
the Portfolio that you choose as your sweep portfolio. In addition, if you set
up your account as a Kennedy Cabot Money Management Account, you will have
access to money in your sweep account 24 hours-a-day, seven days-a-week simply
by writing a check or by using your ATM/VISA Check Card. All of your activity in
the Portfolios will be consolidated on your Kennedy Cabot brokerage account
statement to make your recordkeeping easy. See "Purchases and Redemptions."
An ATM/VISA Check Card cash withdrawal from a customer's Kennedy Cabot Money
Management Account may result in the automatic redemption of Portfolio shares.
For a discussion of these withdrawals, see "Purchases and Redemptions - How To
Sell Shares--Automatic Sweep Redemptions."
6
<PAGE>
SUMMARY OF EXPENSES
<TABLE>
<CAPTION>
Money Market U.S. Government Municipal
Portfolio Portfolio Portfolio
-------------------- ------------------------ ------------------
<S> <C> <C> <C>
Shareholder Transaction Expenses None None None
Annual Operating Expenses (as a
percentage of average daily net assets)
Management Fees .35%1 .35%1 .25%1
(after fee waivers and/or expense reimbursements)1
Shareholder Servicing Fees (after fee .20%2 .17%2 .11%2
waivers and/or expense reimbursements)2
12b-1 Fees None None None
Other Expenses3 .39% .39% .39%
---- ---- ----
Total Portfolio Operating Expenses .94% .91% .75%
(after fee waivers and/or expense reimbursements)
</TABLE>
Example
You would pay the following expenses on a $1,000 investment in shares of each
Portfolio, assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
- ------------------------------
1 The annual investment management fee for each Portfolio is
payable to Waterhouse Asset Management, Inc. (the "Investment
Manager") on a graduated basis of .35 of 1% of the first $1
billion of average daily net assets of each Portfolio, .34 of
1% of the next $1 billion, and .33 of 1% of average daily net
assets over $2 billion. The Investment Manager has agreed to
waive a portion of the annual investment management fee for
the Municipal Portfolio through April 30, 1999, so that the
actual fee payable annually by the Municipal Portfolio during
such period will be .25 of 1% of average daily net assets of
such Portfolio. The investment management fee is payable
monthly. See "Operating Expenses and Fees -- Management and
Related Expenses" and the SAI.
2 The Shareholder Servicing Fee is payable pursuant to a
Shareholder Servicing Plan adopted by the Company's Board of
Directors. Waterhouse Securities, Inc. ("Waterhouse
Securities"), the shareholder servicing agent,
has agreed to waive the annual fees payable through
April 30, 1999 under the Shareholder Servicing Plan so as not
to exceed .20 of 1% of average daily net assets in the case of
the Money Market Portfolio, .17 of 1% of average daily net
assets in the case of the U.S. Government Portfolio and .11 of
1% of average daily net assets in the case of the Municipal
Portfolio. Absent this waiver of fees, the Shareholder
Servicing Fee as a percentage of average daily net assets for
each Portfolio would be .25 of 1%. See "Operating Expenses and
Fees -- Shareholder Servicing" and the SAI.
3 Other Expenses include, among other items, an administration
fee (.10 of 1% of average daily net assets), which is paid to
Waterhouse Securities; and a transfer agent fee (.20 of 1%
average daily net assets), which is paid to National Investor
Services Corp., an affiliate of the Investment Manager (the
"Transfer Agent"). All expenses included in this category are
based upon estimated amounts for the current or fiscal year
ending , . See "Operating Expenses and Fees --
Administration," "-- Transfer Agent," "-- Other Expenses"
and the SAI.
7
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 Years
------ -------
<S> <C> <C>
Money Market Portfolio $10 $30
U.S. Government Portfolio $9 $29
Municipal Portfolio $8 $24
</TABLE>
The purpose of the preceding table is to assist you in understanding the
various costs and expenses that an investor in a Portfolio will bear directly
or indirectly. Investment dealers and other firms may independently charge
shareholders additional fees. The example should not be considered to be a
representation of past or future expenses. Actual expenses may be greater or
less than those shown. The example assumes a 5% annual rate of return
pursuant to the requirements of the SEC. This hypothetical rate of return is
not intended to be representative of past or future performance of any
Portfolio. See "Operating Expenses and Fees."
THE PORTFOLIOS IN DETAIL
MATCHING YOUR INVESTMENT NEEDS TO THE PORTFOLIOS
The Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio are each money market mutual funds. Each Portfolio seeks maximum
current income to the extent consistent with liquidity and preservation of
capital. The Portfolios are managed by investment professionals who purchase
only high quality, short-term money market securities that they believe present
minimal credit risk. Each Portfolio invests only in U.S. dollar denominated
instruments that have a remaining maturity of 397 calendar days or less (as
calculated under Rule 2a-7 ("Rule 2a-7") under the Investment Company Act of
1940, as amended (the "Investment Company Act")) and maintains a dollar-weighted
average portfolio maturity of 90 days or less.
Each Portfolio invests in money market securities of different types. The Money
Market Portfolio has the flexibility to invest broadly in U.S.
dollar-denominated securities of domestic and foreign issuers. The U.S.
Government Portfolio offers an added measure of safety and invests exclusively
in obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. The Municipal Portfolio offers investors federally tax-exempt
income by investing primarily in municipal securities. Each Portfolio may invest
in the types of securities described below under "Investment Policies and
Restrictions." The rates of income will vary from day to day and generally
reflect current short-term interest rates.
Although the Portfolios are managed to avoid fluctuations of principal and
maintain a stable share price of $1.00 per share, there is no guarantee that a
Portfolio will achieve its investment objective or maintain a price of $1.00 per
share.
8
<PAGE>
None of the Portfolios, including the U.S. Government Portfolio, is guaranteed
by the U.S. government. In addition, the Municipal Portfolio would not be an
appropriate investment for retirement plans such as IRA or Keogh accounts, as
income earned by such plans is tax-deferred until withdrawal, and amounts
withdrawn are taxable as ordinary income. Therefore, such plans would receive no
incremental tax benefit by investing in the Municipal Portfolio.
INVESTMENT POLICIES AND RESTRICTIONS
The following is an abbreviated discussion of the investment policies and
restrictions of each Portfolio. A more detailed listing of each Portfolio's
policies and restrictions and more detailed information about a Portfolio's
investments are contained in the appendix to this Prospectus which discusses
certain types of investments (the "Appendix") and in the SAI.
MONEY MARKET PORTFOLIO. The Money Market Portfolio pursues its objective by
investing in high quality U.S. dollar-denominated money market instruments with
remaining maturities of 397 calendar days or less, consisting of the securities
described below and in the section of this Prospectus entitled "All Portfolios":
1. Certificates of deposit and time deposits of domestic banks (including their
foreign branches), domestic savings and loan associations, United States
branches and foreign branches of foreign banks, and bankers' acceptances of each
of such entities other than domestic savings and loan associations.
2. Commercial paper rated in one of the two highest rating categories by a
nationally recognized statistical rating organization ("NRSRO"), or commercial
paper or notes of issuers with a debt issue (which is comparable in priority and
security with the commercial paper or notes) rated in one of the two highest
rating categories for short-term debt obligations by an NRSRO, or unrated
commercial paper or notes of comparable quality as determined by the Investment
Manager, or commercial paper secured by a letter of credit issued by a domestic
or foreign bank rated in the highest rating category by an NRSRO. For a
description of ratings issued by Moody's Investors Service ("Moody's") and
Standard & Poor's Ratings Group ("S&P"), two NRSROs, see "Annex - Ratings of
Investments" in the SAI.
3. Obligations of, or guaranteed by, the United States or Canadian
governments, their agencies or instrumentalities.
4. Repurchase agreements involving obligations that are suitable for
investment under the categories set forth above. Repurchase agreements are
discussed in the Appendix and in the SAI.
In addition, the Money Market Portfolio limits its investments to securities
that meet the quality and diversification requirements of Rule 2a-7. These
diversification requirements prohibit the Money Market Portfolio from investing
more than 5% of its total assets in the securities of any one issuer, except in
limited circumstances permitted by Rule 2a-7. In addition, the Portfolio may
9
<PAGE>
not invest more than 5% of its total assets in securities that have not been
rated (or deemed comparable to securities rated) in the highest rating category
by an NRSRO, with investment in such "second tier securities" of any one issuer
being limited to the greater of 1% of the Portfolio's total assets or $1
million. These issuer diversification restrictions do not apply to securities
issued by the U.S. government and its agencies. The applicable quality
requirements are described below under "All Portfolios."
To the extent the Money Market Portfolio purchases Eurodollar certificates of
deposit issued by foreign branches of U.S. banks or by foreign banks, commercial
paper issued by foreign branches of U.S. banks or by foreign banks, or
commercial paper issued by foreign entities, consideration will be given to
their marketability and possible restrictions on international currency
transactions and to regulations imposed by the domicile country of the foreign
issuer. Eurodollar certificates of deposit may not be subject to the same
regulatory requirements as certificates of deposit issued by U.S. banks and
associated income may be subject to the imposition of foreign taxes which would
reduce the yield on such investments to the Portfolio.
The Money Market Portfolio may invest in commercial paper issued by major
corporations under the Securities Act of 1933 in reliance on the exemption from
registration afforded by Section 3(a)(3) thereof. Such commercial paper may be
issued only to finance current transactions and must mature in nine months or
less. Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers and individual investor participation in
the commercial paper market is very limited. The Portfolio also may invest in
commercial paper issued in reliance on the so-called "private placement"
exemption from registration which is afforded by Section 4(2) of the Securities
Act of 1933 ("Section 4(2) paper"). Section 4(2) paper is restricted as to
disposition under the federal securities laws. In addition, the Money Market
Portfolio may invest in other securities that are not registered under the
Securities Act of 1933 but that may be resold to "qualified institutional
buyers" under Rule 144A under the Securities Act of 1933 ("Rule 144A
Securities"). See "All Portfolios" for additional information about Rule 144A
Securities. For more information about Section 4(2) paper and Rule 144A
Securities, see the Appendix.
U.S. GOVERNMENT PORTFOLIO. The U.S. Government Portfolio pursues its objective
by investing exclusively in U.S. Treasury bills, notes, bonds and other
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities, and repurchase agreements with respect to such obligations
("Government Securities"). A U.S. government guarantee of the securities owned
by the U.S. Government Portfolio, however, does not guarantee the NAV of the
Portfolio's shares. See "Other Information - Pricing Your Shares." All
securities purchased must have a remaining maturity of 397 calendar days or
less. The Portfolio limits its investments to securities that meet the quality
requirements of Rule 2a-7, which are described below under "All Portfolios."
For more information about Government Securities and investments made by the
U.S. Government Portfolio, see "All Portfolios" and the Appendix.
10
<PAGE>
Some securities issued by U.S. government agencies or instrumentalities are
supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Banks, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Federal National
Mortgage Association, Farm Credit System and Student Loan Marketing Association.
With respect to securities supported only by the credit of the issuing agency or
instrumentality or by an additional line of credit with the U.S. Treasury, there
is no guarantee that the U.S. government will provide support to such agencies
or instrumentalities and such securities may involve risk of loss of principal
and interest.
MUNICIPAL PORTFOLIO. The Municipal Portfolio seeks maximum current income that
is exempt from federal income taxes to the extent consistent with preservation
of capital and liquidity. The Portfolio pursues its objective primarily by
investing in a diversified portfolio of short-term, high quality, tax-exempt
municipal obligations. It is a fundamental policy of the Municipal Portfolio
that normally no less than 80% of its total assets will be invested in
obligations issued or guaranteed by states, territories and possessions of the
United States and the District of Columbia and their political subdivisions,
agencies and instrumentalities ("Municipal Securities"), the income from which
is exempt from federal income tax, but may be subject to federal alternative
minimum tax liability.
Dividends representing net interest income received by the Municipal Portfolio
on Municipal Securities will be exempt from federal income tax when distributed
to the Portfolio's shareholders, except to the extent that they are subject to
alternative minimum tax. Such dividend income may be subject to state and local
taxes. See "Other Information - Taxes - Municipal Portfolio." The Portfolio's
assets will consist of Municipal Securities, temporary investments as described
below, and cash.
The Municipal Portfolio will invest only in Municipal Securities that at the
time of purchase: (a) are rated within the two highest ratings by an NRSRO for
Municipal Securities, short-term Municipal Securities or municipal commercial
paper; (b) are guaranteed or insured by the U.S. government as to the payment of
principal and interest; (c) are fully collateralized by an escrow of Government
Securities acceptable to the Investment Manager; or (d) are unrated, if
determined by the Investment Manager to be at least equal in quality to one or
more of the above ratings in accordance with the requirements of Rule 2a-7. In
addition, the Portfolio limits its investments to securities that meet the
applicable quality and diversification requirements of Rule 2a-7, which are
described below under "All Portfolios." For a description of the ratings issued
by Moody's and S&P, see "Annex - Ratings of Investments" in the SAI.
Municipal Securities are generally classified as "general obligation" or
"revenue" issues. General obligation bonds are secured by the issuer's pledge of
its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. For more information about Municipal Securities, see
the Appendix and the SAI.
11
<PAGE>
The Municipal Portfolio may purchase high quality Certificates of Participation
in trusts that hold Municipal Securities. A Certificate of Participation gives
the Portfolio an undivided pro rata interest in each Municipal Security equal to
the Portfolio's percentage ownership interest in the Certificate of
Participation. For more information about Certificates of Participation, see the
Appendix.
The Municipal Portfolio may purchase Municipal Securities that provide for the
right to resell them to an issuer, bank or dealer at an agreed-upon price or
yield within a specified period prior to the maturity date of such securities
subject to the requirements of Rule 2a-7. Such a right to resell is referred to
as a "Standby Commitment." For more information about Standby Commitments, see
the Appendix.
In seeking to achieve its investment objective, the Municipal Portfolio may
invest all or any part of its assets in Municipal Securities that are Industrial
Development Bonds. Moreover, although the Portfolio does not currently intend to
do so on a regular basis, it may invest more than 25% of its assets in Municipal
Securities that are repayable out of revenue streams generated from economically
related projects or facilities, if such investment is deemed necessary or
appropriate by the Portfolio's Investment Manager. To the extent that the
Portfolio's assets are concentrated in Municipal Securities payable from
revenues on economically related projects and facilities, the Portfolio will be
subject to the risks presented by such projects to a greater extent than it
would be if the Portfolio's assets were not so concentrated. For a description
of Industrial Development Bonds, see "Municipal Securities" in the Appendix.
The Municipal Portfolio may invest in Municipal Lease Obligations and
participation interests therein. The Portfolio may also purchase Tender Option
Bonds. To the extent such securities may be considered "conduit securities," as
defined in Rule 2a-7, such securities will also be subject to the limitations of
Rule 2a-7 applied to conduit securities, as discussed more fully below under
"All Portfolios". For a description of each of these types of investments, see
the Appendix.
The Municipal Portfolio may deviate from its investment policies and may adopt
temporary defensive measures when significant adverse market, economic,
political or other circumstances require immediate action in order to avoid
losses. During such periods, the Portfolio may temporarily invest its assets,
without limitation, in taxable temporary investments which include the types of
money market instruments listed under "Money Market Portfolio" above. Interest
income from temporary investments is taxable to shareholders as ordinary income.
Although the Portfolio is permitted to invest in taxable securities, it is the
Portfolio's primary intention to generate income dividends that are not subject
to federal income taxes. See "Other Information Dividends" and "Other
Information - Taxes."
ALL PORTFOLIOS. Each Portfolio must comply with the requirements of Rule 2a-7.
Under the applicable quality requirements of Rule 2a-7, the Portfolios may
purchase only U.S. dollar-denominated instruments that are determined to
present minimal credit risks and that are at the time of acquisition "Eligible
Securities" as defined in Rule 2a-7. Generally, "Eligible
12
<PAGE>
Securities" under Rule 2a-7 include only securities that are rated in the top
two rating categories by the required number of NRSROs (two or, if only one such
NRSRO has rated the security, that one organization) or if unrated, are deemed
to be of comparable quality. For a description of the ratings for Eligible
Securities issued by Moody's and S&P, see "Annex - Ratings of Investments" in
the SAI.
Each Portfolio will maintain a dollar-weighted average maturity of 90 days or
less and will limit its investments to securities that have remaining maturities
of 397 calendar days or less or other features that shorten maturities in a
manner consistent with the requirements of Rule 2a-7, such as interest rate
reset and demand features.
It is a fundamental policy of all Portfolios that, with respect to 75% of its
assets, a Portfolio may not invest in the securities of any one issuer, other
than Government Securities, if as a result, more than 5% of its total assets
would be invested in securities of that issuer or the Portfolio would hold more
than 10% of the outstanding voting securities of that issuer. Rule 2a-7 imposes
additional diversification requirements on the Portfolios. As a matter of
operating policy, as to 100% of their assets, none of the Portfolios will invest
more than 5% of its total assets in the securities of any one issuer, other than
Government Securities and certain demand features permitted by Rule 2a-7,
provided that a Portfolio may invest up to 25% of its total assets in "first
tier securities" of a single issuer for up to three business days. See the SAI.
In addition, the diversification requirements of Rule 2a-7 limit the ability of
the Municipal Portfolio to invest in certain "conduit securities," as defined in
Rule 2a-7, that are "second tier securities." Generally, conduit securities are
securities issued to finance non-governmental private projects, such as
retirement homes, private hospitals, local housing projects, and industrial
development projects, with respect to which the ultimate obligor is not a
government entity. The Municipal Portfolio's investment in "second tier" conduit
securities, which may include certain Industrial Development Bonds, is limited
to 5% of the Portfolio's total assets and, with respect to second tier conduit
securities issued by a single issuer, the greater of $1 million or 1% of the
Portfolio's total assets.
A Portfolio may borrow from banks and engage in reverse repurchase agreements.
However, as a matter of fundamental policy, a Portfolio may not borrow money
except as a temporary measure for defensive or emergency purposes, and then
(together with any reverse repurchase agreements) only in an amount up to
33 1/3% of the value of its total assets less liabilities (other than
borrowings), in order to meet redemption requests without immediately selling
any portfolio securities. No Portfolio will borrow from banks for leverage
purposes. As a matter of fundamental policy, a Portfolio will not purchase any
security, other than a security with a maturity of one day, while reverse
repurchase agreements or borrowings representing more than 5% of its total
assets are outstanding. In addition, as a matter of fundamental policy, no
Portfolio will lend any security or make any other loan if, as a result, more
than 33 1/3% of its total assets would be loaned to other parties, but this
limit does not apply to purchases of debt securities or to repurchase
agreements. For more information on reverse repurchase agreements and loans of
portfolio securities, see the Appendix and the SAI.
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A Portfolio will not purchase or hold illiquid securities, including time
deposits and repurchase agreements not entitling the holder to payment of
principal and interest within seven days upon notice if, as a result thereof,
more than 10% of such Portfolio's net assets would be invested in such
securities. If otherwise consistent with its investment objective and policies,
each Portfolio may purchase securities that are not registered under the
Securities Act of 1933 but that can be sold to qualified institutional buyers in
accordance with Rule 144A thereunder. Rule 144A Securities and Section 4(2)
paper will not be considered to be illiquid so long as the Investment Manager,
acting under guidelines adopted by the Board of Directors, determines that an
adequate trading market exists for the security. For more information on
illiquid securities, see the SAI.
Each Portfolio may purchase securities issued by other investment companies,
consistent with the Portfolio's investment objectives and policies. Such
investments are not currently anticipated, but in the event that such
investments are made, they will be made solely in no-load money market funds.
For more information, see the Appendix and the SAI.
Each Portfolio may invest in instruments having rates of interest that are
adjusted periodically ("Variable Rate Obligations") or that "float" continuously
("Floating Rate Obligations") according to formulae intended to minimize
fluctuation in values of the instruments. For information on Variable and
Floating Rate Obligations, see the Appendix and the SAI. Rule 2a-7 sets forth
certain requirements for determining the maturity of Variable and Floating Rate
Obligations, with which each Portfolio will comply.
Each Portfolio may purchase and sell securities on a when-issued or delayed
delivery basis. A when-issued or delayed delivery transaction arises when
securities are bought or sold for future payment and delivery to secure what is
considered to be an advantageous price and yield to the Portfolio at the time it
enters into the transaction. For more information about when-issued or delayed
delivery basis securities, see the Appendix.
Each Portfolio, other than the Municipal Portfolio, may purchase certain
Stripped Government Securities. For a discussion of Stripped Government
Securities, see the Appendix.
Each Portfolio may also invest in Zero Coupon Bonds, a description of which
appears in the Appendix.
Each Portfolio, other than the Municipal Portfolio, may trade in certain
Asset-Backed Securities, which include pools of mortgages, loans, receivables or
other assets. Payment of principal and interest may be largely dependent upon
the cash flows generated by the assets backing the securities. The U.S.
Government Portfolio will not invest in any Asset-Backed Securities that are not
Government Securities. For a discussion of Asset-Backed Securities, see the
Appendix.
Each Portfolio may invest in securities subject to letters of credit or other
credit enhancement features. Such letters of credit or other credit enhancement
features are not subject to federal
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deposit insurance, and changes in the credit quality of the issuers of such
letters of credit or other credit enhancement features could cause losses to a
Portfolio and affect its share price.
FUNDAMENTAL INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The investment
objective of each Portfolio is fundamental. The Company has also adopted for
each Portfolio certain fundamental investment restrictions and policies which
are identified above and others which are set forth in the SAI. Such fundamental
investment objectives, restrictions and policies cannot be changed without
approval by holders of a "majority of the outstanding voting securities" of such
Portfolio, as defined in the SAI.
PURCHASES AND REDEMPTIONS
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You may invest in the Portfolios through your Kennedy Cabot brokerage account.
Kennedy Cabot is a division of Waterhouse Securities.
OPENING AN ACCOUNT.
You may open a Kennedy Cabot brokerage account by calling or visiting the
Kennedy Cabot office nearest you and requesting a New Account Application. There
is no fee to open a Kennedy Cabot brokerage account.
SETTING UP YOUR ACCOUNT FOR AUTOMATIC SWEEP. By setting up your Kennedy Cabot
brokerage account for automatic sweep, free credit balances in your brokerage
account will be invested or "swept" automatically each day on which the New York
Stock Exchange (the "NYSE") is open ("Business Day") into the Portfolio you have
selected ("Sweep Portfolio"). This feature keeps your money working for you
while it is not invested in other securities. "Free credit balances" refers to
any settled or cleared funds in your Kennedy Cabot brokerage account that are
available for payment or investment.
To set up your Kennedy Cabot brokerage account for automatic sweep, simply call
the Kennedy Cabot office handling your account. In most cases, a Kennedy Cabot
account executive will set up your account for automatic sweep while you are on
the phone.
While you may purchase shares of each Portfolio at any time, only one Portfolio
may be designated as your Sweep Portfolio. The sweep feature is subject to the
terms and conditions of your Kennedy Cabot brokerage account agreement.
SETTING UP YOUR KENNEDY CABOT MONEY MANAGEMENT ACCOUNT. For those Kennedy Cabot
customers who qualify, a Kennedy Cabot Money Management Account provides
additional services beyond those of a traditional brokerage account. In addition
to having free credit balances in your brokerage account swept automatically
each Business Day into your Sweep Portfolio, you can access your investment in
the Portfolio by writing checks or using an
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ATM/VISA Check Card. You should contact your Kennedy Cabot account executive
for more details.
To set up your Kennedy Cabot Money Management Account, you should complete the
appropriate section of the New Account Application.
ACCOUNT PROTECTION. Within your Kennedy Cabot brokerage account, you have access
to other investments available at Kennedy Cabot such as stocks, bonds, and other
mutual funds. The securities in your Kennedy Cabot brokerage account, including
shares of the Portfolios, are protected up to $50 million for loss of securities
(not including loss due to market fluctuations of securities or economic
conditions). The first $500,000 is provided by Securities Investor Protection
Corporation (known as "SIPC") of which $100,000 covers cash. The remaining $49.5
million is provided by a private insurance carrier.
HOW TO BUY SHARES.
You may purchase shares of a Portfolio either through the automatic sweep
feature or by way of a direct purchase as set forth below.
AUTOMATIC SWEEP PURCHASES. Free credit balances in your Kennedy Cabot brokerage
account will be automatically invested each Business Day in the Sweep Portfolio
you have selected. Checks deposited to your Kennedy Cabot brokerage account will
be automatically invested in the Sweep Portfolio, normally after allowing three
Business Days for clearance. Net proceeds from securities transactions in your
brokerage account will be automatically invested on the Business Day following
settlement. Dividends and interest payments from investments in your brokerage
account will be automatically invested in the Sweep Portfolio on the day they
are credited to your account.
DIRECT PURCHASES. A Kennedy Cabot brokerage customer may purchase shares of each
of the Portfolios by placing an order directly with a Kennedy Cabot account
executive. You may buy shares by mailing or bringing your check to any Kennedy
Cabot office. Checks should be made payable to "National Investor Services
Corp." and you should write your Kennedy Cabot account number on the check. The
check will be deposited to your Kennedy Cabot brokerage account.
PRICE. Shares are purchased at their NAV per share next determined after an
order is received by the Portfolio. There is no sales charge imposed at the
time of purchase of shares in the Portfolio.
Each Portfolio reserves the right to suspend the offering of shares for a period
of time and to reject any specific purchase order, including certain purchases
by exchange. Kennedy Cabot is responsible for promptly transmitting purchase
orders to the Transfer Agent.
HOW TO SELL SHARES.
To sell shares of a Portfolio, simply call a Kennedy Cabot account executive.
The proceeds of the sale of your Portfolio shares ordinarily will be credited to
your brokerage account the same
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Business Day, but not later than seven calendar days after an order to sell
shares is received. If Kennedy Cabot issues you a redemption check, it may be
mailed to you, or you may pick it up in person at a Kennedy Cabot office.
AUTOMATIC SWEEP REDEMPTIONS. Shares of your Sweep Portfolio may be sold
automatically to satisfy a debit balance in your Kennedy Cabot brokerage
account. To the extent that there are not a sufficient number of shares of your
Sweep Portfolio to satisfy any such debit, shares that you own of any other
Portfolio may be sold. In addition, shares will be sold to settle securities
transactions in your Kennedy Cabot brokerage account if on the day before
settlement there is insufficient cash in the account to settle the net
transactions. Your brokerage account, as of the close of business each Business
Day, will be scanned for debits and pending securities settlements, and after
application of any free credit balance in the account to the debits, a
sufficient number of shares will be sold the following Business Day to satisfy
any remaining debits. Shares may also be sold automatically to provide the cash
collateral necessary to meet your margin obligations to Kennedy Cabot.
If you have a Kennedy Cabot Money Management Account and you withdraw cash from
your Kennedy Cabot brokerage account by way of a check or ATM/VISA Check Card,
shares of your Sweep Portfolio will automatically be sold to satisfy any
resulting debit balance. Holders of the ATM/VISA Check Card will not be liable
for unauthorized withdrawals resulting in redemptions of Portfolio shares that
occur after Kennedy Cabot is notified of the loss, theft or unauthorized use of
the Card. Further information regarding the rights of holders of the ATM/VISA
Check Card is set forth in the Kennedy Cabot Money Management Agreement provided
to each customer who opens a Kennedy Cabot Money Management Account. ATM cash
withdrawals may be made through participating financial institutions. Although
Kennedy Cabot does not charge for ATM withdrawals, institutions may charge a fee
in connection with their services.
YOUR RETIREMENT ACCOUNT. To sell shares and receive payment in a Retirement
Account, you should complete a Kennedy Cabot Distribution Form. These forms can
be obtained by calling or visiting a Kennedy Cabot office.
PRICE. Shares are redeemed at the NAV next determined after a redemption request
is received by the Portfolio. There are no withdrawal penalties or redemption
fees. Kennedy Cabot is responsible for promptly transmitting redemption and
other requests to the Transfer Agent.
CLEARANCE. If you are selling shares you bought within the last 10 calendar
days, payment will be credited to your brokerage account upon clearance of the
funds used to purchase shares, which may take up to 10 calendar days.
HOW TO EXCHANGE BETWEEN PORTFOLIOS.
You may change your designated Sweep Portfolio to any other Portfolio at any
time without charge. You may also exchange shares of one Portfolio for shares of
another Portfolio. To effect an exchange, call your Kennedy Cabot account
executive with instructions to move your money
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from one Portfolio to another Portfolio, or you may mail written instructions to
your local Kennedy Cabot office. Your letter should reference your Kennedy Cabot
brokerage account number, the Portfolio(s) from which you are exchanging and the
Portfolio(s) into which you are exchanging. This letter should be signed by at
least one registered account holder.
An exchange involves the redemption of Portfolio shares and the purchase of
shares of another Portfolio at their respective NAVs after receipt of an
exchange request in proper form. Each Portfolio reserves the right to reject
specific exchange orders and, on 60 days' prior written notice, to suspend,
modify or terminate exchange privileges.
TELEPHONE TRANSACTIONS.
As a customer of Kennedy Cabot, you will automatically have the privilege of
purchasing, redeeming or exchanging your Portfolio shares by telephone. Kennedy
Cabot will employ reasonable procedures to verify the genuineness of telephone
redemption or exchange requests. These procedures involve requiring certain
personal identification information. If such procedures are not followed,
Kennedy Cabot may be liable for any losses due to unauthorized or fraudulent
instructions. Neither Kennedy Cabot nor the Portfolio will be liable for
following instructions communicated by telephone that are reasonably believed to
be genuine. You should verify the accuracy of your account statements
immediately after you receive them and contact a Kennedy Cabot account executive
if you question any activity in the account.
Each Portfolio reserves the right to refuse to honor requests made by telephone
if the Portfolio believes them not to be genuine. Each Portfolio also may limit
the amount involved or the number of such requests. During periods of drastic
economic or market change, telephone redemption and exchange privileges may be
difficult to implement. Each Portfolio reserves the right to terminate or modify
this privilege at any time.
SMALL ACCOUNTS.
There is currently no minimum requirement for initial and subsequent purchases
of Portfolio shares. However, because currently only customers of Kennedy Cabot
are eligible to purchase shares of the Portfolios, Portfolio shares are subject
to automatic redemption should the Kennedy Cabot brokerage account in which they
are held be closed or if Kennedy Cabot imposes certain requirements with respect
to its brokerage accounts and eligibility for sweep arrangements, including
requirements relating to minimum account balances. Any minimum balance
requirement will not apply to Kennedy Cabot IRA accounts.
SHAREHOLDER INQUIRIES.
Shareholder inquiries may be made by writing to the Portfolio(s) at 9470
Wilshire Boulevard, Beverly Hills, California 90212 or by calling your Kennedy
Cabot account executive.
OPERATING EXPENSES AND FEES
MANAGEMENT AND RELATED EXPENSES.
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Responsibility for overall management of the Company rests with its Board of
Directors in accordance with Maryland law. Professional investment supervision
is provided by the Investment Manager, Waterhouse Asset Management, Inc., 100
Wall Street, New York, New York 10005. Pursuant to the Investment Management
Agreement, the Investment Manager acts as the investment manager for each
Portfolio and manages its investments. Subject to the general supervision of the
Company's Board of Directors and in accordance with each Portfolio's investment
policies, the Investment Manager formulates guidelines and lists of approved
investments for each Portfolio, makes decisions with respect to and places
orders for that Portfolio's purchases and sales of portfolio securities and
maintains records relating to such purchases and sales. For the investment
management services furnished to each Portfolio, such Portfolio pays the
Investment Manager an annual investment management fee, accrued daily and
payable monthly, on a graduated basis equal to .35 of 1% of the first $1 billion
of average daily net assets of each Portfolio, .34 of 1% of the next $1 billion,
and .33 of 1% of average daily net assets of each Portfolio over $2 billion. The
Investment Manager has agreed to waive a portion of the annual investment
management fee through April 30, 1999, so that the actual fee payable by the
Municipal Portfolio during such period will be .25 of 1% of average daily net
assets of such Portfolio.
In order to increase the yield to investors, the Investment Manager and its
affiliates may voluntarily, from time to time, waive or reduce its (or their)
fees or assume certain expenses of a Portfolio, which would have the effect of
lowering the overall expense ratio of a Portfolio and increasing yield to
investors during the time such fees are waived or reduced, or expenses are
reimbursed, as the case may be. For the first year of the Company's operations,
the Investment Manager or its affiliates intend to waive fees and/or reimburse
expenses so that each Portfolio's annual expense ratio will not exceed 0.94% for
the Money Market Portfolio, 0.91% for the U.S. Government Portfolio, and 0.75%
for the Municipal Portfolio. Other voluntary fee waivers or reductions may be
reduced or eliminated at any time without further notice to investors (unless it
is indicated that they are in effect for a particular period of time).
The Investment Manager is a wholly owned subsidiary of Waterhouse National Bank
(the "Bank"), which is a wholly owned subsidiary of Waterhouse Investor
Services, Inc. ("Waterhouse"), which is in turn a wholly owned subsidiary of The
Toronto-Dominion Bank ("TD Bank"). The Bank offers various banking products and
services primarily to the customers of Waterhouse Securities, the principal
subsidiary of Waterhouse. In addition to the Portfolios, the Investment Manager
also currently serves as investment manager to the Bank and to other mutual
funds, and as of March 31, 1998, had total assets under management in excess of
$4.7 billion. TD Bank, a Canadian chartered bank, is subject to the provisions
of the Bank Act of Canada.
SHAREHOLDER SERVICING.
The Company's Shareholder Servicing Plan ("Servicing Plan") permits each
Portfolio to pay banks, broker-dealers or other financial institutions that have
entered into a shareholder services
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agreement with the Company ("Servicing Agents") for shareholder support services
that they provide. Payments under the Servicing Plan are calculated daily and
payable monthly at an annual rate of .25 of 1% of the average daily net assets
of each Portfolio. Waterhouse Securities, the Servicing Agent has agreed to
waive the annual fee payable through April 30, 1999 under the Servicing Plan so
as not to exceed .20 of 1% of average daily net assets in the case of the Money
Market Portfolio, .17 of 1% of average daily net assets in the case of the U.S.
Government Portfolio and .11 of 1% of average daily net assets in the case of
the Municipal Portfolio. The shareholder services provided by the Servicing
Agents pursuant to the Servicing Plan may include, among other services,
providing general shareholder liaison services (including responding to
shareholder inquiries), providing information on shareholder investments,
establishing and maintaining shareholder accounts and records, and providing
such other similar services as may be reasonably requested.
Pursuant to a Shareholder Services Agreement between the Company and Waterhouse
Securities, Waterhouse Securities has agreed to become a Servicing Agent with
respect to each Portfolio and to be compensated in accordance with the fees set
forth above. The Company may enter into similar agreements with other service
organizations, including broker-dealers and banks whose clients are shareholders
of the Portfolios, to act as Servicing Agents and to perform support services
with respect to such clients.
The Company may suspend or reduce payments under the Servicing Plan at any time,
and payments are subject to the continuation of the Servicing Plan described
above and the terms of the various shareholder services agreements. See the SAI
for more details on the Servicing Plan and the Shareholder Services Agreement
between the Company and Waterhouse Securities.
ADMINISTRATION.
Pursuant to an Administration Agreement with the Company, Waterhouse Securities
(or the "Administrator"), as administrator, provides administrative services to
each of the Portfolios. Administrative services furnished by Waterhouse
Securities include, among others, maintaining and preserving the records of the
Company, including financial and corporate records, computing NAV, dividends,
performance data and financial information regarding the Company, preparing
reports, overseeing the preparation and filing with the SEC and state securities
regulators of registration statements, notices, reports and other material
required to be filed under applicable laws, developing and implementing
procedures for monitoring compliance with regulatory requirements, providing
routine accounting services, providing office facilities and clerical support as
well as providing general oversight of other service providers. Waterhouse
Securities is an affiliate of the Investment Manager. For its services as
administrator, Waterhouse Securities receives from each Portfolio an annual fee,
payable monthly, of .10 of 1% of average daily net assets of such Portfolio. The
fee is accrued daily as an expense of each Portfolio.
Waterhouse Securities has entered into a Subadministration Agreement with Funds
Distributor, Inc. ("FDI" or the "Distributor"), 60 State Street, Suite 1300,
Boston, Massachusetts 02109,
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pursuant to which FDI performs certain of the foregoing administrative services
for the Portfolios. Under this Agreement, Waterhouse Securities pays FDI's fees
for providing such services. In addition, Waterhouse Securities may enter into
subadministration agreements with other persons to perform such services from
time to time.
DISTRIBUTOR.
The distributor of the shares of each Portfolio is FDI, which has the exclusive
right to distribute shares of the Portfolios pursuant to a Distribution
Agreement between the Company and FDI. FDI may enter into dealer or selling
agency agreements with affiliates of the Investment Manager and Waterhouse
Securities and other firms for the sale of Portfolio shares. FDI has entered
into such a selling agency agreement with Waterhouse Securities. FDI receives no
fee from the Company under the Distribution Agreement for acting as distributor
to the Portfolios.
TRANSFER AGENT AND CUSTODIAN.
National Investor Services Corp. ("NISC" or the "Transfer Agent"), 55 Water
Street, New York, New York 10041, an affiliate of the Investment Manager, serves
as transfer agent and dividend disbursing agent for the Portfolios. For services
rendered, the Transfer Agent receives from each Portfolio an annual fee, payable
monthly, of .20 of 1% of the Portfolio's average daily net assets. The Transfer
Agent may enter into sub-transfer agency and dividend disbursing agency
agreements with other persons to perform such services from time to time.
The Bank of New York (the "Custodian") serves as the custodian of the assets of
each of the Portfolios.
OTHER EXPENSES.
The Portfolios also pay other expenses that are not assumed by third parties,
such as expenses relating to preparing, printing and mailing prospectuses, proxy
materials and other information to existing shareholders, blue sky servicing
fees, pricing services, legal, audit and custodian fees.
The Portfolios' expenses generally are allocated among the Portfolios on the
basis of relative net assets at the time of allocation, except that expenses
directly attributable to a particular Portfolio are charged to that Portfolio.
OTHER INFORMATION
PRICING YOUR SHARES.
The price of each Portfolio's shares on any given day is its NAV. The Company
normally calculates the NAV per share of each Portfolio as of 12:00 noon and
again at the close of regular
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trading on the NYSE (generally 4:00 p.m. Eastern time) each day that the NYSE
and the Custodian are open. The NAV per share for a Portfolio is calculated by
subtracting the Portfolio's liabilities from its total assets and then dividing
the remainder by the total number of its shares outstanding. Each Portfolio's
shares are sold at the NAV per share next determined after an order and payment
are received in the manner described under "Purchases and Redemptions." Each
Portfolio seeks to maintain its NAV at $1.00 per share.
Like most money market funds, the Company values the securities owned by each
Portfolio at amortized cost, which means that they are valued at their
acquisition cost (as adjusted for amortization of premium or discount) rather
than at current market value. This method of valuation minimizes the effect of
changes in a security market value and helps each Portfolio to maintain a stable
$1.00 share price. The Company's Board of Directors has adopted procedures
pursuant to which the NAV of each Portfolio, as determined under the amortized
cost method, is monitored in relation to the market value of the Portfolios.
Additional information regarding such procedures is contained in the SAI.
DIVIDENDS.
On each day that the NAV of a Portfolio is determined, such Portfolio's net
investment income will be declared at 4:00 p.m. (Eastern time) as a daily
dividend to shareholders of record as of such day's last calculation of NAV. All
expenses are accrued daily and are deducted before declaration of dividends to
investors. Shareholders who buy shares of a Portfolio by 4:00 p.m. (Eastern
time) will begin to earn dividends that Business Day. Shareholders who buy
shares of a Portfolio after 4:00 p.m. (Eastern time) will begin earning
dividends the following Business Day. Shareholders will not earn dividends on
the date of redemption for shares redeemed prior to 4:00 p.m. (Eastern time),
but will earn dividends on such day for shares redeemed after 4:00 p.m. (Eastern
time). Each Portfolio's earnings for Saturdays, Sundays and holidays are
declared as dividends on the previous Business Day.
Dividends and distributions from a Portfolio will be reinvested in additional
full and fractional shares of the same Portfolio at the NAV next determined
after their payable date. Dividends are declared daily and are reinvested
monthly. Shareholders may elect to receive any monthly dividend in cash by
submitting a written election to Kennedy Cabot by the tenth day of the specific
month to which the election to receive cash relates.
TAXES.
MONEY MARKET AND U.S. GOVERNMENT PORTFOLIOS. Each of the Money Market Portfolio
and the U.S. Government Portfolio intends to qualify under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Internal Revenue Code") as a
regulated investment company and, as such, will not be subject to federal income
taxes to the extent its earnings are distributed in accordance with applicable
provisions of the Internal Revenue Code.
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Dividends derived from interest and short-term capital gains are taxable to a
shareholder as ordinary income even though they are reinvested in additional
Portfolio shares. Dividends paid to foreign investors generally will be subject
to a 30% (or lower treaty rate) withholding tax. Dividends from these Portfolios
do not qualify for the dividends received deduction allowable to certain U.S.
corporate shareholders. All or some of the dividends received from the U.S.
Government Portfolio may be exempt from individual state and/or local income
taxes. You should consult with your tax adviser in this regard.
MUNICIPAL PORTFOLIO. The Municipal Portfolio intends to qualify under Subchapter
M of the Internal Revenue Code as a regulated investment company and, as such,
will not be liable for federal income taxes to the extent its earnings are
distributed in accordance with applicable provisions of the Internal Revenue
Code. The Portfolio intends to declare and distribute tax-exempt interest
dividends. Shareholders of the Municipal Portfolio will not be required to
include the "exempt-interest" portion of dividends paid by the Portfolio in
their gross income for federal income tax purposes. However, shareholders will
be required to report the receipt of exempt-interest dividends and other
tax-exempt interest on their federal income tax returns. Moreover, as described
below and in the SAI, exempt-interest dividends may be subject to state income
taxes, may give rise to a federal alternative minimum tax liability, may affect
the amount of social security benefits subject to federal income tax, may affect
the deductibility of interest on certain indebtedness of the shareholder and may
have other collateral federal income tax consequences. The Municipal Portfolio
may purchase without limitation Municipal Securities, the interest on which
constitutes an item of tax preference and which may therefore give rise to a
federal alternative minimum tax liability for individual shareholders.
Dividends representing taxable net investment income (such as net interest
income from temporary investments in obligations of the U.S. government, and any
net short-term capital gains), are taxable to shareholders as ordinary income.
Market discount recognized on taxable and tax-exempt securities is also taxable
as ordinary income and is not treated as excludable income. Such dividends do
not qualify for the dividends received deduction allowable to certain U.S.
corporate shareholders. Dividends representing taxable net investment income
that are paid to foreign investors generally will be subject to a 30% (or lower
treaty rate) withholding tax.
To the extent that exempt-interest dividends are derived from certain "private
activity bonds" (some of which were formerly referred to as "industrial
development bonds") issued on or after August 7, 1986, they will be treated as
an item of tax preference and may, therefore, be subject to both the individual
and corporate alternative minimum tax. All exempt-interest dividends will be
included in determining a corporate shareholder's "adjusted current earnings."
Seventy-five percent of the excess, if any, of "adjusted current earnings" over
the corporate shareholder's alternative minimum taxable income, with certain
adjustments, will be an upward adjustment for purposes of the corporate
alternative minimum tax. The percentage of dividends that constitutes
exempt-interest dividends, and the percentage thereof (if any) that constitutes
an item of tax preference, will be determined annually and will be applied
uniformly to all dividends of the Municipal Portfolio declared during that year.
These percentages may differ from the actual
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percentages for any particular day. Shareholders are advised to consult their
tax advisers with respect to alternative minimum tax consequences of an
investment in the Municipal Portfolio. For additional information concerning the
alternative minimum tax and certain collateral tax consequences of the receipt
of exempt-interest dividends, see the SAI.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to one-half (85% if modified income exceeds a modified
base amount) of their Social Security benefits. Modified income includes
tax-exempt interest, including exempt-interest dividends from the Municipal
Portfolio.
The tax exemption of dividends from the Municipal Portfolio for federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and you are advised to consult your own tax adviser as to the status of your
dividends under state and local tax laws.
ALL PORTFOLIOS. Dividends declared in December to shareholders of record and
paid during the following January are treated as paid on December 31 for federal
income and excise tax purposes. The Company may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with reporting and
minimum distribution requirements contained in the Internal Revenue Code.
Each Portfolio will be subject to a non-deductible 4% excise tax if it does not
distribute sufficient amounts of taxable investment income and capital gains
annually. Each Portfolio intends to distribute sufficient income to avoid the
application of this excise tax. It is not anticipated that the Portfolios will
realize long-term capital gains and therefore the Portfolios do not contemplate
making distributions taxable to shareholders as long-term capital gain.
Each Portfolio is required by law to withhold 31% ("back-up withholding") of
certain dividends, distributions of capital gains and redemption proceeds paid
to certain shareholders who do not furnish a correct taxpayer identification
number (in the case of individuals, a social security number and in the case of
entities, an employer identification number) and in certain other circumstances.
Any tax withheld as a result of backup withholding does not constitute an
additional tax imposed on the shareholder of the account, and may be claimed as
a credit on such shareholder's federal income tax return. You should consult
your own tax adviser regarding the withholding requirement.
Required tax information will be provided annually. You are encouraged to retain
copies of your account statements or year-end statements for tax reporting
purposes. However, if you have incomplete records, you may obtain historical
account transaction information at a reasonable fee.
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You should consult your tax adviser regarding specific questions as to federal,
state and local taxes.
PERFORMANCE.
From time to time, the Company may advertise several types of performance
information for a Portfolio. These are "yield," "effective yield" and, for the
Municipal Portfolio only, "tax equivalent yield" and "tax equivalent effective
yield." Each of these figures will be based upon historical earnings and is not
representative of the future performance of a Portfolio. The yield of a
Portfolio refers to the net investment income generated by a hypothetical
investment in the Portfolio over a specific seven-day period (which period will
be stated in any such advertisement). Net investment income is then annualized,
which means that the net investment income generated during the seven-day period
is assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be reinvested
weekly when annualized. The effective yield will be slightly higher than the
yield due to the compounding effect of this assumed reinvestment. Tax equivalent
yield is the yield that a taxable investment must generate in order to equal the
Municipal Portfolio's yield for an investor in a stated federal income tax
bracket (normally assumed to be the maximum tax rate). Tax equivalent yield is
based upon, and will be higher than, the yield on the portion of the Municipal
Portfolio that is tax-exempt. Tax equivalent effective yield is computed in the
same manner as tax equivalent yield, except that effective yield is substituted
for yield in the calculation.
The performance of the Portfolios may be compared to that of other money market
mutual funds tracked by Lipper Analytical Services, Inc., a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives and assets. A Portfolio's performance also may be compared
to other money market funds rated by IBC/Donoghue's Money Fund Report(R), a
reporting service on money market funds. Investors may want to compare a
Portfolio's performance to that of various bank products as reported by BANK
RATE MONITOR(TM), a financial reporting service that publishes each week average
rates of bank and thrift institution money market deposit accounts and interest
bearing checking accounts. Certain of these alternative investments may offer
fixed rates of return and guaranteed principal and may be insured. The
performance of a Portfolio also may be compared to that of United States
Treasury Bills and Notes, the consumer price index, the S&P's 500 Index(TM), and
various other investment indices.
Each Portfolio's yield will fluctuate. Shares of the Portfolio are not insured
against reduction in NAV. Additional information concerning the calculation of a
Portfolio's performance appears in the SAI.
CAPITAL STRUCTURE.
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The Company is an open-end, diversified management investment company. The
Company was organized as a Maryland corporation on August 19, 1996. The shares
of the Company are divided into three Portfolios, each of which represents
shares of common stock, par value of $.0001. There are no preemptive or
conversion rights applicable to any of the Company's shares. The Company's
shares when issued will be fully paid, non-assessable and transferable.
Currently the Board of Directors has authorized only one class of shares of each
Portfolio. The Board of Directors may increase the number of authorized shares
or create additional series or classes of the Company shares without shareholder
approval. Other classes of shares of the Company's Portfolios may be offered
from time to time in the future through other prospectuses. Such other class or
classes may have different maximum distribution or shareholder servicing plan
payments and may have other different expenses that may affect performance.
Shares of the Company have equal rights with respect to voting, except that the
holders of shares of a particular Portfolio or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such
Portfolio or class. For example, holders of a particular Portfolio will have the
exclusive right to vote on any investment restriction that relates only to such
Portfolio. Likewise, holders of a particular class will have the exclusive right
to vote on a material change to the distribution plan covering such class.
The holders of each Portfolio have distinctive rights with respect to dividends
and redemptions which are more fully described in this prospectus and the SAI.
In the event of dissolution or liquidation, holders of each Portfolio will
receive pro rata, subject to the rights of creditors, (a) the proceeds of the
sale of the assets held in the respective Portfolio to which the shares of the
Company relate, less (b) the liabilities of the Company attributable to the
respective portfolio or allocated between the portfolios based on the respective
liquidation value of each Portfolio. There will not normally be annual
shareholders' meetings. Shareholders may remove directors from office by a
majority of votes entitled to be cast at a meeting of shareholders. Shareholders
holding 10% or more of the Company's outstanding stock may call a special
meeting of shareholders. Prior to the offering of each Portfolio's shares, FDI
Distribution Services, Inc. will be each Portfolio's sole shareholder and deemed
a controlling person of such Portfolio.
The Portfolios may convert to a "master/feeder" structure without a shareholder
vote. A master/feeder structure involves investment in a single central
portfolio (the "master fund") by a variety of pooled investment vehicles (the
"feeder funds") sharing a common investment objective.
YEAR 2000 ISSUES.
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the Year 2000 from the Year 1900
(commonly known as the "Year 2000 Problem"). Like other investment companies and
financial and business organizations, the Company could be adversely affected if
the computer systems used by the Investment Manager or other Company service
providers do not properly address this problem prior to January 1,
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2000. TD Bank has established a dedicated group to analyze these issues and to
implement any systems modifications necessary to prepare for the Year 2000.
Currently, the Investment Manager does not anticipate that the transition to the
21st century will have any material impact on its ability to continue to service
the Company at current levels. In addition, the Investment Manager has sought
assurances from the Company's other service providers that they are taking all
necessary steps to ensure that their computer systems will accurately reflect
the Year 2000, and the Investment Manager will continue to monitor the
situation. At this time, however, no assurance can be given that the Company's
other service providers have anticipated every step necessary to avoid any
adverse effect on the Company attributable to the Year 2000 Problem or that
interaction with other non-complying computer systems will not impact their
services.
APPENDIX
The following describes in greater detail the types of investments discussed
elsewhere in the Prospectus:
ASSET-BACKED SECURITIES. Each Portfolio, other than the Municipal Portfolio, may
invest in securities backed by pools of mortgages, loans, receivables or other
assets. Payment of principal and interest may be largely dependent upon the cash
flows generated by the assets backing the securities, and, in certain cases,
supported by letters of credit, surety bonds, or other credit enhancements. The
value of asset-backed securities may also be affected by the creditworthiness of
the servicing agent for the pool, the originator of the loans or receivables, or
the financial institution(s) providing the credit support. The U.S. Government
Portfolio will invest in asset-backed securities only to the extent that such
securities are considered "Government Securities."
CERTIFICATES OF PARTICIPATION. The Municipal Portfolio may invest in
Certificates of Participation. Certificates of Participation may be variable
rate or fixed rate with remaining maturities of one year or less. A Certificate
of Participation may be backed by an irrevocable letter of credit or guarantee
of a financial institution that satisfies rating agencies as to the credit
quality of the Municipal Security supporting the payment of principal and
interest on the Certificate of Participation. Payments of principal and interest
would be dependent upon the underlying Municipal Security and may be guaranteed
under a letter of credit to the extent of such credit. The quality rating by a
rating service of an issuer of Certificates of Participation is based primarily
upon the rating of the Municipal Security held by the trust and the credit
rating of the issuer of any letter of credit and of any other guarantor
providing credit support to the issue. The Investment Manager considers these
factors as well as others, such as any quality ratings issued by the rating
services identified above, in reviewing the credit risk presented by a
Certificate of Participation and in determining whether the Certificate of
Participation is appropriate for investment by the Portfolio. It is anticipated
by the Investment Manager that for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Portfolio to sell readily its Certificates of
Participation prior to maturity to the issuer or third party. As to those
instruments with demand features, the Portfolio intends to exercise its right to
demand payment from the issuer of the
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demand feature only upon a default under the terms of the Municipal Security, as
needed to provide liquidity to meet redemptions, or to maintain a high quality
investment portfolio.
GOVERNMENT SECURITIES. Each Portfolio may invest in Government Securities.
Government Securities consist of marketable securities and instruments issued or
guaranteed by the U.S. government or by its agencies or instrumentalities, and
repurchase agreements with respect to such obligations. Direct obligations are
issued by the U.S. Treasury and include bills, certificates of indebtedness,
notes and bonds. Obligations of U.S. government agencies and instrumentalities
("Agencies") are issued by government-sponsored agencies and enterprises acting
under authority of Congress. Although obligations of federal agencies and
instrumentalities are not debts of the U.S. Treasury, in some cases payment of
interest and principal on such obligations is guaranteed by the U.S. government,
including, but not limited to, obligations of the Federal Housing
Administration, the Export-Import Bank of the United States, the Small Business
Administration, the Government National Mortgage Association, the General
Services Administration and the Maritime Administration. In other cases, payment
of interest and principal is not guaranteed, e.g., obligations of the Student
Loan Marketing Association, Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation, Tennessee Valley Authority, Federal Home Loan Bank,
and the Federal Farm Credit Bank.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. A Portfolio may invest in securities
issued by other investment companies to the extent that such investments are
consistent with the Portfolio's investment objectives and policies and are
permissible under the Investment Company Act. Under one of the Investment
Company Acts limitations, the Portfolios may not acquire collectively more than
3% of the outstanding securities of any one investment company. In addition,
each Portfolio will limit its investments in other investment companies in
accordance with the diversification and quality requirements of such Portfolio.
As a shareholder of another investment company, a Portfolio would bear, along
with other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that a Portfolio bears directly in connection with
its own operations. Such investments are not currently anticipated, but in the
event that such investments are made, it is contemplated that they will be made
solely in no-load money market funds.
LOANS OF PORTFOLIO SECURITIES. Each Portfolio may lend portfolio securities in
amounts up to 33 1/3% of its respective total assets to brokers, dealers and
other financial institutions, provided such loans are callable at any time by
the Portfolio and are at all times secured by cash or by equivalent collateral.
By lending its portfolio securities, a Portfolio will receive income while
retaining the securities' potential for capital appreciation. As with any
extensions of credit, there are risks of delay in recovery and, in some cases,
even loss of rights in the collateral should the borrower of the securities fail
financially. However, such loans of securities will be made only to firms deemed
to be creditworthy by the Investment Manager.
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MUNICIPAL LEASE OBLIGATIONS. The Municipal Portfolio may invest a portion of its
assets in municipal leases and participation interests therein. These
obligations, which may take the form of a lease, an installment purchase, or a
conditional sale contract, are issued by state and local governments and
authorities to acquire land and a wide variety of equipment and facilities.
Generally, the Portfolio will not hold such obligations directly as a lessor of
the property, but will purchase a participation interest in a municipal
obligation from a bank or other third party. A participation interest gives the
Portfolio a specified, undivided interest in the obligation in proportion to its
purchased interest in the total amount of the obligation.
Municipal leases frequently have risks distinct from those associated with
general obligation or revenue bonds. State constitutions and statutes set forth
requirements that states or municipalities must meet to incur debt. These may
include voter referenda, interest rate limits, or public sale requirements.
Leases, installment purchases, or conditional sale contracts (which normally
provide for title to the leased asset to pass to the governmental issuer) have
evolved as a means for governmental issuers to acquire property and equipment
without meeting their constitutional and statutory requirements for the issuance
of debt. Many leases and contracts include "non-appropriation clauses" providing
that the governmental issuer has no obligation to make future payments under the
lease or contract unless money is appropriated for such purposes by the
appropriate legislative body on a yearly or other periodic basis.
Non-appropriation clauses free the issuer from debt issuance limitations. The
Portfolio's ability to recover under such a lease in the event of
non-appropriation or default will be limited solely to the repossession of the
leased property in the event foreclosure proves difficult. In addition to the
"non-appropriation" risk, these securities represent a relatively new type of
financing that has not yet developed the depth of marketability associated with
more conventional bonds.
MUNICIPAL SECURITIES. The Municipal Portfolio will invest in Municipal
Securities. Municipal Securities are issued to raise money for a variety of
public purposes, including general financing for state and local governments, or
financing for specific projects or public facilities. Municipal Securities may
be issued in anticipation of future revenues and may be backed by the full
taxing power of a municipality, the revenues from a specific project, or the
credit of a private organization. A security credit may be enhanced by a bank,
insurance company, or other financial institution. The securities may carry
fixed, variable, or floating interest rates. A Portfolio may own a Municipal
Security directly or through a participation interest. Industrial Development
Bonds are a type of Municipal Security that may be held by the Municipal
Portfolio. These are in most cases revenue bonds and are not payable from the
unrestricted revenues of the issuer. Among other types of instruments, the
Portfolio may purchase tax-exempt commercial paper and short-term municipal
notes such as tax anticipation notes, bond anticipation notes, revenue
anticipation notes, construction loan notes and other forms of short-term loans.
Such notes are issued with a short-term maturity in anticipation of the receipt
of tax payments, the proceeds of bond placements, or other revenues.
PUT FEATURES. Put features entitle the holder to sell a security (including a
repurchase agreement) back to the issuer or a third party at any time or at
specific intervals. They are subject to the risk
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that the put provider is unable to honor the put feature (purchase the
security). Put providers often support their ability to buy securities on demand
by obtaining letters of credit or other guarantees from domestic or foreign
banks. The Investment Manager may rely on its evaluation of a bank's credit in
determining whether to purchase a security supported by a letter of credit. In
evaluating a foreign bank's credit, the Investment Manager will consider whether
adequate public information about the bank is available and whether the bank may
be subject to unfavorable political or economic developments, currency controls,
or other government restrictions that might affect the bank's ability to honor
its credit commitment. Demand features, standby commitments, and tender options
are types of put features.
REPURCHASE AGREEMENTS. Each Portfolio may enter into repurchase agreements,
which are instruments under which a Portfolio acquires ownership of a security
from a broker-dealer or bank that agrees to repurchase the security at a
mutually agreed upon time and price (which price is higher than the purchase
price), thereby determining the yield during the Portfolio's holding period.
Repurchase agreements are, in effect, loans collateralized by the underlying
securities. Maturity of the securities subject to repurchase may exceed one
year. In the event of a bankruptcy or other default of a seller of a repurchase
agreement, a Portfolio might have expenses in enforcing its rights, and could
experience losses, including a decline in the value of the underlying security
and loss of income.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse repurchase
agreements, instruments under which a Portfolio sells a portfolio instrument to
another party, such as a bank or broker-dealer, in return for cash and agrees to
repurchase the instrument at a particular price and time. While a reverse
repurchase agreement is outstanding, a Portfolio will segregate appropriate
liquid assets to cover its obligation under the agreement. Each Portfolio will
enter into reverse repurchase agreements only with parties whose
creditworthiness has been found satisfactory by the Investment Manager. Such
transactions may increase fluctuations in the market value of a Portfolio's
assets and may be viewed as a form of leverage.
RULE 144A SECURITIES. If otherwise consistent with its investment objectives and
policies, each Portfolio, other than the Government Portfolio, may invest in
Rule 144A Securities. Rule 144A Securities are securities that are not
registered under the Securities Act of 1933 but which can be sold to "qualified
institutional buyers" in accordance with Rule 144A under the Securities Act of
1933. Any such security will not be considered illiquid so long as it is
determined by the Company's Board of Directors or the Investment Manager, acting
under guidelines approved and monitored by the Company's Board, that an adequate
trading market exists for that security. This investment practice could have the
effect of increasing the level of illiquidity in a Portfolio during any period
that qualified institutional buyers become uninterested in purchasing these
restricted securities.
SECTION 4(2) PAPER. The Money Market Portfolio may invest in Section 4(2) paper.
Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as the Money Market
Portfolio who agree that they are purchasing the
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paper for investment and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) paper normally is
resold to other institutional investors like the Portfolio through or with the
assistance of the issuer or investment dealers who make a market in the Section
4(2) paper, thus providing liquidity. The Portfolio's Investment Manager
considers the legally restricted but readily saleable Section 4(2) paper to be
liquid. However, pursuant to procedures adopted by the Company's Board of
Directors, if an investment in Section 4(2) paper is not determined by the
Investment Manager to be liquid, that investment will be included within the 10%
limitation on illiquid securities discussed under "All Portfolios" in this
Prospectus. The Portfolio's Investment Manager will monitor the liquidity of the
Portfolio's investments in Section 4(2) paper on a continuous basis.
STANDBY COMMITMENTS. The Municipal Portfolio may acquire Standby Commitments.
Standby Commitments are put options that entitle holders to same day settlement
at an exercise price equal to the amortized cost of the underlying security plus
accrued interest, if any, at the time of exercise. The Municipal Portfolio may
acquire Standby Commitments to enhance the liquidity of portfolio securities,
but only when the issuers of the commitments present minimal risk of default.
Ordinarily, the Municipal Portfolio may not transfer a Standby Commitment to a
third party, although it could sell the underlying Municipal Security to a third
party at any time. The Portfolio may purchase Standby Commitments separate from
or in conjunction with the purchase of securities subject to such commitments.
In the latter case, the Portfolio would pay a higher price for the securities
acquired, thus reducing their yield to maturity. Standby Commitments will not
affect the dollar-weighted average maturity of the Portfolio, or the valuation
of the securities underlying the commitments. Issuers or financial
intermediaries may obtain letters of credit or other guarantees to support their
ability to buy securities on demand. The Investment Manager may rely upon its
evaluation of a bank's credit in determining whether to support an instrument
supported by a letter of credit. Standby Commitments are subject to certain
risks, including the ability of issuers of standby commitments to pay for
securities at the time the commitments are exercised; the fact that Standby
Commitments are not marketable by the Portfolios; and the possibility that the
maturities of the underlying securities may be different from those of the
commitments.
STRIPPED GOVERNMENT SECURITIES. Each of the Portfolios, except the Municipal
Portfolio, may purchase U.S. Treasury STRIPS (Separate Trading of Registered
Interest and Principal of Securities), which are created when the coupon
payments and the principal payment are stripped from an outstanding Treasury
bond by the Federal Reserve Bank. These instruments are issued at a discount to
their "face value" and may exhibit greater price volatility than ordinary debt
securities because of the manner in which their principal and interest are
returned to investors. Bonds issued by the Resolution Funding Corporation
(REFCORP) can also be stripped in this fashion. REFCORP Strips are eligible
investments for the Money Market Portfolio and the U.S. Government Portfolio.
The Money Market Portfolio can purchase privately stripped government
securities, which are created when a dealer deposits a Treasury security or
federal agency security with a custodian for safekeeping and then sells the
coupon payments and principal payment that will be generated by this security.
Proprietary receipts, such as Certificates of
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Accrual on Treasury Securities (CATS), Treasury Investment Growth Receipts
(TIGRs), and generic Treasury Receipts (TRs), are stripped U.S. Treasury
securities that are separated into their component parts through trusts created
by their broker sponsors. Bonds issued by the Financing Corporation (FICO) can
also be stripped in this fashion. Because of the view of the SEC on privately
stripped government securities, the Money Market Portfolio must evaluate them as
it would non-government securities pursuant to regulatory guidelines applicable
to all money market funds.
TENDER OPTION BONDS. The Municipal Portfolio may purchase Tender Option Bonds.
Tender Option Bonds are created by coupling an intermediate- or long-term,
fixed-rate, tax-exempt bond (generally held pursuant to a custodial arrangement)
with a tender agreement that gives the holder the option to tender the bond at
its face value. As consideration for providing the tender option, the sponsor
(usually a bank, broker-dealer, or other financial institution) receives
periodic fees equal to the difference between the bond's fixed coupon rate and
the rate (determined by a remarketing or similar agent) that would cause the
bond, coupled with the tender option, to trade at par on the date of such
determination. After payment of the tender option fee, the Portfolio effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. Subject to applicable regulatory requirements, the Municipal
Portfolio may buy Tender Option Bonds if the agreement gives the Portfolio the
right to tender the bond to its sponsor no less frequently than once every 397
days. In selecting Tender Option Bonds for the Portfolio, the Investment Manager
will consider the creditworthiness of the issuer of the underlying bond, the
custodian, and the third party provider of the tender option. In certain
instances, a sponsor may terminate a tender option if, for example, the issuer
of the underlying bond defaults on an interest payment.
VARIABLE OR FLOATING RATE OBLIGATIONS. Each Portfolio may invest in Variable
Rate or Floating Rate Obligations. Floating rate instruments have interest rates
that change whenever there is a change in a designated base rate while variable
rate instruments provide for a specified periodic adjustment in the interest
rate. The interest rate of Variable Rate Obligations ordinarily is determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury Bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Obligations reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Obligations ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Obligations, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Portfolio determines the maturity of Variable Rate Obligations
and Floating Rate Obligations in accordance with Rule 2a-7, which allows the
Portfolio to consider certain of such instruments as having maturities shorter
than the maturity date on the face of the instrument.
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WHEN-ISSUED AND DELAYED DELIVERY BASIS SECURITIES. Each Portfolio may invest in
when-issued and delayed delivery basis securities. A security purchased on a
when-issued basis is subject to changes in market value based upon changes in
the level of interest rates and investors' perceptions of the creditworthiness
of the issuer. Generally such securities will appreciate in value when interest
rates decline and decrease in value when interest rates rise. In determining the
maturity of portfolio securities purchased on a when-issued or delayed delivery
basis, the Portfolio will consider them to have been purchased on the date when
it committed itself to the purchase. When when-issued or delayed delivery
purchases are outstanding, a Portfolio will segregate appropriate liquid assets
to cover its purchase obligations. The securities so purchased are subject to
market fluctuation and no interest accrues to the purchaser during the period
between purchase and settlement. At the time of delivery of the securities, the
value may be more or less than the purchase price and an increase in the
percentage of the Portfolio's assets committed to the purchase of securities on
a when-issued or delayed delivery basis may increase the volatility of the
Portfolio's NAV. A Portfolio will make commitments to purchase securities on a
when-issued or delayed delivery basis only with the intention of actually
acquiring or disposing of the securities, but the Portfolio reserves the right
to sell these securities before the settlement date if deemed advisable. The
sale of such securities by the Municipal Portfolio may result in the realization
of gains that are not exempt from federal income tax.
ZERO COUPON BONDS. Each Portfolio may invest in Zero Coupon Bonds. Zero Coupon
Bonds do not make regular interest payments. Instead, they are sold at a
discount from their face value and are redeemed at face value when they mature.
Because Zero Coupon Bonds do not pay current income, their prices can be very
volatile when interest rates change. In calculating its daily dividend, a
Portfolio takes into account as income a portion of the difference between a
Zero Coupon Bond's purchase price and its face value.
------------------------
FUTURE DEVELOPMENTS. Each Portfolio may invest in securities and in other
instruments that do not presently exist but may be developed in the future,
provided that each such investment is consistent with such Portfolio's
investment objectives, policies and restrictions and is otherwise legally
permissible under federal and state laws. The Prospectus will be amended or
supplemented as appropriate to discuss any such new investments.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
KENNEDY CABOT CASH MANAGEMENT PORTFOLIOS
KENNEDY CABOT MONEY MARKET PORTFOLIO
KENNEDY CABOT U.S. GOVERNMENT PORTFOLIO
KENNEDY CABOT MUNICIPAL PORTFOLIO
9470 Wilshire Boulevard, Beverly Hills, California 90212
1-800-252-0090
STATEMENT OF ADDITIONAL INFORMATION
________ __, 1998
This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the prospectus dated _______, 1998 (the "Prospectus") for
the Kennedy Cabot Money Market Portfolio (the "Money Market Portfolio"), the
Kennedy Cabot U.S. Government Portfolio (the "U.S. Government Portfolio") and
the Kennedy Cabot Municipal Portfolio (the "Municipal Portfolio"), each a series
of National Investors Cash Management Fund, Inc. (the "Company"). To obtain a
copy of the Prospectus, please write the Portfolios at 9470 Wilshire Boulevard,
Beverly Hills, California 90212 or call (800) 252-0090.
TABLE OF CONTENTS
Page
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INVESTMENT POLICIES AND RESTRICTIONS.......................................
PORTFOLIO TRANSACTIONS.....................................................
DIRECTORS AND EXECUTIVE OFFICERS...........................................
THE INVESTMENT MANAGER.....................................................
INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES.....................
DIVIDENDS AND TAXES........................................................
SHARE PRICE CALCULATION....................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................
PERFORMANCE................................................................
GENERAL INFORMATION.........................................................
ANNEX -- RATINGS OF INVESTMENTS............................................
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KENNEDY CABOT CASH MANAGEMENT PORTFOLIOS
KENNEDY CABOT MONEY MARKET PORTFOLIO
KENNEDY CABOT U.S. GOVERNMENT PORTFOLIO
KENNEDY CABOT MUNICIPAL PORTFOLIO
INVESTMENT POLICIES AND RESTRICTIONS
The Money Market Portfolio, the U.S. Government Portfolio and the Municipal
Portfolio have adopted certain fundamental investment limitations, which cannot
be changed for a Portfolio without approval by holders of a majority of the
outstanding voting securities of that Portfolio. However, except for each
Portfolio's investment objectives and the fundamental investment limitations set
forth below, the investment policies and restrictions described in the
Prospectus and this Statement of Additional Information are not fundamental and
may be changed without shareholder approval. As defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act"), and as used
herein and in the Prospectus, the term "majority of the outstanding voting
securities" of the Company, or of a particular Portfolio means, respectively,
the vote of the holders of the lesser of (i) 67% of the shares of the Company or
such Portfolio present or represented by proxy at a meeting where more than 50%
of the outstanding shares of the Company or such Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding shares of the
Company or such Portfolio.
The following policies and restrictions supplement those set forth in the
Prospectus. Unless otherwise noted, whenever an investment policy or limitation
states a maximum percentage of a Portfolio's assets that may be invested in any
security or other assets, or sets forth a policy regarding quality standards,
such standard or percentage limitation will be determined immediately after and
as a result of the Portfolio's acquisition of such security or other asset.
Accordingly, any subsequent change in values, net assets, or other circumstances
will not be considered when determining whether the investment complies with the
Portfolio's investment policies and restrictions.
INVESTMENT RESTRICTIONS. THE FOLLOWING ARE THE FUNDAMENTAL INVESTMENT
RESTRICTIONS OF EACH PORTFOLIO OF THE COMPANY. EACH PORTFOLIO MAY NOT (UNLESS
NOTED OTHERWISE):
(1) with respect to 75% of its total assets, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. government, or
any of its agencies or instrumentalities) if, as a result thereof, (a) more than
5% of the Portfolio's total assets would be invested in the securities of that
issuer, or (b) the Portfolio would hold more than 10% of the outstanding voting
securities of that issuer;
(2) with respect to the Municipal Portfolio, normally invest less than 80% of
its total assets in obligations issued or guaranteed by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities ("Municipal
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Securities"), the income from which is exempt from federal income tax, but may
be subject to federal alternative minimum tax liability;
(3) issue senior securities, except as permitted under the Investment Company
Act;
(4) make short sales of securities or purchase securities on margin (but a
Portfolio may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities);
(5) borrow money, except that each Portfolio may: (i) borrow money for temporary
defensive or emergency purposes (not for leveraging or investment), (ii) engage
in reverse repurchase agreements for any purpose, and (iii) pledge its assets in
connection with such borrowing to the extent necessary; provided that (i) and
(ii) in combination do not exceed 33 1/3% of the Portfolio's total assets
(including the amount borrowed) less liabilities (other than borrowings). Any
borrowings that exceed this amount will be reduced within three days (not
including Sundays and holidays) to the extent necessary to comply with the
33 1/3% limitation. A Portfolio will not purchase any security, other than a
security with a maturity of one day, while reverse repurchase agreements or
borrowings representing more than 5% of its total assets are outstanding;
(6) act as an underwriter (except as it may be deemed such in a sale of
restricted securities);
(7) purchase the securities of any issuer (other than securities issued or
guaranteed by the U.S. government or any of its agencies or instrumentalities;
or, in the case of the Municipal Portfolio, tax-exempt obligations issued or
guaranteed by a U.S. territory or possession or a state or local government, or
a political subdivision, agency or instrumentality of any of the foregoing) if,
as a result, more than 25% of the Portfolio's total assets would be invested in
the securities of companies whose principal business activities are in the same
industry, except that the Money Market Portfolio may invest more than 25% of its
total assets in the financial services industry and the Municipal Portfolio may
invest more than 25% of its total assets in industrial development bonds related
to a single industry. The Money Market Portfolio specifically reserves the right
to invest up to 100% of its assets in certificates of deposit or bankers'
acceptances issued by U.S. banks including their foreign branches, and U.S.
branches of foreign banks, in accordance with its investment objectives and
policies;
(8) purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments (but this shall not prevent a Portfolio from
investing in securities or other instruments backed by real estate or securities
of companies engaged in the real estate business);
(9) buy or sell commodities or commodity (futures) contracts, except for
financial futures and options thereon. This limitation does not apply to options
attached to, or acquired or traded together with, their underlying securities,
and does not apply to securities that incorporate features similar to options or
futures contracts;
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(10) lend any security or make any other loan if, as a result, more than 33 1/3%
of its total assets would be loaned to other parties, but this limit does not
apply to purchases of debt securities or to repurchase agreements; or
(11) purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets or to the
extent otherwise permitted by the Investment Company Act; however, a Portfolio
may, notwithstanding any other fundamental investment policy or limitation,
invest all of its assets in the securities of a single open-end management
investment company with substantially the same fundamental investment
objectives, policies, and restrictions as the Portfolio.
THE FOLLOWING INVESTMENT RESTRICTIONS ARE NOT FUNDAMENTAL, AND MAY BE CHANGED
WITHOUT SHAREHOLDER APPROVAL. EACH PORTFOLIO DOES NOT CURRENTLY INTEND:
(i) to purchase a security (other than a security issued or guaranteed by the
U.S. government or any of its agencies or instrumentalities, or a security
subject to an "unconditional demand feature issued by a non-controlled person,"
as defined in Rule 2a-7 under the Investment Company Act ("Rule 2a-7")) if, as a
result, more than 5% of its total assets would be invested in the securities of
a single issuer, provided that a Portfolio may invest up to 25% of its total
assets in the first tier securities of a single issuer for up to three business
days;
(ii) to purchase or hold any security if, as a result, more than 10% of its net
assets would be invested in securities that are deemed to be illiquid because
they are subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued, including repurchase
agreements not entitling the holder to payment of principal and interest within
seven days upon notice and securities restricted as to disposition under federal
securities laws, except for commercial paper issued in reliance on the "private
placement" exemption from registration afforded by Section 4(2) of the
Securities Act of 1933 ("Section 4(2) paper") and securities eligible for resale
pursuant to Rule 144A under the Securities Act of 1933 ("144A securities"),
which are determined to be liquid pursuant to procedures adopted by the
Company's Board of Directors; or
(iii) to invest in financial futures and options thereon.
For the Company's policies on quality and maturity, see the subsection entitled
"Quality and Maturity" below.
Each Portfolio's investments must be consistent with its investment objective
and policies. Accordingly, not all of the security types and investment
techniques discussed below are eligible investments for each of the Portfolios.
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INVESTMENT POLICIES OF ALL PORTFOLIOS:
CREDIT ENHANCEMENT FEATURES. Each Portfolio may invest in securities subject to
letters of credit or other credit enhancement features. Such letters of credit
or other credit enhancement features are not subject to federal deposit
insurance, and changes in the credit quality of the issuers of such letters of
credit or other credit enhancement features could cause losses to a Portfolio
and affect its share price.
PUT FEATURES. Put features entitle the holder to sell a security (including a
repurchase agreement) back to the issuer or a third party at any time or at
specified intervals. They are subject to the risk that the put provider is
unable to honor the put feature (purchase the security). Put providers often
support their ability to buy securities on demand by obtaining letters of credit
or other guarantees from domestic or foreign banks. The Investment Manager may
rely on its evaluation of a bank's credit in determining whether to purchase a
security supported by a letter of credit. In evaluating a foreign bank's credit,
the Investment Manager will consider whether adequate public information about
the bank is available and whether the bank may be subject to unfavorable
political or economic developments, currency controls, or other government
restrictions that might affect the bank's ability to honor its credit
commitment. Demand features, standby commitments, and tender options are types
of put features.
QUALITY AND MATURITY. Pursuant to procedures adopted by the Board of Directors,
a Portfolio may purchase only high quality securities that the Investment
Manager believes present minimal credit risks. To be considered high quality, a
security must be rated in accordance with applicable rules in one of the two
highest categories for short-term securities by at least two nationally
recognized statistical rating organizations (or by one, if only one such rating
organization has rated the security); or, if unrated, judged to be of equivalent
quality by the Investment Manager.
High quality securities are divided into "first tier" and "second tier"
securities. First tier securities are generally those deemed to be in the
highest rating category (e.g., A-1 by Standard & Poor's ("S&P")), Government
Securities and securities issued by other money market funds. Second tier
securities are generally those deemed to be in the second highest rating
category (e.g., A-2 by S&P). See "Annex -- Ratings of Investments."
The Money Market Portfolio may not invest more than 5% of its total assets in
second tier securities. In addition, the Money Market Portfolio may not invest
more than 1% of its total assets or $1 million (whichever is greater) in the
second tier securities of a single issuer. The Municipal Portfolio may not
invest more than 5% of its total assets in second tier securities that are
"conduit securities," as that term is defined in Rule 2a-7. In addition, the
Municipal Portfolio may not invest more than 1% of its assets or $1 million
(whichever is greater) in second tier conduit securities of a single issue.
Each Portfolio will limit its investments to securities with remaining
maturities of 397 calendar days or less, and maintain a dollar-weighted average
maturity of 90 days or less. When
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determining the maturity of a security, a Portfolio may rely upon an interest
rate reset or demand feature.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. Each Portfolio may buy and sell
securities on a when-issued or delayed delivery basis. These transactions
involve a commitment by a Portfolio to purchase or sell specific securities at a
predetermined price or yield, with payment and delivery taking place after the
customary settlement period for that type of security (and more than seven days
in the future). Typically, no interest accrues to the purchaser until the
security is delivered.
When purchasing securities on a when-issued or delayed delivery basis, a
Portfolio assumes the rights and risks of ownership, including the risk of price
and yield fluctuations. Because a Portfolio is not required to pay for
securities until the delivery date, these risks are in addition to the risks
associated with each Portfolio's other investments. If a Portfolio remains
substantially fully invested at a time when when-issued or delayed delivery
purchases are outstanding, the purchases may result in a form of leverage. When
when-issued or delayed delivery purchases are outstanding, a Portfolio will
segregate appropriate liquid assets to cover its purchase obligations. When a
Portfolio has sold a security on a delayed delivery basis, the Portfolio does
not participate in further gains or losses with respect to the security. If the
other party to a delayed delivery transaction fails to deliver or pay for the
securities, a Portfolio could miss a favorable price or yield opportunity, or
could suffer a loss.
Each Portfolio may renegotiate when-issued or delayed delivery transactions
after they are entered into, and may sell underlying securities before they are
delivered, which may result in capital gains or losses.
VARIABLE OR FLOATING RATE OBLIGATIONS. Variable or Floating Rate Obligations
bear variable or floating interest rates and carry rights that permit holders to
demand payment of the unpaid principal balance plus accrued interest from the
issuers or certain financial intermediaries. Floating rate instruments have
interest rates that change whenever there is a change in a designated base rate
while variable rate instruments provide for a specified periodic adjustment in
the interest rate. These formulas are designed to result in a market value for
the instrument that approximates its amortized cost. A demand instrument with a
conditional demand feature must have received both a short-term and a long-term
high quality rating or, if unrated, have been determined to be of comparable
quality pursuant to procedures adopted by the Board of Directors. In addition,
the Board must make certain findings to insure, pursuant to Rule 2a-7, the
appropriateness of the conditional demand feature for money fund investment. A
demand instrument with an unconditional demand feature may be acquired solely in
reliance upon a short-term high quality rating or, if unrated, upon a finding of
comparable short-term quality pursuant to procedures adopted by the Board of
Directors.
REPURCHASE AGREEMENTS. In a repurchase agreement, a Portfolio purchases a
security and simultaneously commits to sell that security back to the original
seller at an agreed-upon price.
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The resale price reflects the purchase price plus an agreed-upon incremental
amount unrelated to the coupon rate or maturity of the purchased security. It is
each Portfolio's current policy to engage in repurchase agreement transactions
with parties whose creditworthiness has been reviewed and found satisfactory by
the Investment Manager pursuant to procedures approved by the Board of
Directors, however, it does not presently appear possible to eliminate all risks
from these transactions (particularly the possibility that the value of the
underlying security will be less than the resale price, as well as delays and
costs to a Portfolio in connection with a seller's bankruptcy proceedings).
REVERSE REPURCHASE AGREEMENTS. In a reverse repurchase agreement, a Portfolio
sells a portfolio instrument to another party, such as a bank or broker-dealer,
in return for cash and agrees to repurchase the instrument at a particular price
and time. While a reverse repurchase agreement is outstanding, a Portfolio will
segregate appropriate liquid assets to cover its obligation under the agreement.
Each Portfolio will enter into reverse repurchase agreements only with parties
whose creditworthiness has been found satisfactory by the Investment Manager.
ILLIQUID INVESTMENTS. Illiquid investments are investments that cannot be sold
or disposed of in the ordinary course of business within seven days at
approximately the prices at which they are valued. Under the supervision of the
Board of Directors, the Investment Manager determines the liquidity of a
Portfolio's investments and, through reports from the Investment Manager, the
Board monitors investments in illiquid instruments. In determining the liquidity
of a Portfolio's investments, the Investment Manager may consider various
factors, including (i) the frequency of trades and quotations, (ii) the number
of dealers and prospective purchasers in the marketplace, (iii) dealer
undertakings to make a market, (iv) the nature of the security (including any
demand or tender features), and (v) the nature of the marketplace for trades
(including the ability to assign or offset the Portfolio's rights and
obligations relating to the investment).
Investments currently considered by the Portfolios to be illiquid include
repurchase agreements not entitling the holder to payment of principal and
interest within seven days upon notice. Also, with regard to the Money Market
Portfolio, the Investment Manager may determine some time deposits to be
illiquid. In the absence of market quotations, illiquid investments are valued
for purposes of monitoring amortized cost valuation at fair value as determined
in good faith by or under the direction of the Board of Directors. If through a
change in values, net assets, or other circumstances, a Portfolio were in a
position where more than 10% of its net assets was invested in illiquid
securities, it would seek to take appropriate steps to protect liquidity.
For purposes of the 10% limit on illiquid securities, 144A securities will not
be considered to be illiquid so long as the Investment Manager determines, in
accordance with procedures adopted by the Board of Directors, that such
securities have a readily available market. The Investment Manager will monitor
the liquidity of such securities subject to the supervision of the Board of
Directors.
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Municipal lease obligations will not be considered illiquid for purposes of the
Municipal Portfolio's 10% limitation on illiquid securities, provided the
Investment Manager determines that there is a readily available market for such
securities. With respect to municipal lease obligations, the Investment Manager
will consider, pursuant to procedures adopted by the Board of Directors, the
following: (1) the willingness of the municipality to continue, annually or
biannually, to appropriate funds for payment of the lease; (2) the general
credit quality of the municipality and the essentiality to the municipality of
the property covered by the lease; (3) in the case of unrated municipal lease
obligations, an analysis of factors similar to that performed by nationally
recognized statistical rating organizations in evaluating the credit quality of
a municipal lease obligation, including (i) whether the lease can be canceled;
(ii) if applicable, what assurance there is that the assets represented by the
lease can be sold; (iii) the strength of the lessee's general credit (e.g., its
debt, administrative, economic and financial characteristics); (iv) the
likelihood that the municipality will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to the
operations of the municipality (e.g., the potential for an event of
nonappropriation); (v) the legal recourse in the event of failure to
appropriate; and (4) any other factors unique to municipal lease obligations as
determined by the Investment Manager.
INVESTMENT POLICIES OF MONEY MARKET PORTFOLIO ONLY:
DOMESTIC AND FOREIGN ISSUERS. Investments may be made in U.S.
dollar-denominated time deposits, certificates of deposit, and bankers'
acceptances of U.S. banks and their branches located outside of the United
States, U.S. savings and loan institutions, U.S. branches of foreign banks, and
foreign branches of foreign banks. The Portfolio may also invest in U.S.
dollar-denominated securities issued or guaranteed by other U.S. or foreign
issuers, including U.S. and foreign corporations or other business
organizations, foreign governments, foreign government agencies or
instrumentalities, and U.S. and foreign financial institutions, including
savings and loan institutions, insurance companies, mortgage bankers, and real
estate investment trusts, as well as banks.
The obligations of foreign branches of U.S. banks may be general obligations of
the parent bank in addition to the issuing branch, or may be limited by the
terms of a specific obligation and by governmental regulation. Payment of
interest and principal on these obligations may also be affected by governmental
action in the country of domicile of the branch (generally referred to as
sovereign risk). In addition, evidence of ownership of portfolio securities may
be held outside of the United States and the Company may be subject to the risks
associated with the holding of such property overseas. Various provisions of
federal law governing the establishment and operation of U.S. branches do not
apply to foreign branches of U.S. banks.
Obligations of U.S. branches and agencies of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal and state
regulation, as well as by governmental action in the country in which the
foreign bank has its head office.
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Obligations of foreign issuers involve certain additional risks. These risks may
include future unfavorable political and economic developments, withholding
taxes, seizures of foreign deposits, currency controls, interest limitations, or
other governmental restrictions that might affect payment of principal or
interest. Additionally, there may be less public information available about
foreign banks and their branches. Foreign issuers may be subject to less
governmental regulation and supervision than U.S. issuers. Foreign issuers also
generally are not bound by uniform accounting, auditing, and financial reporting
requirements comparable to those applicable to U.S. issuers.
INVESTMENT POLICIES OF THE MUNICIPAL PORTFOLIO ONLY:
DOMESTIC AND FOREIGN ISSUERS. See the discussion under "Investment Policies of
Money Market Portfolio Only," above.
MUNICIPAL SECURITIES. Municipal Securities which the Municipal Portfolio may
purchase include, without limitation, debt obligations issued to obtain funds
for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, public utilities, schools, streets, and water and sewer works.
Other public purposes for which Municipal Securities may be issued include
refunding outstanding obligations, obtaining funds for general operating
expenses and obtaining funds to loan to other public institutions and
facilities.
Municipal Securities, such as private activity bonds ("industrial development
bonds" under prior law), are issued by or on behalf of public authorities to
obtain funds for purposes including privately operated airports, housing,
conventions, trade shows, ports, sports, parking or pollution control facilities
or for facilities for water, gas, electricity, or sewage and solid waste
disposal. Such obligations, which may include lease arrangements, are included
within the term Municipal Securities if the interest paid thereon qualifies as
exempt from federal income tax. Other types of industrial development bonds, the
proceeds of which are used for the construction, equipment, repair or
improvement of privately operated industrial or commercial facilities, may
constitute Municipal Securities, although current federal tax laws place
substantial limitations on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds which are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.
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Examples of Municipal Securities that are issued with original maturities of 397
calendar days or less are short-term tax anticipation notes, bond anticipation
notes, revenue anticipation notes, construction loan notes, pre-refunded
municipal bonds and tax-free commercial paper. Tax anticipation notes typically
are sold to finance working capital needs of municipalities in anticipation of
receiving property taxes on a future date. Bond anticipation notes are sold on
an interim basis in anticipation of a municipality issuing a longer term bond in
the future. Revenue anticipation notes are issued in expectation of receipt of
other types of revenue such as those available under the Federal Revenue Sharing
Program. Construction loan notes are instruments insured by the Federal Housing
Administration with permanent financing by "Fannie Mae" (the Federal National
Mortgage Association) or "Ginnie Mae" (the Government National Mortgage
Association) at the end of the project construction period. Pre-refunded
municipal bonds are bonds which are not yet refundable, but for which securities
have been placed in escrow to refund an original municipal bond issue when it
becomes refundable. Tax-free commercial paper is an unsecured promissory
obligation issued or guaranteed by a municipal issuer. The Municipal Portfolio
may purchase other Municipal Securities similar to the foregoing, which are or
may become available, including securities issued to pre-refund other
outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under the state constitutions of present
systems of financing public education has been initiated or adjudicated in a
number of states, and legislation has been introduced to effect changes in
public school finances in some states. In other instances there has been
litigation challenging the issuance of pollution control revenue bonds or the
validity of their issuance under state or federal law which ultimately could
affect the validity of those Municipal Securities or the tax-free nature of the
interest thereon.
FEDERALLY TAXABLE OBLIGATIONS. From time to time, the Municipal Portfolio may
invest a portion of its assets on a temporary basis in fixed-income obligations
whose interest is subject to federal income tax. For example, the Portfolio may
invest in obligations whose interest is federally taxable pending the investment
or reinvestment in Municipal Securities of proceeds from the sale of its shares
or sales of portfolio securities. Should the Portfolio invest in federally
taxable obligations, it would purchase securities that in the Investment
Manager's judgment are of high quality. These would include obligations issued
or guaranteed by the U.S. government or its agencies or instrumentalities;
obligations of domestic banks; and repurchase agreements. In addition, the
Municipal Portfolio may deviate from its investment policies and may adopt
temporary defensive measures when significant adverse market, economic,
political or other circumstances require immediate action in order to avoid
losses. During such periods, the
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Portfolio may temporarily invest its assets, without limitation, in taxable
temporary investments. The Municipal Portfolio will purchase taxable obligations
only if they meet its quality requirements.
Proposals to restrict or eliminate the federal income tax exemption for interest
on municipal obligations are introduced before Congress from time to time.
Proposals also may be introduced before state legislatures that would affect the
state tax treatment of the Portfolio's distributions. If such proposals were
enacted, the availability of municipal obligations and the value of the
Portfolio's holdings would be affected and the directors would reevaluate the
Portfolio's investment objective and policies.
The Municipal Portfolio anticipates being as fully invested as practicable in
Municipal Securities; however, there may be occasions when, as a result of
maturities of portfolio securities, sales of Portfolio shares, or in order to
meet redemption requests, the Portfolio may hold cash that is not earning
income. In addition, there may be occasions when, in order to raise cash to meet
redemptions, the Portfolio may be required to sell securities at a loss.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the objective of
each Portfolio in relation to movements in the general level of interest rates,
to invest money obtained from the sale of Company shares, to reinvest proceeds
from maturing portfolio securities and to meet redemptions of Company shares.
This may increase or decrease the yield of a Portfolio depending upon the
Investment Manager's ability to correctly time and execute such transactions.
Each Portfolio normally intends to hold its portfolio securities to maturity.
The Portfolios do not intend to trade portfolio securities although they may do
so to take advantage of short-term market movements.
In effecting purchases and sales of portfolio securities for the account of each
Portfolio, the Investment Manager will implement the Company's policy of seeking
the best execution of orders, which includes best net prices. Consistent with
this policy, orders for portfolio transactions are placed with broker-dealer
firms giving consideration to the quality, quantity and nature of the firms'
professional services which include execution, clearance procedures, reliability
and other factors. In selecting among the firms believed to meet the criteria
for handling a particular transaction, the Investment Manager may give
consideration to those firms that provide market, statistical and other research
information to the Company and the Investment Manager, although the Investment
Manager is not authorized to pay higher prices to firms that provide such
services. Any research benefits derived are available for all clients. Because
statistical and other research information is only supplementary to the
Investment Manager's research efforts and still must be analyzed and reviewed by
its staff, the receipt of research information is not expected to significantly
reduce its expenses. The Company expects that purchases and sales of portfolio
securities usually will be principal transactions. Portfolio
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securities will normally be purchased directly from the issuer or from an
underwriter or market maker for the securities. Purchases from underwriters may
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers will include the spread between
the bid and asked prices.
The investment decisions for each Portfolio will be reached independently from
those for each other and for other accounts, if any, managed by the Investment
Manager. On occasions when the Investment Manager deems the purchase or sale of
securities to be in the best interest of one or more Portfolios as well as other
clients of the Investment Manager, the Investment Manager, to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be so sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Investment
Manager in accordance with its policy for aggregation of orders, as in effect
from time to time. In some cases this procedure may affect the size or price of
the position obtainable for a Portfolio.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company, their principal occupations
over the past five years and their affiliations, if any, with the Investment
Manager and Funds Distributor, Inc. ("FDI" or the "Distributor"), the Company's
distributor, are as follows:
RICHARD W. DALRYMPLE, Director. Mr. Dalrymple has served as a Director of each
of the Company and Waterhouse Investors Family of Funds, Inc. ("WIFF") since
February 26, 1998 and December 12, 1995, respectively. Mr. Dalrymple has been
the President of Teamwork Management, Inc. since January 1997. Mr. Dalrymple
has served as a Director of Dime Bancorp, Inc. since 1990. Mr. Dalrymple has
been a Trustee of The Shannon McCormack Foundation since 1988, the Kevin Scott
Dalrymple Foundation since 1993 and a Director of National Center for
Disability Services since 1983. From 1990 through 1995, Mr. Dalrymple served
as President and Chief Operating Officer of Anchor Bank. From 1985 through
1990, Mr. Dalrymple worked for the Bank of Boston. During this time, Mr.
Dalrymple served as the President of Massachusetts Banking and the Southern New
England Region, and as Department Executive of Banking Services. He is 54
years old. Mr. Dalrymple's address is 45 Rockefeller Plaza, New York, NY
10111.
CAROLYN B. LEWIS, Director. Ms. Lewis has served as a Director of each of the
Company and WIFF since February 26, 1998. Since March 1997, Ms. Lewis has
served as President of The CBL Group providing professional services to clients
in the securities and healthcare industries. Ms. Lewis spent over 30 years at
the SEC in various positions including Senior Financial Analyst, Branch Chief
and Assistant Director. In September 1997, Ms. Lewis was appointed a member of
the Board of Governors of the Philadelphia Stock Exchange. Presently, Ms.
Lewis is a member of the Board of Directors of the Metropolitan Washington
Airports
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Authority and a director on various healthcare and hospital Boards, including
the Board of Trustees of the American Hospital Association. She is 61 years
old. Ms. Lewis' address is 2920 W. Street, Southeast, Washington, DC 20020.
THEODORE ROSEN, Director. Mr. Rosen has served as a Director of the Company
since February 26, 1998. From December, 1995 through February, 1998, Mr. Rosen
served as a Director of WIFF. Since 1993, Mr. Rosen has been a Managing Director
of Burnham Securities Inc. and Chairman of the Board of Directors of U.S. Energy
Systems, Inc. Mr. Rosen has held senior management positions in retail sales,
investment management, and corporate finance. From 1991 to 1993, Mr. Rosen was a
Senior Vice President at Oppenheimer & Co., and from 1989 to 1991 was a Vice
President-Sales at Smith Barney. Prior to 1989, Mr. Rosen held senior management
positions with other firms including D.H. Blair & Co., Morgan Stanley & Co.,
Ladenburg Thalman, and Burnham & Co. Mr. Rosen was the founder and President of
Summit Capital Group, a money management and investment banking form. He is 73
years old. Mr. Rosen's address is 1325 Avenue of the Americas, New York, NY
10019.
ANTHONY J. PACE*, Director. Mr. Pace has served as a Director of the Company
since February 26, 1998. Since January 1988, Mr. Pace has served as the
President and Chief Executive Officer of A. J. Pace & Co. Inc., an investment
management firm. From December 1995 through October 1996, Mr. Pace served as a
Director of Waterhouse Investors Cash Management Fund, Inc. From December 1979
through December 1987, Mr. Pace was an Associate Director of Bear Stearns & Co.
Inc. He is 60 years old. Mr. Pace's address is 981 Madison Avenue, New York, NY
10021.
JAMES F. RITTINGER*, Director. Mr. Rittinger has served as a Director of the
Company since February 26, 1998. Since 1979, Mr. Rittinger has served as a
Partner of Satterlee Stephens Burke & Burke LLP, a law firm. From 1987 through
1996, Mr. Rittinger was a member of the Board of Directors of Waterhouse
Investor Services, Inc., a New York Stock Exchange listed company. From 1983
through 1994, Mr. Rittinger served as Justice of the Village of Briarcliffe
Manor, New York. Mr. Rittinger is a member of the Association of the Bar of the
State of New York. He is 51 years old. Mr. Rittinger's address is 230 Park
Avenue, New York, NY 10169-0079.
RICHARD W. INGRAM**, President, Treasurer and Chief Financial Officer. Senior
Vice President and Director of Client Services and Treasury Administration of
FDI, Executive Vice President of Premier Mutual Fund Services, Inc., an
affiliate of FDI ("Premier Mutual"), and an officer of certain investment
companies distributed or administered by FDI. From March 1994 to November 1995,
Mr. Ingram was Vice President and Division Manager of First Data Investor
Services Group, Inc. From 1989 to 1994, Mr. Ingram was Vice President, Assistant
Treasurer and Tax Director - Mutual Funds of The Boston Company, Inc. He is 42
years old.
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* Each of these directors is an "interested person" of the Company.
** Address: 60 State Street, Suite 1300, Boston, MA 02109
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CHRISTOPHER J. KELLEY**, Vice President and Secretary. Vice President and
Senior Associate General Counsel of FDI and Premier Mutual, and an officer of
certain investment companies distributed or administered by FDI. From April
1994 to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial Group.
From October 1992 to March 1994, Mr. Kelley was employed by Putnam Investments
in legal and compliance capacities. He is 33 years old.
Officers and directors who are interested persons of the Investment Manager or
FDI will receive no compensation from the Company. The Company expects to pay or
accrue total directors' fees of approximately $45,000 per year to those
directors who are not designated above as "interested persons." Directors who
are interested persons of the Company may be compensated by the Investment
Manager for their services to the Company. On [__, 1998,] the officers and
directors of the Company, as a group, owned less than 1% of the then outstanding
shares of each Portfolio and FDI Distribution Services, Inc., an affiliate of
FDI, owned of record 100% of the outstanding shares of each of the Portfolios as
the initial shareholder. Because the initial shareholder's ownership interest
will be diluted upon the sale of shares to the public, such control will not
affect the rights of shareholders of the Company.
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The Company pays its directors an annual retainer and a per meeting fee and
reimburses them for their expenses. The amounts of compensation that the Company
estimates it will pay to each director for the fiscal year ending April 30,
1999, are as follows:
<TABLE>
<CAPTION>
Aggregate Pension or Total Compensation
Compensation Retirement Estimated Annual from
Name of Board from Benefits Accrued Benefits Upon Fund Complex (3)
Member Company as Retirement Paid to Board
Part of Company's Members
Expenses
- -------------------------- ------------ ----------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Richard W. Dalrymple (1) $12,500 $0 $0 (1)$ 25,000
Carolyn B. Lewis (1) $12,500 $0 $0 $25,000
Anthony J. Pace (2) $0 $0 $0 $0
James F. Rittinger (2) $0 $0 $0 $0
Theodore Rosen(1) $20,000 $0 $0 (1) $20,000
<FN>
(1) Amounts do not include reimbursed expenses for attending Board meetings.
(2) Interested director of the Company.
(3) "Fund Complex" includes the Company, and WIFF.
</FN>
</TABLE>
THE INVESTMENT MANAGER
Waterhouse Asset Management, Inc., a Delaware corporation, is the Investment
Manager of each Portfolio. The Investment Manager is a wholly owned subsidiary
of Waterhouse National Bank (the "Bank"), which is a wholly owned subsidiary of
Waterhouse Investor Services, Inc. ("Waterhouse"), which is in turn a wholly
owned subsidiary of The Toronto-Dominion Bank ("TD Bank"). The Bank offers
various banking products and services primarily to the customers of Waterhouse
Securities, the principal subsidiary of Waterhouse. TD Bank, a Canadian
chartered bank, is subject to the provisions of the Bank Act of Canada. The
Investment Manager also currently serves as investment
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<PAGE>
manager to the Bank and WIFF and, as of March 31, 1998, had total assets under
management in excess of $4.7 billion.
Personnel of the Investment Manager may invest in securities for their own
account pursuant to a code of ethics that sets forth all employees' fiduciary
responsibilities regarding the Company, establishes procedures for personal
investing and restricts certain transactions. Restrictions on the timing of
personal investing relative to trades by the Company have been adopted.
The following persons are senior officers of the Investment Manager, each of
whom have substantial responsibilities in connection with the management of the
Portfolios:
FRANK J. PETRILLI, Chairman, President and Chief Executive Officer of the
Investment Manager since January 1997. Mr. Petrilli has served as President and
Chief Operating Officer of Waterhouse since January 1995 and Chief Executive
Officer since February 1998. Mr. Petrilli has served as a Director of the Bank
and National Investor Services Corp. since March 1995 and September 1995,
respectively. From May 1993 to January 1995, Mr. Petrilli served as President
and Chief Operating Officer of American Express Centurion Bank. From January
1991 to May 1993, Mr. Petrilli served as Chief Financial Officer of American
Express Centurion Bank. Mr. Petrilli is 47 years old. Mr. Petrilli's address is
100 Wall Street, New York, NY 10005.
DAVID HARTMAN, Senior Vice President and Chief Investment Officer of the
Investment Manager. Mr. Hartman has been serving as Senior Vice President and
Chief Investment Officer of the Investment Manager since October 1995. From
February 1995 through August 1995, Mr. Hartman served as Senior Vice President
and Senior Portfolio Manager in charge of Fixed Income Separate Accounts at
Mitchell Hutchins - Paine Webber. From 1983 to 1995, Mr. Hartman was a Senior
Vice President of Kidder Peabody & Co. In this capacity, Mr. Hartman served as
the Chief Investment Officer for Fixed Income accounts and both taxable and
municipal money market funds. From 1976 to 1983, Mr. Hartman served as Vice
President of Federated Investors Inc. and was responsible for managing $5
billion in mutual funds. From 1967 to 1976, Mr. Hartman was a Senior Auditor at
Arthur Andersen & Co. where he was a small business consultant. Mr. Hartman is
51 years old. Mr. Hartman's address is 100 Wall Street, New York, NY 10005.
MICHELE R. TEICHNER, Senior Vice President of the Investment Manager. Ms.
Teichner has been serving as Senior Vice President of the Investment Manager
since August 1996, with responsibility for operations and compliance. Ms.
Teichner has served as Senior Vice President of Waterhouse Securities since
June 1997 and Senior Vice President and Senior Trust Officer of the Bank since
January 1997. From August 1994 to July 1996, Ms. Teichner served as President
of Mutual Fund Training & Consulting, Inc. From July 1993 to July 1994, Ms.
Teichner served as
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<PAGE>
Assistant Vice President of Concord Financial Group, Inc. From 1987 to 1992,
Ms. Teichner served as Assistant Vice President of Dillon, Read & Co. Inc. and
was responsible for the administration, operations and compliance for mutual
funds and the investment adviser. Ms. Teichner is 38 years old. Ms.
Teichner's address is 100 Wall Street, New York, NY 10005.
INVESTMENT MANAGEMENT, DISTRIBUTION AND OTHER SERVICES
INVESTMENT MANAGEMENT
Pursuant to the Investment Management Agreement with the Company on behalf of
each Portfolio, the Investment Manager manages each Portfolio's investments in
accordance with its stated policies and restrictions, subject to oversight by
the Company's Board of Directors.
The Investment Management Agreement continues in effect for two years from the
date of execution, and thereafter from year to year so long as its continuation
is approved at least annually by (i) a majority vote of the directors who are
not parties to such agreement or interested persons of any such party except in
their capacity as directors of the Company ("Disinterested Directors"), cast in
person at a meeting called for such purpose, and (ii) by the vote of a majority
(as defined in the Investment Company Act) of the outstanding voting securities
of each Portfolio, or by the Company's Board of Directors. The agreement may be
terminated as to any Portfolio at any time upon 60 days prior written notice,
without penalty, by either party, or by a majority vote of the outstanding
shares of a Portfolio with respect to that Portfolio, and will terminate
automatically upon assignment. The Investment Management Agreement was approved
by the Board of Directors of the Company, including a majority of the
Disinterested Directors who have no direct or indirect financial interest in the
Agreement, and by the shareholders of each Portfolio.
The Investment Management Agreement provides that the Investment Manager will
not be liable for any error of judgment or of law, or for any loss suffered by a
Portfolio in connection with the matters to which such agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
Investment Manager's part in the performance of its obligations and duties, or
by reason of its reckless disregard of its obligations and duties under such
agreement. The services of the Investment Manager to the Portfolios under the
Investment Management Agreement are not exclusive and it is free to render
similar services to others.
For the investment management services furnished to each Portfolio, such
Portfolio pays the Investment Manager an annual investment management fee,
accrued daily and payable monthly, on a graduated basis equal to .35 of 1% of
the first $1 billion of average daily net assets of each such Portfolio, .34 of
1% of the next $1 billion, and .33 of 1% of average daily net assets of each
Portfolio over $2 billion. The Investment Manager and its affiliates may, from
time to time, voluntarily waive its (or their) fees or assume certain expenses
of a Portfolio. The Investment Manager has agreed to waive a portion of the
annual investment management fee for the Municipal Portfolio through April 30,
1999, so that the actual fee payable annually by the Municipal Portfolio during
such period will be .25 of 1% of average daily net assets of such Portfolio. For
the first fiscal year of the Company's
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<PAGE>
operations, the Investment Manager or its affiliates intends to waive fees
and/or reimburse expenses so that each Portfolio's annual expense ratio will not
exceed 0.94% for the Money Market Portfolio, 0.91% for the U.S. Government
Portfolio, and 0.75% for the Municipal Portfolio. Other voluntary fee waivers or
reductions may be reduced or rescinded at the Investment Manager's discretion.
Expense reimbursements by the Investment Manager or its affiliates will increase
each Portfolio's total returns and yield.
The Investment Manager and its affiliates may, from time to time, voluntarily
waive or reimburse all or a part of each Portfolio's operating expenses. Expense
reimbursements by the Investment Manager or its affiliates will increase each
Portfolio's total returns and yield.
DISTRIBUTION
The distributor of the Company is FDI, 60 State Street, Suite 1300, Boston,
Massachusetts 02109. Pursuant to a Distribution Agreement between the Company
and FDI, FDI has the exclusive right to distribute shares of the Company. FDI
may enter into dealer or agency agreements with affiliates of the Investment
Manager and other firms for the sale of Company shares. FDI has entered into
such an agency agreement with Waterhouse Securities. FDI receives no fee from
the Company under the Distribution Agreement for acting as distributor to the
Company.
The Distribution Agreement will continue in effect for two years from the date
of its execution, and is renewable thereafter for periods of one year, so long
as such continuance is approved at least annually by a vote of the Board of
Directors of the Company, including a majority of Disinterested Directors who
have no direct or indirect financial interest in the Agreement. The Agreement
was approved by the Board of Directors of the Company, including a majority of
Disinterested Directors who have no direct or indirect financial interest in the
Agreement. Each Portfolio may terminate the Distribution Agreement on 60 days'
prior written notice without penalty. Termination by a Portfolio may be by vote
of a majority of the Company's Board of Directors, or a majority of the
Disinterested Directors, or by a "majority of the outstanding voting securities"
of such Portfolio as defined under the Investment Company Act. The Agreement
terminates automatically in the event of its "assignment" as defined in the
Investment Company Act.
SHAREHOLDER SERVICING
The Board of Directors of the Company has approved a Shareholder Servicing Plan
("Servicing Plan") pursuant to which each Portfolio may pay banks,
broker-dealers or other financial institutions that have entered into a
shareholder services agreement with the Company ("Servicing Agents") in
connection with shareholder support services that they provide. Payments under
the Servicing Plan will be calculated daily and payable monthly at an annual
rate of .25 of 1% of the average daily net assets of each Portfolio. Waterhouse
Securities, the Servicing Agent has agreed to waive the annual fee payable
through April 30, 1999 under the Servicing Plan so as not to exceed .20 of 1% of
average daily net assets in the case of the Money Market Portfolio, .17 of 1% of
average daily net assets in the case of the U.S. Government Portfolio and .11 of
1% of average daily net assets in the case of
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<PAGE>
the Municipal Portfolio. The shareholder services provided by the Servicing
Agents pursuant to the Servicing Plan may include, among other services,
providing general shareholder liaison services (including responding to
shareholder inquiries), providing information on shareholder investments,
establishing and maintaining shareholder accounts and records, and providing
such other similar services as may be reasonably requested.
The Servicing Plan was approved by the Board of Directors, including a majority
of the Disinterested Directors who have no direct or indirect financial interest
in the Plan or the Shareholder Services Agreement. The Servicing Plan continues
in effect as long as such continuance is specifically so approved at least
annually. The Servicing Plan may be terminated by the Company with respect to
any Portfolio by a vote of a majority of the Disinterested Directors who have no
direct or indirect financial interest in the Plan or any agreements relating
thereto.
Pursuant to a Shareholder Services Agreement between the Company and Waterhouse
Securities, Waterhouse Securities has agreed to provide shareholder services to
each Portfolio pursuant to the Shareholder Servicing Plan. The Company may enter
into similar agreements with other service organizations, including
broker-dealers and banks whose clients are shareholders of the Company, to act
as Servicing Agents and to perform shareholder support services with respect to
such clients.
The Shareholder Services Agreement with Waterhouse Securities will continue in
effect for two years, and is renewable thereafter for periods of one year, so
long as such continuance is approved at least annually by a vote of the Board of
Directors of the Company, including a majority of the Disinterested Directors
who have no direct or indirect financial interest in the Agreement.
The Agreement was approved by the Board of Directors of the Company, including a
majority of the Disinterested Directors who have no direct or indirect financial
interest in the Agreement. Each Portfolio or Waterhouse Securities may terminate
the Shareholder Services Agreement on 60 days' prior written notice without
penalty. Termination by a Portfolio may be by vote of the Company's Board of
Directors, or a majority of the Disinterested Directors who have no direct or
indirect financial interest in the Agreement. The Agreement terminates
automatically in the event of its "assignment" as defined in the Investment
Company Act.
Conflict of interest restrictions may apply to the receipt by Servicing Agents
of compensation from the Company in connection with the investment of fiduciary
assets in Company shares. Servicing Agents, including banks regulated by the
Comptroller of the Currency, the Federal Reserve Board or the Federal Deposit
Insurance Corporation, and investment advisers and other money managers are
urged to consult their legal advisers before investing such assets in Company
shares.
ADMINISTRATION
Under an Administration Agreement with the Company, the Administrator, an
affiliate of the Investment Manager, provides administrative services to the
Portfolios. Administrative services furnished by the Administrator include,
among others, maintaining and preserving the records of the
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<PAGE>
Company, including financial and corporate records, computing NAV, dividends,
performance data and financial information regarding the Company, preparing
reports, overseeing the preparation and filing with the SEC and state securities
regulators of registration statements, notices, reports and other material
required to be filed under applicable laws, developing and implementing
procedures for monitoring compliance with regulatory requirements, providing
routine accounting services, providing office facilities and clerical support as
well as providing general oversight of other service providers. For its
services, the Administrator receives from each Portfolio an annual fee, payable
monthly, of .10 of 1% of the average daily net assets of each Portfolio. The fee
is accrued daily as an expense of each Portfolio. The Administrator provides
similar services to each Portfolio, for which it receives no separate fee.
The Administrator has entered into a Subadministration Agreement with FDI
pursuant to which FDI will perform certain of the foregoing administrative
services for the Company. Under this Agreement, the Administrator pays FDI's
fees for providing such services. In addition, the Administrator may enter into
subadministration agreements with other persons to perform such services from
time to time.
The Administration Agreement has an initial term of two years from the date of
execution, and is renewable thereafter for periods of one year, so long as such
continuance is approved at least annually by a vote of the Company's Board,
including a majority of Disinterested Directors of the Company who have no
direct or indirect financial interest in the Agreement. The Agreement was
approved by the Company's Board, including a majority of the Disinterested
Directors of the Company who have no direct or indirect financial interest in
the Agreement. Each Portfolio or the Administrator may terminate the
Administration Agreement on 60 days' prior written notice without penalty.
Termination by a Portfolio may be by vote of the Company's Board, or a majority
of the Disinterested Directors of the Company who have no direct or indirect
financial interest in the Agreement, or by a "majority of the outstanding voting
securities" of such Portfolio as defined under the Investment Company Act. The
Agreement terminates automatically in the event of its "assignment" as defined
in the Investment Company Act.
The Administration Agreement provides that the Administrator will not be liable
for any error of judgment or of law, or for any loss suffered by a Portfolio in
connection with the matters to which such agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the
Administrator's part in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under such
agreement.
The Glass-Steagall Act and other applicable laws generally prohibit federally
chartered or supervised banks from engaging in the business of underwriting,
selling or distributing securities. While the matter is not free from doubt, the
Investment Manager and Administrator believe that such laws should not preclude
them or their affiliates from performing the activities contemplated by the
Prospectus or this Statement of Additional Information. Accordingly, the
Investment Manager and Administrator will perform only investment management
servicing and administrative functions. However, judicial and administrative
decisions or interpretations of such laws as well as changes in
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<PAGE>
either state statutes or regulations relating to the permissible activities of
banks or their subsidiaries or affiliates could prevent the Investment Manager,
the Administrator or their affiliates from continuing to perform all or a part
of their activities. If the Investment Manager, the Administrator or any of
their affiliates were prohibited from so acting, alternative means of continuing
such services would be sought by the Company's Board. It is not expected that
shareholders would suffer any adverse financial consequences as a result of such
an occurrence.
TRANSFER AGENT AND CUSTODIAN
National Investor Services Corp. (also referred to as the "Transfer Agent"), an
affiliate of the Investment Manager, serves as transfer and dividend disbursing
agent for each Portfolio. For the services provided under the Transfer Agency
and Dividend Disbursing Agency Agreement, which include furnishing periodic and
year-end shareholder statements and confirmations of purchases and sales,
reporting share ownership, aggregating, processing and recording purchases and
redemptions of shares, processing dividend and distribution payments, forwarding
shareholder communications such as proxies, shareholder reports, dividend
notices and prospectuses to beneficial owners, receiving, tabulating and
transmitting proxies executed by beneficial owners and sending year-end tax
reporting to shareholders and the Internal Revenue Service, the Transfer Agent
is entitled to an annual fee, payable monthly, of .20 of 1% of each Portfolio's
average daily net assets.
The Transfer Agent may enter into sub-transfer agency and dividend disbursing
agency agreements with other persons to perform such services for compensation
from time to time.
Pursuant to a Custodian Agreement, The Bank of New York acts as the custodian of
each of the Portfolio's assets.
DIVIDENDS AND TAXES
DIVIDENDS. On each day that the NAV per share of a Portfolio is determined, such
Portfolio's net investment income will be declared at 4:00 p.m. (Eastern time)
as a daily dividend to shareholders of record as of such day's last calculation
of NAV.
Each Portfolio calculates its dividends based on its daily net investment
income. For this purpose, the net investment income of a Portfolio consists of
accrued interest income plus or minus amortized discount or premium minus
accrued expenses. Expenses of each Portfolio are accrued each day.
Because each Portfolio's income is entirely derived from interest or gains from
the sale of debt instruments, dividends from a Portfolio will not qualify for
the dividends received deduction available to corporate shareholders.
Distributions of income realized with respect to market discount will be made,
at least annually, as determined by the Board of Directors, to maintain each
Portfolio's net asset value at $1.00 per share.
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<PAGE>
CAPITAL GAINS DISTRIBUTION. If a Portfolio realizes any net capital gains, such
gains will be distributed at least once during the year as determined by the
Board of Directors, to maintain its NAV at $1.00 per share. Short-term capital
gains distributed by a Portfolio are taxable to shareholders as ordinary income,
not as capital gains. Any realized short-term capital losses to the extent not
offset by realized capital gains will be carried forward. It is not anticipated
that a Portfolio will realize any capital gains from the sale of securities held
for more than 12 months, but if it does so, these gains will be distributed
annually.
TAX STATUS OF THE COMPANY. Each Portfolio intends to meet the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute all of its investment company taxable income and net realized gains,
if applicable, to shareholders. Therefore, it is not anticipated that any of the
Portfolios will be subject to the 4% excise tax applicable to regulated
investment companies that fail to satisfy certain distribution requirements.
Each Portfolio is treated as a separate entity from the other Portfolios for tax
purposes.
STATE AND LOCAL TAX ISSUES. Shareholders are urged to consult with their tax
advisers as to whether any of the dividends paid by the U.S. Government
Portfolio are exempt from state and local taxation. The exemption from state and
local income taxation does not preclude states from assessing other taxes on the
ownership of U.S. government securities whether such securities are held
directly or through the Company.
FEDERAL TAX ISSUES - MUNICIPAL PORTFOLIO. Distributions from the Municipal
Portfolio will constitute exempt-interest dividends to the extent of the
Portfolio's tax-exempt interest income (net of expenses and amortized bond
premium). Exempt-interest dividends distributed to shareholders of the Municipal
Portfolio are excluded from gross income for federal income tax purposes.
However, shareholders required to file a federal income tax return will be
required to report the receipt of exempt-interest dividends on their returns.
Moreover, while exempt-interest dividends are excluded from gross income for
federal income tax purposes, they may be subject to alternative minimum tax
("AMT") in certain circumstances and may have other collateral tax consequences
as discussed below. Distributions by the Municipal Portfolio of any investment
company taxable income (which include any short-term capital gains and market
discount) will be taxable to shareholders.
Dividend distributions resulting from a recharacterization of gain from the sale
of bonds purchased with market discount are not considered income for purposes
of the Municipal Portfolio's policy of investing so that at least 80% of its
income is free from federal income tax.
AMT is imposed in addition to, but only to the extent it exceeds, the regular
tax and is computed at a maximum marginal rate of 28% for noncorporate taxpayers
and 20% for corporate taxpayers on the excess of the taxpayer's alternative
minimum taxable income ("AMTI") over an exemption amount. Exempt-interest
dividends derived from certain "private activity" municipal obligations issued
after August 7, 1986 will generally constitute an item of tax preference
includable in AMTI
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<PAGE>
for both corporate and noncorporate taxpayers. Corporate investors should note
that 75% of the amount by which adjusted current earnings (which includes all
tax-exempt interest) exceeds the AMTI of the corporation constitutes an upward
adjustment for purposes of the corporate AMT.
Exempt-interest dividends must be taken into account in computing the portion,
if any, of social security or railroad retirement benefits that must be included
in an individual shareholder's gross income and subject to federal income tax.
Receipt of exempt-interest dividends may result in other collateral federal
income tax consequences to certain taxpayers. Prospective investors should
consult their own tax advisers as to such consequences.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Further, the Municipal
Portfolio may not be an appropriate investment for (i) persons who are
"substantial users" of facilities financed by industrial development bonds held
by the Municipal Portfolio or are "related persons" to such users; or (ii)
persons who are investing through a tax-exempt retirement plan, IRA or Keogh
Account.
A separate tax is imposed on corporations at a rate of 0.12 percent of the
excess of such corporation's "modified" AMTI over $2,000,000. A portion of
tax-exempt interest, including exempt-interest dividends, may be includable in
modified AMTI. Corporate shareholders are advised to consult with their tax
advisers.
The Municipal Portfolio purchases municipal obligations based on opinions of
bond counsel regarding the federal income tax status of the obligations. These
opinions generally will be based on covenants by the issuers regarding
continuing compliance with federal tax requirements. If the issuer of an
obligation fails to comply with its covenant at any time, interest on the
obligation could become federally taxable, either prospectively or retroactively
to the date the obligation was issued.
Each of the Portfolios may invest in obligations such as zero coupon bonds,
issued with original issue discount ("OID") for federal income tax purposes.
Accrued OID constitutes income subject to the distribution requirements
applicable to regulated investment companies, although such income may not be
represented by any cash payment. Accordingly, it may be necessary for a
Portfolio to dispose of other assets in order to satisfy such distribution
requirements.
OTHER TAX INFORMATION. The Transfer Agent will send each shareholder a notice in
January describing the tax status of dividend and capital gain distributions
(where applicable) for the prior year.
The information above, together with the information set forth in the
Prospectus, is only a summary of some of the federal income tax consequences
generally affecting each Portfolio and its shareholders, and no attempt has been
made to present a detailed explanation of the tax treatment of each Portfolio or
to discuss individual tax consequences. In addition to federal income taxes,
shareholders may be subject to state and local taxes on Company distributions,
and shares may be
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<PAGE>
subject to state and local personal property taxes. Investors should consult
their tax advisers to determine whether a Portfolio is suitable to their
particular tax situation.
Foreign shareholders should consult their tax advisers regarding foreign tax
consequences applicable to their purchase of Company shares.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Company's independent
auditors, Ernst & Young LLP, whose address is 787 Seventh Avenue, New York, New
York 10019, audit and report on the Company's annual financial statements,
review certain regulatory reports and the Company's federal income tax returns,
and perform other professional accounting, auditing, tax and advisory services
when engaged to do so by the Company. Shareholders will receive annual audited
financial statements and semi-annual unaudited financial statements.
SHARE PRICE CALCULATION
Each Portfolio values its portfolio instruments at amortized cost, which means
that they are valued at their acquisition cost, as adjusted for amortization of
premium or accretion of discount, rather than at current market value. The
amortized cost value of an instrument may be higher or lower than the price each
Portfolio would receive if it sold the instrument.
Valuing a Portfolio's instruments on the basis of amortized cost and use of the
term "money market fund" are permitted by Rule 2a-7. Each Portfolio must adhere
to certain conditions under Rule 2a-7.
The Board of Directors of the Company oversees the Investment Manager's
adherence to SEC rules concerning money market funds, and has established
procedures designed to stabilize each Portfolio's NAV per share at $1.00. At
such intervals as they deem appropriate, the Board of Directors considers the
extent to which NAV calculated by using market valuations would deviate from
$1.00 per share. Market valuations are obtained by using actual quotations
provided by market makers, estimates of current market value, or values obtained
from yield data relating to classes of money market instruments published by
reputable sources at the mean between the bid and asked prices of the
instruments. If a deviation were to occur between the NAV per share calculated
by reference to market values and a Portfolio's NAV per share, which the Board
of Directors of the Company believed may result in material dilution or other
unfair results to shareholders, the directors have agreed promptly to consider
what corrective action they deem appropriate to eliminate or reduce, to the
extent reasonably practicable, the dilution or unfair results. Such corrective
action could include selling portfolio securities prior to maturity; withholding
dividends; redeeming shares in kind; establishing NAV by using available market
quotations; and such other measures as the directors may deem appropriate.
During periods of declining interest rates, each Portfolio's yield based on
amortized cost may be higher than the yield based on market valuations. Under
these circumstances, a shareholder of any Portfolio would be able to retain a
somewhat higher yield than would result if each Portfolio utilized
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market valuations to determine its NAV. The converse would apply in a period of
rising interest rates.
NAV is calculated by the Company as to each Portfolio on each day that the NYSE
and the Custodian are open. Currently, the NYSE is closed on weekends and New
Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
In addition to these holidays, the Custodian generally is closed on Veteran's
Day and Columbus Day.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Each Portfolio does not currently impose a minimum for initial or subsequent
investments. However, minimum requirements may be imposed or changed at any
time. Each Portfolio may waive minimum investment requirements for purchases by
directors, officers or employees of the Company, Waterhouse or any of its
subsidiaries. Each Portfolio is open for business and its NAV is calculated each
day the Custodian is open and the NYSE is open for trading.
The Company normally calculates the NAV of each Portfolio as of 12:00 noon and
4:00 p.m. Eastern time each day that the NYSE and the bank that serves as the
Custodian are open. To the extent that portfolio securities are traded in other
markets on days when the NYSE or the Custodian are closed, a Portfolio's NAV may
be affected on days when investors do not have access to the Company to purchase
or redeem shares. In addition, trading in some of a Portfolio's portfolio
securities may not occur on days when the Company is open for business.
If the Board of Directors determines that existing conditions make cash payments
undesirable, redemption payments may be made in whole or in part in securities
or other property, valued for this purpose as they are valued in computing a
Portfolio's NAV. Shareholders receiving securities or other property on
redemption may realize a gain or loss for tax purposes, and will incur any costs
of sale, as well as the associated inconveniences.
The Company may suspend redemption rights and postpone payments at times when
trading on the NYSE is restricted, the NYSE is closed for any reason other than
its customary weekend or holiday closings, emergency circumstances as determined
by the SEC exist, or for such other circumstances as the SEC may permit.
PERFORMANCE
As reflected in the Prospectus, the historical performance calculation for a
Portfolio may be shown in the form of "yield," "effective yield" and, for the
Municipal Portfolio only, "tax equivalent yield" and "tax equivalent effective
yield." These various measures of performance are described below.
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Each Portfolio's yield is computed in accordance with a standardized method
prescribed by rules of the SEC. Under that method, the yield quotation is based
on a seven-day period and is computed for each Portfolio as follows: the first
calculation is net investment income per share for the period, which is accrued
interest on portfolio securities, plus or minus amortized discount or premium
(excluding market discount for the Municipal Portfolio), less accrued expenses.
This number is then divided by the price per share (expected to remain constant
at $1.00) at the beginning of the period ("base period return"). The result is
then divided by 7 and multiplied by 365 and the resulting yield figure is
carried to the nearest one-hundredth of one percent. Realized capital gains or
losses and unrealized appreciation or depreciation of investments are not
included in the calculation.
Each Portfolio's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for effective yield is:
[(base period return + 1)365/7] - 1.
The tax equivalent yield of the shares of the Municipal Portfolio is computed by
dividing that portion of the yield of the Portfolio (computed as described
above) that is tax-exempt by an amount equal to one minus the stated federal
income tax rate (normally assumed to be the maximum applicable marginal tax
bracket rate) and adding the result to that portion, if any, of the yield of the
Portfolio that is not tax-exempt.
Tax equivalent effective yield is computed in the same manner as tax equivalent
yield, except that effective yield is substituted for yield in the calculation.
Each Portfolio's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in that Portfolio
will actually yield for any given future period. Actual yields will depend not
only on changes in interest rates on money market instruments during the period
in which the investment in the Portfolio is held, but also on such matters as
expenses of that Portfolio.
As indicated in the Prospectus (see "Performance"), the performance of the
Company's Portfolios may be compared to that of other money market mutual funds
tracked by Lipper Analytical Services, Inc. ("Lipper"), a widely used
independent research firm that ranks mutual funds by overall performance,
investment objectives and assets. Lipper performance calculations include the
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. A Portfolio's performance also may be compared to other money
market funds as reported by IBC/Donoghue's Money Fund Report(R), a reporting
service on money market funds. As reported by Money Portfolio Report, all
investment results represent total return (annualized results for the period net
of management fees and expenses) and one year investment results are effective
annual yields assuming reinvestment of dividends.
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<PAGE>
BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408, a financial reporting
service which each week publishes average rates of bank and thrift institution
money market deposit accounts and interest bearing checking accounts, reports
results for the BANK RATE MONITOR National Index. The rates published by the
BANK RATE MONITOR National Index are averages of the personal account rates
offered on the Wednesday prior to the date of publication by 100 of the leading
bank and thrift institutions in the ten largest Consolidated Metropolitan
Statistical Areas. Account minimums range upward from $2,000 in each institution
and compounding methods vary. Interest bearing checking accounts generally offer
unlimited checking while money market deposit accounts generally restrict the
number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Bank products
represent a taxable alternative income producing product. Bank and thrift
institution account deposits may be insured. Shareholder accounts in the Company
are not insured. Bank savings accounts compete with money market mutual fund
products with respect to certain liquidity features but may not offer all of the
features available from a money market mutual fund, such as checkwriting. Bank
checking accounts normally do not pay interest but compete with money market
mutual fund products with respect to certain liquidity features (e.g., the
ability to write checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity will normally be
subject to a penalty. In contrast, shares of a Portfolio are redeemable at the
net asset value next determined (normally, $1.00 per share) after a request is
received without charge.
Investors may also want to compare a Portfolio's performance to that of United
States Treasury Bills or Notes because such instruments represent alternative
income producing products. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the United States Treasury. The market value of such instruments will generally
fluctuate inversely with interest rates prior to maturity and will equal par
value at maturity. Generally, the values of obligations with shorter maturities
will fluctuate less than those with longer maturities. A Portfolio's yield will
fluctuate.
TAX-EXEMPT VERSUS TAXABLE YIELD. Investors may want to determine which
investment -- tax exempt or taxable -- will provide a higher after-tax return.
To determine the tax equivalent yield, simply divide the yield from the
tax-exempt investment by an amount equal to 1 minus the investor's marginal
federal income tax rate.
GENERAL INFORMATION
SHAREHOLDER RIGHTS
The Company is an open-end, diversified management investment company. The
Company was organized as a Maryland corporation on August 19, 1996. The shares
of the Company are divided into three Portfolios (or series) constituting
separate portfolios of investments, with various
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investment objectives and policies. The Company has currently authorized one
class of shares to be issued by each Portfolio.
The Board of Directors may authorize the issuance of additional series or
classes of shares. The Board of Directors anticipates that it will from time to
time, classify or reclassify issued or any unissued shares to create one or more
new series or classes of shares in addition to the existing series or class
setting or changing in any one or more respects the designations, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications, or terms or conditions of redemption, of such
classes; provided, however, that any such classification or reclassification
shall not substantially adversely affect the rights of holders of issued shares.
Any such classification or reclassification will comply with the provisions of
the Investment Company Act. The Portfolios may convert to a "master/feeder"
structure without shareholder vote. A master/feeder structure involves
investment in a single central portfolio (the "master fund") by a variety of
pooled investment vehicles (the "feeder funds") sharing a common investment
objective.
Shares of the Company have equal rights with respect to voting, except that the
holders of shares of a particular Portfolio or class will have the exclusive
right to vote on matters affecting only the rights of the holders of such
Portfolio or class. For example, holders of a particular Portfolio will have the
exclusive right to vote on any investment advisory agreement or investment
restriction that relates only to such Portfolio. Shareholders of the Portfolios
do not have cumulative voting rights, and therefore the holders of more than 50%
of the outstanding shares of the Company voting together for the election of
directors may elect all of the members of the Board of Directors. In such event,
the remaining holders cannot elect any members of the Board of Directors.
The Articles of Incorporation permit the Directors to issue 100 billion full and
fractional shares, par value $.0001, of the Portfolios, as follows: 60 billion
shares of the Kennedy Cabot Money Market Portfolio; 20 billion shares of the
Kennedy Cabot U.S. Government Portfolio; and 20 billion shares of the Kennedy
Cabot Municipal Portfolio. Each Portfolio share is entitled to participate pro
rata in the dividends and distributions from that Portfolio.
As described in each Prospectus, the Company will not normally hold annual
shareholders' meetings. Under Maryland law and the Company's By-Laws, an annual
meeting is not required to be held in any year in which the election of
directors is not required to be acted upon under the Investment Company Act. The
Company's By-Laws provide that special meetings of shareholders, unless
otherwise provided by law or by the Articles of Incorporation, may be called for
any purpose or purposes by a majority of the Board of Directors, the Chairman of
the Board, the President, or the written request of the holders of at least 10%
of the outstanding shares of capital stock of the corporation entitled to be
voted at such meeting to the extent permitted by Maryland law.
Each Director serves until the next election of Directors and until the election
and qualification of his or her successor or until such Director sooner dies,
resigns, retires or is removed by the affirmative vote of a majority of the
outstanding voting securities of the Company. In accordance with the Investment
Company Act (i) the Company will hold a shareholder meeting for the election
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of Directors at such time as less than a majority of the Directors have been
elected by shareholders, and (ii) if, as a result of a vacancy in the Board of
Directors, less than two-thirds of the Directors have been elected by the
shareholders, that vacancy will be filled only by a vote of the shareholders.
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<PAGE>
ANNEX -- RATINGS OF INVESTMENTS
STANDARD AND POOR'S RATINGS GROUP AND
MOODY'S INVESTORS SERVICE, INC.
COMMERCIAL PAPER RATINGS
Commercial paper rated by Standard & Poor's Ratings Group has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service. Among the factors considered by them
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of a public interest questions and preparations to meet such obligations.
Relative strength or weakness of the above factors determines whether the
issuer's commercial paper is rated Prime-1, 2 or 3.
MIG-1 AND MIG-2 MUNICIPAL NOTES
Moody's Investors Service's ratings for state and municipal notes and other
short-term loans will be designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit risk
and long-term risk. Factors affecting the liquidity of the borrower are
uppermost in importance in short-term borrowing, while various factors of the
first importance in bond risk are of lesser importance in the short run. Loans
designated MIG-1 are of the best quality, enjoying strong protection from
established cash flows of funds for their servicing or from established and
broad-based access to the market for refinancing, or both. Loans designated
MIG-2 are of high quality, with margins of protection ample although not so
large as in the preceding group.
STANDARD & POOR'S RATINGS GROUP BOND RATINGS, CORPORATE BONDS
AAA. This is the highest rating assigned by Standard & Poor's Ratings Group to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
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AA. Bonds rated AA also qualify as high quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt-edge."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa. Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high-grade bonds.
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A. Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
B-31
<PAGE>
PART C. OTHER INFORMATION
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS:
Contained in Part A, the Prospectus:
None
Contained in Part B, the Statement of Additional Information:
Statement of Assets and Liabilities as of , 1998 *
(b) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C> <C>
1(a) -- Articles of Incorporation of Registrant (a)
(b) -- Articles of Amendment
2 -- By-Laws of Registrant, as amended to date.(a)
3 -- Inapplicable
4 -- Instrument defining rights of Shareholders (Incorporated by
Reference to Exhibits 1 and 2 above).
5 -- Investment Management Agreement
6 -- Form of Distribution Agreement
7 -- Inapplicable
8(a) -- Form of Custody Agreement
(b) -- Foreign Custody Manager Agreement
9(a) -- Transfer Agency and Dividend Disbursing Agency Agreement
(b) -- Accounting Services Agreement
(c) -- Form of State Filing Services Agreement
(d) -- Administration Agreement
(e) -- Subadministration Agreement
(f) -- Form of Shareholder Servicing Plan
(g) -- Form of Shareholder Servicing Agreement
(h) -- Form of Shareholder Services Agreement for Waterhouse Securities,
Inc.
(i) -- Form of License Agreement
10 -- Opinion and Consent of Shereff, Friedman, Hoffman and
Goodman, LLP as to legality of the securities being
registered *
11 -- Consent of Independent Auditors *
12 -- Inapplicable
13 -- Form of Subscription Agreement between Registrant and FDI
Distribution Services, Inc.
14 -- Model Plan to Establish Retirement Plans
</TABLE>
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<TABLE>
<S> <C> <C>
15 -- Inapplicable
16 -- Schedule for computation of each performance quotation.*
17 -- Other Exhibits - Power of attorney for:
James F. Rittinger
Anthony J. Pace
Richard W. Dalrymple
Theodore Rosen
Carolyn B. Lewis
18 -- Inapplicable
<FN>
- ----------
(a) incorporated by reference to Registrant's Registration
Statement, on Form N-1A filed on October 21, 1996.
* To be filed by subsequent amendment
</FN>
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
As of ________________, 1998, the number of record holders of each
class of securities of the Registrant were as follows:
Title of Series Number of Record Holders
Kennedy Cabot Money Market Portfolio 1
Kennedy Cabot U.S. Government Portfolio 1
Kennedy Cabot Municipal Portfolio 1
ITEM 27. INDEMNIFICATION.
Section 2-418 of the General Corporation Law of the State of Maryland,
Article IX of the Registrant's Articles of Incorporation, filed as Exhibit
(1)(a) hereto, Article V of the Registrant's ByLaws, filed as Exhibit (2)
hereto, and the Investment Management Agreement, a form of which has been filed
as Exhibit 5 hereto, provide for indemnification.
The Articles of Incorporation and By-Laws provide that to the fullest
extent that limitations on the liability of directors and officers are permitted
by the Maryland General Corporation Law, no director or officer of the
Registrant shall have any liability to the Registrant or to its shareholders for
damages.
The Articles of Incorporation and By-Laws further provide that the
Registrant shall indemnify and advance expenses to its currently acting and its
former directors to the fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law and the
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Investment Company Act; that the Registrant shall indemnify and advance expenses
to its officers to the same extent as its directors and to such further extent
as is consistent with applicable law. The Board of Directors may, through
by-law, resolution or agreement, make further provisions for indemnification of
directors, officers, employees and agents to the fullest extent permitted by the
Maryland General Corporation Law. However, nothing in the Articles of
Incorporation or By-Laws protects any director or officer of the Registrant
against any liability to the Registrant or to its shareholders to which he or
she would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his or her office.
Section 2-418 of the General Corporation Law of the State of Maryland
provides that a corporation may indemnify any director made a party to any
proceeding by reason of service in that capacity unless it is established that
(i) the act or omission of the director was material to the matter giving rise
to the proceeding; and (a) was committed in bad faith; or (b) was the result of
active and deliberate dishonesty; or (ii) the director actually received an
improper personal benefit in money, property, or services; or (iii) in the case
of any criminal proceeding, the director had reasonable cause to believe that
the act or omission was unlawful. Section 2-418 permits indemnification to be
made against judgments, penalties, fines, settlements, and reasonable expenses
actually incurred by the director in connection with the proceeding; however, if
the proceeding was one by or in the right of the corporation, indemnification
may not be made in respect of any proceeding in which the director shall have
been adjudged to be liable to the corporation. A director may not be indemnified
under Section 2-418 in respect of any proceeding charging improper personal
benefit to the director, whether or not involving action in the director's
official capacity, in which the director was adjudged to be liable on the basis
that personal benefit was improperly received.
Unless limited by the Registrant's charter, a director who has been
successful, on the merits or otherwise, in the defense of any proceeding
referred to above shall be indemnified against any reasonable expenses incurred
by the director in connection with the proceeding. Reasonable expenses incurred
by a director who is a party to a proceeding may be paid or reimbursed by the
corporation in advance of the final disposition of the proceeding upon receipt
by the corporation of (i) a written affirmation by the director of the
director's good faith belief that the standard of conduct necessary for
indemnification by the corporation has been met; and (ii) a written undertaking
by or on behalf of the director to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
The indemnification and advancement of expenses provided or authorized
by Section 2-418 may not be deemed exclusive of any other rights, by
indemnification or otherwise, to which a director may be entitled under the
charter, the bylaws, a resolution of stockholders or directors, an agreement or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.
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Under Section 2-418, a corporation may indemnify and advance expenses
to an officer, employee, or agent of the corporation to the same extent that it
may indemnify directors and a corporation, in addition, may indemnify and
advance expenses to an officer, employee, or agent who is not a director to such
further extent, consistent with law, as may be provided by its charter, bylaws,
general or specific action of its board of directors or contract.
Under Section 2-418, a corporation may purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position, whether or not
the corporation would have the power to indemnify against liability under the
provisions of such Section. A corporation also may provide similar protection,
including a trust fund, letter of credit, or surety bond, not inconsistent with
the foregoing. The insurance or similar protection may be provided by a
subsidiary or an affiliate of the corporation.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, 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 Act and will be governed by the final adjudication of
such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Set forth below is a list of each Director and officer of the
Investment Manager indicating each business, profession, vocation or employment
of a substantial nature in which each such person or entity has been engaged
during the last two fiscal years.
*DAVID HARTMAN, Senior Vice President and Chief Investment Officer.
From February 1995 through August 1995, Mr. Hartman served as Senior Vice
President and Senior Portfolio Manager of Fixed Income Separate Accounts at
Mitchell Hutchins - Paine Webber. Mr. Hartman also served in similar
capacities for Kidder Peabody & Co. from 1983 to 1995.
*RICHARD H. NEIMAN, Director and Secretary. Mr. Neiman has served as
Executive Vice President, General Counsel, Director and Secretary of Waterhouse
Investor Services, Inc. since
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July 1994. Mr. Neiman also serves in similar capacities for Waterhouse
Securities, Inc. Mr. Neiman has served as General Counsel, Director and
Secretary of Waterhouse National Bank and National Investor Services Corp.
since July 1994 and September 1995, respectively.
*FRANK J. PETRILLI, Chairman, Director, President, CEO. Mr. Petrilli
has served as President and Chief Operating Officer of Waterhouse Investor
Services, Inc. since January 1995. Since February 1998 Mr. Petrilli has served
as CEO of Waterhouse Investor Services. Mr. Petrilli has served as a Director
of Waterhouse National Bank and National Investor Services Corp. since March
1995 and September 1995, respectively.
**M. BERNARD SIEGEL, Senior Vice President, Chief Financial Officer
and Treasurer. Mr. Siegel has served as Executive Vice President of Finance and
Administration of Waterhouse Investor Services, Inc., since January 1997. Mr.
Siegel served as Chief Financial Officer of Waterhouse Investor Services, Inc.,
from November 1993 to January 1997. Mr. Siegel has served as Director of
National Investor Services Corp. since September 1995.
*MICHELE R. TEICHNER, Senior Vice President Operations and Compliance.
Ms. Teichner has been serving as Senior Vice President of Waterhouse Asset
Management, Inc. since August 1996, with responsibility for operations and
compliance. Michele Teichner has served as Senior Vice President of Waterhouse
Securities, Inc. since June 1997 and Senior Vice President and Senior Trust
Officer of Waterhouse National Bank since January 1997. From August 1994 to
July 1996, Ms. Teichner served as President of Mutual Fund Training &
Consulting, Inc.
*LAWRENCE M. WATERHOUSE, JR., Director. As of February 1998, Mr.
Waterhouse has served as Chairman of Waterhouse Investor Services. Mr.
Waterhouse has served as Chief Executive Officer and Chairman of Waterhouse
Investor Services, Inc. since its inception in 1987. Mr. Waterhouse is the
founder of Waterhouse Securities, Inc. and has served as Chief Executive
Officer since its inception in March 1979. Mr. Waterhouse has also served as
Chairman of Waterhouse National Bank and Director of National Investor Services
Corp. since July 1994 and September 1995, respectively.
* Address: 100 Wall Street, New York, NY 10005
**Address: 55 Water Street, New York, NY 10041
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) Funds Distributor, Inc. (the "Distributor") acts as principal
underwriter and distributor of the Registrant's shares. The Distributor
currently acts as a principal underwriter, for the following other investment
companies:
American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
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American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Institutional Funds
J.P. Morgan Funds
J.P. Morgan Series Trust
JPM Series Trust II
LaSalle Partners Funds, Inc.
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
Orbitex Group of Funds
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.
The Distributor is registered with the SEC as a broker-dealer and is a
member of the National Association of Securities Dealers. The Distributor is an
indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.
(b) The following is a list of the executive officers, directors
and partners of Funds Distributor, Inc.
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<TABLE>
<S> <C> <C>
Director, President and Chief Executive Officer - Marie E. Connolly
Executive Vice President - Richard W. Ingram
Executive Vice President - George A. Rio
Executive Vice President - Donald R. Roberson
Executive Vice President - William S. Nichols
Senior Vice President, General Counsel, Chief - Margaret W. Chambers
Compliance Officer, Secretary and Clerk
Senior Vice President - Michael S. Petrucelli
Director, Senior Vice President, Treasurer and - Joseph F. Tower, III
Chief Financial Officer
Senior Vice President - Paula R. David
Senior Vice President - Allen B. Closser
Senior Vice President - Bernard A. Whalen
Director - William J. Nutt
</TABLE>
(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
All accounts, books and other documents required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the Rules thereunder
are maintained at the offices of the Registrant, the offices of the Registrant's
Investment Manager and Administrator, Waterhouse Asset Management, Inc. and
Waterhouse Securities, Inc., respectively, 100 Wall Street, New York, New York
10005, or (i) in the case of records concerning custodial functions, at the
offices of the Registrant's Custodian, The Bank of New York, 48 Wall Street, New
York, New York 10286; (ii) in the case of records concerning transfer agency
functions, at the offices of the Registrant's transfer agent, National Investor
Services Corp., 55 Water Street, New York, New York 10041; (iii) in the case of
records concerning distribution, administration and certain other functions, at
the offices of the Registrant's or Company's Distributor and Sub-Administrator,
Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Massachusetts
02109; and (iv) in the case of records concerning fund accounting functions, at
the offices of the Registrant's or Company's fund accountant, Countrywide Fund
Services, Inc., 312 Walnut Street, Cincinnati, Ohio 45202.
ITEM 31. MANAGEMENT SERVICES.
Not applicable.
ITEM 32. UNDERTAKINGS.
(a) If requested to do so by the holders of at least 10% of the Fund's
outstanding shares, the Company will call a meeting of shareholders for the
purpose of voting upon the removal of a Director or Directors and the Company
will assist with communications
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with other shareholders as required by Section 16(c) of the Investment Company
Act of 1940.
(b) Registrant hereby undertakes to file a post-effective amendment,
using reasonably current financial statements which need not be certified,
within four to six months from the effective date of Registrant's Registration
Statement under the Securities Act of 1933, as amended.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York, County of New York, and State of New York
the 29 day of April, 1998.
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Registrant
By: /s/ Christopher J. Kelley
-------------------------------
Christopher J. Kelley
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on April 29, 1998 on behalf of the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Richard W. Ingram President, Treasurer and April 29, 1998
Richard W. Ingram Chief Financial Officer
* Director
James F. Rittinger
* Director
Anthony J. Pace
* Director
Richard W. Dalrymple
* Director
Theodore Rosen
* Director
Carolyn B. Lewis
</TABLE>
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* By: /s/ Richard H. Neiman, Attorney-in-Fact, April 29, 1998
* This amendment has been signed by each of the persons so indicated by
the undersigned as Attorney-in-Fact.
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EXHIBIT NUMBER
1(b) Articles of Amendment
5 Investment Management Agreement
6 Form of Distribution Agreement
8(a) Form of Custody Agreement
(b) Foreign Custody Manager Agreement
9(a) Transfer Agency and Dividend Disbursing Agency Agreement
(b) Accounting Services Agreement
(c) Form of State Filing Services Agreement
(d) Administration Agreement
(e) Subadministration Agreement
(f) Form of Shareholder Servicing Plan
(g) Form of Shareholder Servicing Agreement
(h) Form of Shareholder Services Agreement for Waterhouse Securities, Inc.
(i) Form of License Agreement
13 Form of Subscription Agreement
14 Model Plan to Establish Retirement Plans
17 Other Exhibits - Power of attorney for:
James F. Rittinger
Anthony J. Pace
Theodore Rosen
Carolyn B. Lewis
Richard W. Dalrymple
C-11
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NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
National Investors Cash Management Fund, Inc., a Maryland corporation
having its principal Maryland office c/o The Corporation Trust Incorporated, 300
East Lombard Street, Baltimore, Maryland 21202 (hereinafter called the
Corporation), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Article V(1) of the Corporations charter is hereby amended in its
entirety to read as follows:
The total number of shares which the Corporation has authority to issue is
one hundred billion (100,000,000,000) shares of common stock (par value
$0.0001 per share), amounting in aggregate par value to ten million dollars
($10,000,000.00). All of such shares of common stock are classified into
three separate series to be known as Kennedy Cabot Money Market Portfolio,
Kennedy Cabot U.S. Government Portfolio and Kennedy Cabot Municipal
Portfolio. Each such series shall be divided as follows: the Kennedy Cabot
Money Market Portfolio shall consist of sixty billion (60,000,000,000)
shares; the Kennedy Cabot U.S. Government Portfolio shall consist of twenty
billion (20,000,000,000) shares; and the Municipal Portfolio shall consist
of twenty billion (20,000,000,000) shares. All of the shares of each such
series are classified as a single class.
SECOND: The foregoing amendments have been effected in the manner and by
the vote required by the Corporations charter and the laws of the State of
Maryland. The amendments were approved by a majority of the Board of Directors
of the Corporation, and at the time of approval by the Board of Directors there
were no shares of stock of the Corporation entitled to vote on the matter either
outstanding or subscribed for.
THIRD: Except as amended hereby, the Corporations
charter shall remain in full force and effect.
FOURTH: The authorized capital stock of the Corporation has
not been increased by these Articles of Amendment.
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The Vice President and Secretary acknowledges these Articles of
Amendment to be the corporate act of the Corporation and states that to the best
of his knowledge, information and belief, the matters set forth in these
Articles of Amendment with respect to the authorization and approval of the
amendment of the Corporations charter are true in all material respects, and
that this statement is made under the penalties of perjury.
IN WITNESS WHEREOF, NATIONAL INVESTORS CASH MANAGEMENT FUND, INC. has
caused these Articles of Amendment to be signed in its name and on its behalf by
its Vice President and Secretary, a duly authorized officer of the Corporation,
and attested by its Assistant Secretary, effective the 12th day of March, 1998.
NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC.
/s/ Christopher J. Kelley
Christopher J. Kelley
Vice President and Secretary
ATTEST:
/s/ Karen Jacoppo-Wood
Karen Jacoppo-Wood
Assistant Secretary
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INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 26th day of February, 1998, by and between
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation, whose
address is 100 Wall Street, New York, New York 10005 (the "Company") and
WATERHOUSE ASSET MANAGEMENT, INC., a Delaware corporation, whose address is 100
Wall Street, New York 10005 (the "Investment Manager").
W I T N E S S E T H:
WHEREAS, the Company is an open-end, diversified management
investment company, registered under the Investment Company Act of 1940, as
amended (the 1940 Act), with distinct series of shares each having its own
investment objectives, policies and restrictions, including the Company's
Kennedy Cabot Money Market Portfolio, Kennedy Cabot U.S. Government Portfolio
and Kennedy Cabot Municipal Portfolio (each, a Portfolio), and including such
other Portfolios as may hereafter be offered by the Company, all as more fully
described in the Company's Registration Statement on Form N-1A under the 1940
Act and the Securities Act of 1933, as amended (the Registration Statement), as
filed with the Securities and Exchange Commission (the Commission) relating to
the Company and shares of the Company's capital stock, and all amendments
thereto;
WHEREAS, the Investment Manager is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Company and the Investment Manager desire to enter
into an agreement to provide for comprehensive management and investment
advisory services to each Portfolio upon the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is hereby agreed by and between the parties
hereto as follows:
1. Duties of Investment Manager. (a) The Company hereby employs the
Investment Manager to act as the investment adviser for each of the Portfolios
and to manage the investment and reinvestment of the assets of each Portfolio in
accordance with the investment objectives, policies and restrictions of each
such Portfolio as the same are set forth in the Registration Statement, and in
accordance with the requirements of the 1940 Act and all other applicable state
and federal laws, rules and regulations, subject to the supervision of the Board
of Directors of the Company for the period and upon the terms herein set forth.
The investment of funds shall also be subject to all applicable restrictions of
the Articles of Incorporation and By-laws of the Company as may from time to
time be in force. Without limiting the generality of the foregoing, the
Investment Manager shall:
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(i) obtain and evaluate pertinent information about significant
developments and economic, statistical and financial data, domestic, foreign or
otherwise, whether affecting the economy generally or a Portfolio specifically,
and whether concerning the individual issuers whose securities are included in a
Portfolio or the activities in which such issuers engage, or with respect to
securities which the Investment Manager considers desirable for inclusion in a
Portfolio;
(ii) determine which issuers and securities shall be represented
in a Portfolio and regularly report thereon to the Company's Board of Directors;
(iii) formulate and implement continuing programs for the
purchases and sales of securities of such issuers and lists of approved
investments for each Portfolio and regularly report thereon to the Company's
Board of Directors;
(iv) make decisions with respect to and take, on behalf of each
Portfolio, all actions which appear necessary to carry into effect such purchase
and sale programs and supervisory functions aforesaid, including the placing of
orders for the purchase and sale of securities for such Portfolio.
(b) The Investment Manager accepts such employment and agrees during such
period to render such services and to assume the obligations herein set forth
for the compensation herein provided. The Investment Manager shall give each
Portfolio the benefit of its best judgment, efforts and facilities in rendering
its services as an investment manager. The Investment Manager shall for all
purposes herein provided be deemed to be an independent contractor and, unless
otherwise expressly provided or authorized, shall have no authority to act for
or represent the Company in any way or otherwise be deemed an agent of the
Company. It is understood and agreed that the Investment Manager, by separate
agreements with the Company, may also serve the Company in other capacities. It
is further agreed that the Investment Manager and its officers and directors are
not prohibited from engaging in any other business activity or from rendering
services to any other person, or from serving as partners, officers or directors
of any other firm or corporation, including other investment companies, so long
as its or their services hereunder are not impaired thereby. It is further
agreed that personnel of the Investment Manager may invest in securities for
their own account pursuant to a code of ethics that sets forth all employees'
fiduciary responsibilities regarding the Company, establishes procedures for
personal investing and restricts certain transactions.
(c) The Investment Manager shall keep any books and records relevant to the
provision of its investment advisory services to each Portfolio and shall
specifically maintain all books and records with respect to each Portfolio's
securities and portfolio transactions and shall render to the Company's Board of
Directors such periodic and special reports as the Board may reasonably request.
The Investment Manager agrees that all records which it maintains for the
Company are the property of the Company and it will surrender promptly to the
Company any such records upon the Company's request, provided however that the
Investment Manager may retain a copy of such records. The Investment Manager
further agrees to preserve for the periods prescribed
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by Rule 31a-2 under the 1940 Act any such records kept by the Investment
Manager in connection with investment advisory services provided pursuant
hereto.
(d) The Company has delivered to the Investment Manager copies of each of the
following documents and will deliver to it all future amendments and supplements
thereto, if any:
(i) The Registration Statement; and
(ii) The Prospectus(es) of the Company (such Prospectus(es) and the related
Statement(s) of Additional Information of the Company, as currently in effect
and as amended or supplemented from time to time, being herein collectively
called the Prospectus).
(e) The Company shall at all times keep the Investment Manager fully informed
with regard to the securities owned by each Portfolio, its funds available or to
become available for investment, and generally as to the condition of its
affairs. The Company shall furnish the Investment Manager with a copy of all
financial statements and each report prepared by certified public accountants
with respect to it, and with such other information with regard to its affairs
as the Investment Manager may from time to time reasonably request.
(f) Any investment program undertaken by the Investment Manager pursuant to
this Agreement, as well as any other activities undertaken by the Investment
Manager on behalf of any Portfolio pursuant thereto, shall at all times be
subject to any directives of the Board of Directors.
2. Expenses. The Investment Manager shall pay all of its expenses arising
from the performance of its obligations under Section 1 of this Agreement and
shall pay any salaries, fees and expenses of Company directors or officers who
are employees, officers or directors of the Investment Manager.
The Investment Manager shall not be required to pay any other expenses of
the Company or the Portfolios, including (a) the fees and expenses of directors
who are not interested persons of the Company, as defined by the 1940 Act, and
travel and related expenses of the directors for attendance at meetings; (b) the
fees and expenses of the custodian and transfer agent of the Company or any
pricing service, including but not limited to fees and expenses relating to
Company accounting, pricing of portfolio shares, and computation of net asset
value; (c) the fees and expenses of calculating yield and/or performance of the
Portfolios; (d) the charges and expenses of legal counsel and independent
accountants; (e) taxes and corporate fees payable to governmental agencies; (f)
the costs of share certificates and of membership dues of any trade association
of which the Company is a member; (g) reimbursement of each Portfolio's share of
the organization expenses of the Company; (h) the fees and expenses involved in
registering and maintaining registration of the Company and the Portfolios'
shares with the Commission, blue sky service providers, registering the Company
as a broker or dealer, including the preparation and printing of the
registration statements and prospectuses for such purposes; (I) allocable
communications
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expenses with respect to investor services, expenses of shareholders' and
Board of Directors' meetings and preparing, printing and mailing proxies,
prospectuses and reports to shareholders; (j) costs of acquiring and disposing
of portfolio securities, including but not limited to brokers' commissions,
dealers' mark-ups and any issue or transfer taxes chargeable in connection with
the Portfolios' transactions; (k) the cost of stock certificates representing
shares of the Portfolios, if any; (l) insurance expenses, including, but not
limited to, the cost of a fidelity bond, directors and officers insurance and
errors and omissions insurance; and (m) litigation and indemnification expenses,
expenses incurred in connection with mergers, and other extraordinary expenses
not incurred in the ordinary course of the Portfolios' business.
3. Compensation. For the services described in Section 1 hereof, the
Company, on behalf of each Portfolio, will pay to the Investment Manager
promptly after the end of each calendar month, an investment management fee
computed at the annual rate applicable to such Portfolio set forth on Schedule A
hereto. The fee as computed in accordance with Schedule A shall be based upon
the net assets of each Portfolio as to which this Agreement is then effective.
The value of the net assets for each Portfolio shall be calculated in accordance
with the provisions of the Company's Prospectus. For purposes of this Agreement,
on each day when net asset value is not calculated, the net assets of any
Portfolio shall be deemed to be the net assets of such Portfolio as of the close
of business on the last day on which net asset value was determined. Except as
hereinafter set forth, compensation under this Agreement shall be calculated and
accrued daily and the amounts of the daily accruals shall be paid monthly in
arrears (i.e., the applicable annual fee rate divided by 365 as applied to each
prior day's net assets in order to calculate the daily accrual). If this
Agreement becomes effective subsequent to the first day of a month or shall
terminate before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner consistent with
the calculation of the fees as set forth above.
4. Brokerage. In managing the assets of each Portfolio, the Investment
Manager shall purchase securities from or through and sell securities to or
through such persons, brokers or dealers as the Investment Manager shall deem
appropriate in conformity with applicable law and with the terms of the
Registration Statement, and as the Company's Board of Directors may direct from
time to time. Without limiting the generality of the foregoing, the Investment
Manager will implement the Company's policy of seeking the best execution of
orders, which includes best net prices, in effecting purchases and sales of
portfolio securities for the account of each Portfolio.
On occasions when the Investment Manager deems the purchase or sale of
securities to be in the best interest of one or more Portfolios as well as other
clients of the Investment Manager, the Investment Manager, to the extent
permitted by applicable laws and regulations, may, but shall be under no
obligation to, aggregate the securities to be so sold or purchased in order to
obtain the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Investment
Manager in accordance with its policy for aggregation of orders, as in effect
from time to time, which has been approved by the Company's Board of Directors.
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<PAGE>
5. Interested Persons. No director, officer or employee of the Company
shall receive from the Company any salary or other compensation as such
director, officer or employee while he or she is at the same time a director,
officer or employee of the Investment Manager or any affiliated person (as
defined in the 1940 Act) thereof. The Investment Manager shall authorize and
permit any of its directors, officers and employees who may be elected as
directors or officers of the Company to serve in the capacities in which they
are elected, subject to their individual consent and to any limitations imposed
by law. All services to be furnished by the Investment Manager under this
Agreement may be furnished through the medium of any such directors, officers or
employees of the Investment Manager.
6. Limitation of Liability. Subject to Section 36 of the 1940 Act, the
Investment Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by any Portfolio in connection with the matters to
which this Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Investment Manager in the
performance of its obligations and duties or by reason of its reckless disregard
of its obligations and duties under this Agreement.
7. Term of Agreement. This Agreement shall become effective upon its
execution by an authorized officer of the respective parties hereto. This
Agreement shall continue in effect with respect to each Portfolio for an initial
two-year term, and thereafter from year to year so long as such continuation is
specifically approved at least annually in conformity with the requirements of
the 1940 Act with regard to investment advisory contracts; provided, however,
that this Agreement may be terminated at any time without the payment of any
penalty, on behalf of any or all of the Portfolios, by the Company, by the Board
or, with respect to any Portfolio, by "vote of a majority of the outstanding
voting securities" (as defined in the 1940 Act) of that Portfolio, or by the
Investment Manager on not less than 60 days' written notice to the other party.
This Agreement shall terminate automatically in the event of its assignment (as
defined in the 1940 Act).
Termination of this Agreement shall not affect the right of the Investment
Manager to receive payments on any unpaid balance of the compensation described
in Section 3 hereof earned prior to such termination.
8. Amendments; Partial Invalidity. This Agreement may be amended by mutual
consent, but the consent of the Company must be obtained in conformity with the
requirements of the 1940 Act. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise, the remainder
shall not be thereby affected.
9. Notices. All notices or other communications hereunder to either party
shall be in writing and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after postmark if such notice is
mailed first class postage prepaid. Notice shall be addressed: (a) if to the
Company, to: President, National Investors Cash Management Fund, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109; or (b) if to the Investment
Manager, to: President, Waterhouse Asset Management, Inc., 100 Wall Street, New
York, New York 10005, or at such other address as either party may designate by
written notice to the other. Notice shall also be
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deemed sufficient if given by telex, telecopier, telegram or similar means
of same day delivery (with a confirming copy by mail as provided herein).
10. Separate Portfolios. This Agreement shall be construed to be made by
the Company as a separate agreement with respect to each Portfolio, and under no
circumstances shall the rights, obligations or remedies with respect to a
particular Portfolio be deemed to constitute a right, obligation or remedy
applicable to any other Portfolio.
11. Entire Agreement; Governing Law. This Agreement contains the entire
agreement between the parties hereto and supersedes all prior agreements,
understandings and arrangements with respect to the subject matter hereof. This
Agreement shall be construed in accordance with applicable federal law and the
laws of the State of New York. Anything herein to the contrary notwithstanding,
this Agreement shall not be construed to require, or to impose any duty upon,
either of the parties to do anything in violation of any applicable laws or
regulations.
IN WITNESS WHEREOF, the Company and the Investment Manager have caused this
Agreement to be executed as of the day and year first above written.
NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC.
By: /s/ Richard Ingram
----------------------------
WITNESS:
/s/ Karen Jacoppo Wood
- ----------------------
WATERHOUSE ASSET MANAGEMENT, INC.
By: /s/ David Hartman
-----------------------------
WITNESS:
/s/ Michele R. Teichner
- -----------------------
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SCHEDULE A
Fees
For the services provided by the Investment Manager under the foregoing
agreement to each of the following Portfolios, the Investment Manager will
receive the following fees:
In the case of each of the Kennedy Cabot Money Market Portfolio, the Kennedy
Cabot U.S. Government Portfolio and the Kennedy Cabot Municipal Portfolio an
annual investment management fee, payable monthly, on a graduated basis equal to
.35 of 1% of the first $1 billion of average daily net assets of each Portfolio,
.34 of 1% of the next $1 billion, and .33 of 1% of average daily net assets of
each Portfolio over $2 billion.
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DISTRIBUTION AGREEMENT
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
100 Wall Street
New York, NY 10005
_________, 1998
Funds Distributor, Inc.
60 State Street
Suite 1300
Boston, Massachusetts 02109
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the above-named investment company (the "Company") has agreed that
you shall be, for the period of this agreement, the distributor of (a) shares of
each Series of the Company set forth on Exhibit A hereto, as such Exhibit may be
revised from time to time (each, a "Series") or (b) if no Series are set forth
on such Exhibit, shares of the Company. For purposes of this agreement, the term
"Shares" shall mean the authorized shares of the relevant Series, if any, and
otherwise shall mean the Company's authorized shares.
1. Services as Distributor
1.1 You will act as agent for the distribution of Shares covered by, and in
accordance with, the registration statement and prospectus of the Company then
in effect under the Securities Act of 1933, as amended, and will transmit
promptly any orders received by you for purchase or redemption of Shares to the
Transfer and Dividend Disbursing Agent for the Company of which the Company has
notified you in writing.
1.2 You agree to use your best efforts to solicit orders for the sale of
Shares in accordance with the terms and conditions of the aforementioned
prospectus. It is contemplated that you may enter into sales or servicing
agreements with securities dealers, financial institutions and other industry
professionals, such as investment advisers, accountants and estate planning
firms, and in so doing you will act only on your own behalf as principal.
1.3 You shall act as distributor of Shares in compliance with all
applicable laws, rules and regulations, including, without limitation, all rules
and regulations made or adopted pursuant to the Investment Company Act of 1940,
as amended (the "1940 Act"), by the Securities and Exchange Commission or any
securities association registered under the Securities Exchange Act of 1934, as
amended, and the Glass-Steagall Act to the extent applicable.
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1.4 Whenever in their judgment such action is warranted by unusual market,
economic or political conditions, or by abnormal circumstances of any kind
deemed by the parties hereto to render sales of a Company's Shares not in the
best interest of the Company, the parties hereto may decline to accept any
orders for, or make any sales of, any Shares until such time as those parties
deem it advisable to accept such orders and to make such sales; and each party
shall advise promptly the other party of any such determination.
1.5 The Company agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and all
expenses in connection with maintaining facilities for the issue and transfer of
Shares and for supplying information, prices and other data to be furnished by
the Company hereunder, and all expenses in connection with the preparation and
printing of the Company's prospectuses and statements of additional information
for regulatory purposes and for distribution to shareholders; provided however,
that the Company shall not pay any of the costs of advertising or promotion for
the sale of Shares.
1.6 The Company agrees to execute any and all documents and to furnish any
and all information and otherwise use its best efforts to take all actions that
may be reasonably necessary in the discretion of the Company' s officers in
connection with the qualification of Shares for sale in such states as you may
designate to the Company and the Company may approve, and the Company agrees to
pay all expenses that may be incurred in connection with such qualification;
provided, however that the Company shall not be required to qualify to do
business as a foreign corporation in any jurisdiction. You shall pay all
expenses connected with your own qualification as a dealer under state or
Federal laws and, except as otherwise specifically provided in this agreement,
all other expenses incurred by you in connection with the sale of Shares as
contemplated in this agreement.
1.7 The Company shall furnish you from time to time, for use in connection
with the sale of Shares, such information with respect to the Company or any
relevant Series and the Shares as you may reasonably request, all of which shall
be signed by one or more of the Company's duly authorized officers; and the
Company warrants that the statements contained in any such information, when so
signed by the Company's officers, shall be true and correct. The Company also
shall furnish you upon request with: (a) semi-annual reports and annual audited
reports of the Company's books and accounts made by independent public
accountants regularly retained by the Company, (b) quarterly earnings statements
prepared by the Company, (c) a monthly itemized list of the securities in the
Company's or, if applicable, each Series portfolio, (d) monthly balance sheets
as soon as practicable after the end of each month, and (e) from time to time
such additional information regarding the Company's financial condition as you
may reasonably request.
1.8 The Company represents to you that all registration statements and
prospectuses filed by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the 1940 Act, with
respect to the Shares have been carefully prepared in conformity with the
then-current requirements of said Acts and rules and regulations of the
Securities and Exchange Commission thereunder. As used in this agreement the
terms "registration statement" and "prospectus" shall mean any registration
statement and prospectus, including the
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statement of additional information incorporated by reference therein,
filed with the Securities and Exchange Commission and any amendments and
supplements thereto that at any time shall have been filed with said Commission.
The Company represents and warrants to you that any registration statement and
prospectus, when such registration statement becomes effective, will contain all
statements required to be stated therein in conformity with said Acts and the
rules and regulations of said Commission; that all statements of fact contained
in any such registration statement and prospectus will be true and correct when
such registration statement becomes effective; and that neither any registration
statement nor any prospectus when such registration statement becomes effective
will include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
The Company may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any prospectus as, in the light of future developments, may, in
the opinion of the Company's counsel, be necessary or advisable. If the Company
shall not propose such amendment or amendments and/or supplement or supplements
within fifteen days after receipt by the Company of a written request from you
to do so, you may, at your option, terminate this agreement or decline to make
offers of the Company's securities until such amendments are made. The Company
shall not file any amendment to any registration statement or supplement to any
prospectus without giving you reasonable notice thereof in advance; provided,
however, that nothing contained in this agreement shall in any way limit the
Company's right to file at any time such amendments to any registration
statement and/or supplements to any prospectus, of whatever character, as the
Company may deem advisable, such right being in all respects absolute and
unconditional.
1.9 The Company authorizes you and any dealers with whom you have entered
into dealer agreements to use any prospectus in the then-current form furnished
by the Company in connection with the sale of Shares. The Company agrees to
indemnify, defend and hold you, your several officers and directors, and any
person who controls you within the meaning of Section 15 of the Securities Act
of 1933, as amended, free and harmless from and against any and all claims,
demands, liabilities and expenses (including the cost of investigating or
defending such claims, demands or liabilities and any counsel fees incurred in
connection therewith) which you, your officers and directors, or any such
controlling persons, may incur under the Securities Act of 1933, as amended, the
1940 Act, or common law or otherwise, arising out of or on the basis of any
untrue statement, or alleged untrue statement, of a material fact required to be
stated in either any registration statement or any prospectus or any statement
of additional information, or arising out of or based upon any omission, or
alleged omission, to state a material fact required to be stated in any
registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any of them, in the light of
the circumstances under which they were made, not misleading, except that the
Company's agreement to indemnify you, your officers or directors, and any such
controlling person will not be deemed to cover any such claim, demand, liability
or expense to the extent that it arises out of or is based upon any such untrue
statement, alleged untrue statement, omission or alleged omission made in any
registration statement, any prospectus or any statement of additional
information in reliance upon information furnished by you your officers,
directors or any such controlling person to the Company or its representatives
for use in the
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<PAGE>
preparation thereof, and except that the Company's agreement to indemnify
you and the Company's representations and warranties set out in paragraph 1.8 of
this Agreement will not be deemed to cover any liability to the Company or its
shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties under this
Agreement ("Disqualifying Conduct"). The Company's agreement to indemnify you,
your officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon the Company being notified of any action brought
against you, your officers or directors, or any such controlling person, such
notification to be given by letter, by facsimile or by telegram addressed to the
Company at its address set forth above within a reasonable period of time after
the summons or other first legal process shall have been served. The failure so
to notify the Company of any such action shall not relieve the Company from any
liability that the Company may have to the person against whom such action is
brought by reason of any such untrue, or alleged untrue, statement or omission,
or alleged omission, (i) except to the extent the Company's ability to defend
such action has been materially adversely affected by such failure, or (ii)
otherwise than on account of the Company's indemnity agreement contained in this
paragraph 1.9. The Company will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Company and
approved by you. In the event the Company elects to assume the defense of any
such suit and retain counsel of good standing approved by you, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them but in case the Company does not elect to assume
the defense of any such suit, the Company will reimburse you, your officers and
directors, or the controlling person or persons named as defendant or defendants
in such suit, for the fees and expenses of any counsel retained by you or them,
subject to the right of the Company to assume the defense of such suit with
counsel of good standing at any time prior to the settlement or final
determination thereof. The Company' s indemnification agreement contained in
this paragraph 1.9 and the Company's representations and warranties in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of you, your officers and directors, or any
controlling person, and shall survive the delivery of any Shares. This agreement
of indemnity will inure exclusively to your benefit, to the benefit of your
several officers and directors, and their respective estates, and to the benefit
of any controlling persons and their successors. The Company agrees promptly to
notify you of the commencement of any litigation or proceedings against the
Company or any of its officers or Board members in connection with the issue and
sale of Shares.
1.10 You agree to indemnify, defend and hold the Company, its several
officers and Board members, and any person who controls the Company within the
meaning of Section 15 of the Securities Act of 1933, as amended, free and
harmless from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which the
Company, its officers or Board members, or any such controlling person, may
incur under the Securities Act of 1933, as amended, the 1940 Act, or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Company, its officers or Board members, or such controlling
person resulting from such claims or demands, (a) shall arise out of or be based
upon
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any unauthorized sales literature, advertisements, information, statements
or representations or any Disqualifying Conduct in connection with the offering
and sale of any Shares, or (b) shall arise out of or be based upon any untrue,
or alleged untrue, statement of a material fact contained in information
furnished in writing by you to the Company specifically for use in the Company's
registration statement and used in the answers to any of the items of the
registration statement or in the corresponding statements made in the prospectus
or statement of additional information, or shall arise out of or be based upon
any omission, or alleged omission, to state a material fact in connection with
such information furnished in writing by you to the Company and required to be
stated in such answers or necessary to make such information, in the light of
the circumstances under which it was made, not misleading. Your agreement to
indemnify the Company, its officers and Board members, and any such controlling
person, as aforesaid, is expressly conditioned upon your being notified of any
action brought against the Company, its officers or Board members, or any such
controlling person, such notification to be given by letter, by facsimile or by
telegram addressed to you at your address set forth above within a reasonable
period of time after the summons or other first legal process shall have been
served. You shall have the right to control the defense of such action, with
counsel of your own choosing, satisfactory to the Company, if such action is
based solely upon such alleged misstatement or omission on your part, and in any
other event the Company, its officers or Board members, or such controlling
person shall each have the right to participate in the defense or preparation of
the defense of any such action. The failure so to notify you of any such action
shall not relieve you from any liability that you may have to the Company, its
officers or Board members, or to such controlling person by reason of any such
untrue, or alleged untrue, statement or omission, or alleged omission, (i)
except to the extent your ability to defend such action has been materially
adversely affected by such failure, or (ii) otherwise than on account of your
indemnity agreement contained in this paragraph 1.10. This agreement of
indemnity will inure exclusively to the Company's benefit, to the benefit of the
Company' s officers and Board members, and their respective estates, and to the
benefit of any controlling persons and their successors. You agree promptly to
notify the Company of the commencement of any litigation or proceedings against
you or any of your officers or directors in connection with the issue and sale
of Shares.
1.11 No Shares shall be offered by either you or the Company under any of
the provisions of this agreement and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Company if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act of 1933, as amended, or if and so long as a current prospectus as
required by Section 10 of said Act, as amended, is not on file with the
Securities and Exchange Commission provided, however, that nothing contained in
this paragraph 1.11 shall in any way restrict or have an application to or
bearing upon the Company's obligation to repurchase any Shares from any
shareholder in accordance with the provisions of the Company's prospectus or
charter documents.
1.12 The Company agrees to advise you immediately in writing:
(a) of any request by the Securities and Exchange Commission for amendments
to the registration statement or prospectus then in effect or for additional
information;
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(b) in the event of the issuance by the Securities and Exchange Commission
of any stop order suspending the effectiveness of the registration statement or
prospectus then in effect or the initiation of any proceeding for that purpose;
(c) of the happening of any, event that in the judgment of the Company's
Board of Directors makes untrue any statement of a material fact made in the
registration statement or prospectus then in effect or that requires the making
of a change in such registration statement or prospectus in order to make the
statements therein not misleading in any material respect; and
(d) of all declarations of effectiveness and other actions of the
Securities and Exchange Commission with respect to any amendments to the
registration statement or prospectus that may from time to time be filed with
the Securities and Exchange Commission.
2. Offering Price
Shares of any class or series of the Company offered for sale by you shall
be offered at a price per share (the "offering price") equal to (a) the net
asset value (determined in the manner set forth in the Company's charter
documents) plus (b) a sales charge, if any, and except to those persons set
forth in the then-current prospectus, which shall be the percentage of the
offering price of such Shares as set forth in the Company's then-current
prospectus. The offering price, if not an exact multiple of one cent, shall be
adjusted to the nearest cent. In addition, Shares of any class of the Company
offered for sale by you may be subject to a contingent deferred sales charge, to
the extent set forth in the Company's then-current prospectus. You shall be
entitled to receive any sales charge or contingent deferred sales charge in
respect of the Shares. Any payments to dealers shall be governed by a separate
agreement between you and such dealer and the Company's then-current prospectus.
3. Term
This Agreement shall become effective with respect to the Company as of the
date hereof and will continue for an initial two-year term and will continue
thereafter so long as such continuance is specifically approved at least
annually (i) by the Company's Board or (ii) by a vote of a majority (as defined
in the 1940 Act) of the Shares of the Company or the relevant Series, as the
case may be, provided that in either event its continuance also is approved by a
majority of the Board members who are not "interested persons" (as defined in
the 1940 Act) of any party to this Agreement and who have no direct or indirect
financial interest in this Agreement, by vote cast in person at a meeting called
for the purpose of voting on such approval. This agreement is terminable with
respect to any Series or the Company, without penalty, on not less than sixty
days notice, by the Company's Board of Directors, by vote of a majority (as
defined in the 1940 Act) of the outstanding voting securities of such Company,
or by you. This Agreement shall terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
4. Miscellaneous
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4.1 The Company recognizes that your directors, officers and employees may
from time to time serve as directors, trustees, officers and employees of
corporations and business trusts (including other investment companies), and
that you or your affiliates may enter into distribution or other agreements with
such other corporations and trusts.
4.2 No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.
4.3 This Agreement shall be governed by the internal laws of the State of
New York without giving effect to principles of conflicts of laws.
4.4 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
4.5 Funds Distributor, Inc. ("FDI") represents and warrants that it is a
member of the National Association of Securities Dealers (NASD) and agrees to
abide by all of the rules and regulations of the NASD, including, without
limitation, its Conduct Rules. FDI agrees to comply with all applicable federal
and state laws, rules and regulations. FDI agrees to notify the Company
immediately in the event of its expulsion or suspension by the NASD. Expulsion
of FDI by the NASD will automatically terminate this Agreement immediately
without notice. Suspension of FDI by the NASD will terminate this Agreement
effective immediately upon written notice of termination to FDI from the
Company.
4.6 All notices or other communications hereunder to either party shall be
in writing and shall be deemed sufficient if mailed to such party at the address
of such party set forth on page 1 of this Agreement or at such other address as
such party may be designated by written notice to the other, or by telex,
telecopier, telegram or similar means of same day delivery (with a confirming
copy by mail as provided herein).
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Please confirm that the foregoing is in accordance with your understanding
and indicate your acceptance hereof by signing below, whereupon it shall become
a binding agreement between us.
Very truly yours,
NATIONAL INVESTORS CASH
MANAGEMENT FUND INC.
By: ______________________
Accepted:
FUNDS DISTRIBUTOR, INC.
By: ___________________________
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EXHIBIT A
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Kennedy Cabot Money Market Portfolio
Kennedy Cabot U.S. Government Portfolio
Kennedy Cabot Municipal Portfolio
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CUSTODY AGREEMENT
Agreement made as of this day of , 1998, between
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation
organized and existing under the laws of the State of Maryland, having its
principal office and place of business at 100 Wall Street, New York, New York
10005 (hereinafter called the "Fund"), and THE BANK OF NEW YORK, a New York
corporation authorized to do a banking business, having its principal office and
place of business at 48 Wall Street, New York, New York 10286 (hereinafter
called the "Custodian").
W I T N E S S E T H :
that for and in consideration of the mutual promises hereinafter set forth, the
Fund and the Custodian agree as follows:
ARTICLE I.
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Authorized Persons" shall be deemed to include any person, whether
or not such person is an officer or employee of the Fund, duly authorized by the
Board of Trustees of the Fund to execute any Certificate, instruction, notice or
other instrument on behalf of the Fund and listed in the Certificate annexed
hereto as Appendix A or such other Certificate as may be received by the
Custodian from time to time.
2. "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its successor
or successors and its nominee or nominees.
3. "Call Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and payment of the
exercise price, as specified therein, to purchase from the writer thereof the
specified underlying Securities.
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4. "Certificate" shall mean any notice, instruction, or other
instrument in writing, authorized or required by this Agreement to be given to
the Custodian which is actually received by the Custodian and signed on behalf
of the Fund by any two Authorized Persons, and the term Certificate shall also
include Instructions.
5. "Clearing Member" shall mean a registered broker-dealer which is a
clearing member under the rules of O.C.C. and a member of a national securities
exchange qualified to act as a custodian for an investment company, or any
broker-dealer reasonably believed by the Custodian to be such a clearing member.
6. "Collateral Account" shall mean a segregated account so denominated
which is specifically allocated to a Series and pledged to the Custodian as
security for, and in consideration of, the Custodian's issuance of (a) any Put
Option guarantee letter or similar document described in paragraph 8 of Article
V herein, or (b) any receipt described in Article V or VIII herein.
7. "Composite Currency Unit" shall mean the European Currency Unit or
any other composite unit consisting of the aggregate of specified amounts of
specified Currencies as such unit may be constituted from time to time.
8. "Covered Call Option" shall mean an exchange traded option entitling
the holder, upon timely exercise and payment of the exercise price, as specified
therein, to purchase from the writer thereof the specified underlying Securities
(excluding Futures Contracts) which are owned by the writer thereof and subject
to appropriate restrictions.
9. "Currency" shall mean money denominated in a lawful currency of any
country or the European Currency Unit.
10. "Depository" shall mean The Depository Trust Company ("DTC"), a
clearing agency registered with the Securities and Exchange Commission, its
successor or successors and its nominee or nominees. The term "Depository" shall
further mean and include any other person authorized to act as a depository
under the Investment Company Act of 1940, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a resolution
of the Fund's Board of Directors specifically approving deposits therein by the
Custodian.
11. "Financial Futures Contract" shall mean the firm commitment to buy
or sell fixed income securities including, without limitation, U.S. Treasury
Bills, U.S. Treasury Notes, U.S. Treasury Bonds, domestic bank certificates of
deposit, and Eurodollar certificates of deposit, during a specified month at an
agreed upon price.
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12. "Futures Contract" shall mean a Financial Futures Contract and/or
Stock Index Futures Contracts.
13. "Futures Contract Option" shall mean an option with respect to a
Futures Contract.
14. "FX Transaction" shall mean any transaction for the purchase by one
party of an agreed amount in one Currency against the sale by it to the other
party of an agreed amount in another Currency.
15. "Instructions" shall mean instructions communications transmitted
by electronic or telecommunications media including S.W.I.F.T.,
computer-to-computer interface, dedicated transmission line, facsimile
transmission (which may be signed by an Authorized Person or unsigned) and
tested telex.
16. "Margin Account" shall mean a segregated account in the name of a
broker, dealer, futures commission merchant, or a Clearing Member, or in the
name of the Fund for the benefit of a broker, dealer, futures commission
merchant, or Clearing Member, or otherwise, in accordance with an agreement
between the Fund, the Custodian and a broker, dealer, futures commission
merchant or a Clearing Member (a "Margin Account Agreement"), separate and
distinct from the custody account, in which certain Securities and/or money of
the Fund shall be deposited and withdrawn from time to time in connection with
such transactions as the Fund may from time to time determine. Securities held
in the Book-Entry System or the Depository shall be deemed to have been
deposited in, or withdrawn from, a Margin Account upon the Custodian's effecting
an appropriate entry in its books and records.
17. "Money Market Security" shall be deemed to include, without
limitation, certain Reverse Repurchase Agreements, debt obligations issued or
guaranteed as to interest and principal by the government of the United States
or agencies or instrumentalities thereof, any tax, bond or revenue anticipation
note issued by any state or municipal government or public authority, commercial
paper, certificates of deposit and bankers' acceptances, repurchase agreements
with respect to the same and bank time deposits, where the purchase and sale of
such securities normally requires settlement in federal funds on the same day as
such purchase or sale.
18. "O.C.C." shall mean the Options Clearing Corporation, a clearing
agency registered under Section 17A of the Securities Exchange Act of 1934, its
successor or successors, and its nominee or nominees.
19. "Option" shall mean a Call Option, Covered Call Option, Stock Index
Option and/or a Put Option.
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20. "Oral Instructions" shall mean verbal instructions actually
received by the Custodian from an Authorized Person or from a person reasonably
believed by the Custodian to be an Authorized Person.
21. "Put Option" shall mean an exchange traded option with respect to
Securities other than Stock Index Options, Futures Contracts, and Futures
Contract Options entitling the holder, upon timely exercise and tender of the
specified underlying Securities, to sell such Securities to the writer thereof
for the exercise price.
22. "Reverse Repurchase Agreement" shall mean an agreement pursuant to
which the Fund sells Securities and agrees to repurchase such Securities at a
described or specified date and price.
23. "Security" shall be deemed to include, without limitation, Money
Market Securities, Call Options, Put Options, Stock Index Options, Stock Index
Futures Contracts, Stock Index Futures Contract Options, Financial Futures
Contracts, Financial Futures Contract Options, Reverse Repurchase Agreements,
common stocks and other securities having characteristics similar to common
stocks, preferred stocks, debt obligations issued by state or municipal
governments and by public authorities, (including, without limitation, general
obligation bonds, revenue bonds, industrial bonds and industrial development
bonds), bonds, debentures, notes, mortgages or other obligations, and any
certificates, receipts, warrants or other instruments representing rights to
receive, purchase, sell or subscribe for the same, or evidencing or representing
any other rights or interest therein, or any property or assets.
24. "Senior Security Account" shall mean an account maintained and
specifically allocated to a Series under the terms of this Agreement as a
segregated account, by recordation or otherwise, within the custody account in
which certain Securities and/or other assets of the Fund specifically allocated
to such Series shall be deposited and withdrawn from time to time in accordance
with Certificates received by the Custodian in connection with such transactions
as the Fund may from time to time determine.
25. "Series" shall mean the various portfolios, if any, of the Fund
listed on Appendix B hereto as amended from time to time.
26. "Shares" shall mean the shares of capital stock of the Fund, each
of which is, in the case of a Fund having Series, allocated to a particular
Series.
27. "Stock Index Futures Contract" shall mean a bilateral agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the difference between the value
of a particular stock index at the close of the last business day of the
contract and the price at which the futures contract is originally struck.
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28. "Stock Index Option" shall mean an exchange traded option entitling
the holder, upon timely exercise, to receive an amount of cash determined by
reference to the difference between the exercise price and the value of the
index on the date of exercise.
ARTICLE II.
APPOINTMENT OF CUSTODIAN
1. The Fund hereby constitutes and appoints the Custodian as custodian
of the Securities and money at any time owned by the Fund during the period of
this Agreement.
2. The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III.
CUSTODY OF CASH AND SECURITIES
1. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, the Fund will deliver or cause to be delivered to the Custodian
all Securities and all money owned by it, at any time during the period of this
Agreement, and shall specify with respect to such Securities and money the
Series to which the same are specifically allocated. The Custodian shall
segregate, keep and maintain the assets of the Series separate and apart. The
Custodian will not be responsible for any Securities and money not actually
received by it. The Custodian will be entitled to reverse any credits made on
the Fund's behalf where such credits have been previously made and money is not
finally collected. The Fund shall deliver to the Custodian a certified
resolution of the Board of Directors of the Fund, substantially in the form of
Exhibit A hereto, approving, authorizing and instructing the Custodian on a
continuous and on-going basis to deposit in the Book-Entry System all Securities
eligible for deposit therein, regardless of the Series to which the same are
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specifically allocated and to utilize the Book-Entry System to the extent
possible in connection with its performance hereunder, including, without
limitation, in connection with settlements of purchases and sales of Securities,
loans of Securities and deliveries and returns of Securities collateral. Prior
to a deposit of Securities specifically allocated to a Series in the Depository,
the Fund shall deliver to the Custodian a certified resolution of the Board of
Directors of the Fund, substantially in the form of Exhibit B hereto, approving,
authorizing and instructing the Custodian on a continuous and ongoing basis
until instructed to the contrary by a Certificate actually received by the
Custodian to deposit in the Depository all Securities specifically allocated to
such Series eligible for deposit therein, and to utilize the Depository to the
extent possible with respect to such Securities in connection with its
performance hereunder, including, without limitation, in connection with
settlements of purchases and sales of Securities, loans of Securities, and
deliveries and returns of Securities collateral. Securities and money deposited
in either the Book-Entry System or the Depository will be represented in
accounts which include only assets held by the Custodian for customers,
including, but not limited to, accounts in which the Custodian acts in a
fiduciary or representative capacity and will be specifically allocated on the
Custodian's books to the separate account for the applicable Series. Prior to
the Custodian's accepting, utilizing and acting with respect to Clearing Member
confirmations for Options and transactions in Options for a Series as provided
in this Agreement, the Custodian shall have received a certified resolution of
the Fund's Board of Directors, substantially in the form of Exhibit C hereto,
approving, authorizing and instructing the Custodian on a continuous and
on-going basis, until instructed to the contrary by a Certificate actually
received by the Custodian, to accept, utilize and act in accordance with such
confirmations as provided in this Agreement with respect to such Series.
2. The Custodian shall establish and maintain separate accounts, in the
name of each Series, and shall credit to the separate account for each Series
all money received by it for the account of the Fund with respect to such
Series. Money credited to a separate account for a Series shall be disbursed by
the Custodian only:
(a) as hereinafter provided;
(b) pursuant to Certificates setting forth the name and
address of the person to whom the payment is to be made, the Series account from
which payment is to be made and the purpose for which payment is to be made; or
(c) in payment of the fees and in reimbursement of the expenses
and liabilities of the Custodian attributable to such Series.
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3. Promptly after the close of business on each day, the Custodian
shall furnish the Fund with confirmations and a summary, on a per Series basis,
of all transfers to or from the account of the Fund for a Series, either
hereunder or with any co-custodian or sub-custodian appointed in accordance with
this Agreement during said day. Where Securities are transferred to the account
of the Fund for a Series, the Custodian shall also by book-entry or otherwise
identify as belonging to such Series a quantity of Securities in a fungible bulk
of Securities registered in the name of the Custodian (or its nominee) or shown
on the Custodian's account on the books of the Book- Entry System or the
Depository. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, on a per Series basis, of the Securities and
money held by the Custodian for the Fund.
4. Except as otherwise provided in paragraph 7 of this Article and in
Article VIII, all Securities held by the Custodian hereunder, which are issued
or issuable only in bearer form, except such Securities as are held in the
Book-Entry System, shall be held by the Custodian in that form; all other
Securities held hereunder may be registered in the name of the Fund, in the name
of any duly appointed registered nominee of the Custodian as the Custodian may
from time to time determine, or in the name of the Book-Entry System or the
Depository or their successor or successors, or their nominee or nominees. The
Fund agrees to furnish to the Custodian appropriate instruments to enable the
Custodian to hold or deliver in proper form for transfer, or to register in the
name of its registered nominee or in the name of the Book-Entry System or the
Depository any Securities which it may hold hereunder and which may from time to
time be registered in the name of the Fund. The Custodian shall hold all such
Securities specifically allocated to a Series which are not held in the
Book-Entry System or in the Depository in a separate account in the name of such
Series physically segregated at all times from those of any other person or
persons.
5. Except as otherwise provided in this Agreement and unless otherwise
instructed to the contrary by a Certificate, the Custodian by itself, or through
the use of the Book-Entry System or the Depository with respect to Securities
held hereunder and therein deposited, shall with respect to all Securities held
for the Fund hereunder in accordance with preceding paragraph 4:
(a) collect all income, dividends and distributions due
or payable;
(b) give notice to the Fund and present payment and collect
the amount payable upon such Securities which are called, but only if either (i)
the Custodian receives a written notice of such call, or (ii) notice of such
call appears in one or more of the publications listed in Appendix C annexed
hereto, which may be amended at any time by the Custodian without the prior
notification or consent of the Fund;
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(c) present for payment and collect the amount payable
upon all Securities which mature;
(d) surrender Securities in temporary form for definitive
Securities;
(e) execute, as custodian, any necessary declarations or
certificates of ownership under the Federal Income Tax Laws or the laws or
regulations of any other taxing authority now or hereafter in effect;
(f) hold directly, or through the Book-Entry System or the
Depository with respect to Securities therein deposited, for the account of a
Series, all rights and similar securities issued with respect to any Securities
held by the Custodian for such Series hereunder; and
(g) deliver to the Fund all notices, proxies, proxy soliciting
materials, consents and other written information (including, without
limitation, notices of tender offers and exchange offers, pendency of calls,
maturities of Securities and expiration of rights) relating to Securities held
pursuant to this Agrement which are actually received by the Custodian, such
proxies and other similar materials to be executed by the registered owner (if
Securities are registered otherwise than in the name of the Fund), but without
indicating the manner in which proxies or consents are to be voted.
6. Upon receipt of a Certificate and not otherwise, the Custodian,
directly or through the use of the Book-Entry System or the Depository, shall:
(a) execute and deliver to such persons as may be designated
in such Certificate proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities held by the
Custodian hereunder for the Series specified in such Certificate may be
exercised;
(b) deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate in exchange for other Securities or
cash issued or paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any corporation, or
the exercise of any conversion privilege and receive and hold hereunder
specifically allocated to such Series any cash or other Securities received in
exchange;
(c) deliver any Securities held by the Custodian hereunder for
the Series specified in such Certificate to any protective committee,
reorganization committee or other person in connection with the reorganization,
refinancing, merger, consolidation, recapitalization or sale of assets of any
corporation, and receive and hold hereunder specifically allocated to such
Series such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
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(d) make such transfers or exchanges of the assets of the
Series specified in such Certificate, and take such other steps as shall be
stated in such Certificate to be for the purpose of effectuating any duly
authorized plan of liquidation, reorganization, merger, consolidation or
recapitalization of the Fund; and
(e) present for payment and collect the amount payable upon
Securities not described in preceding paragraph 5(b) of this Article which may
be called as specified in the Certificate.
7. Notwithstanding any provision elsewhere contained herein, the
Custodian shall not be required to obtain possession of any instrument or
certificate representing any Futures Contract, any Option, or any Futures
Contract Option until after it shall have determined, or shall have received a
Certificate from the Fund stating, that any such instruments or certificates are
available. The Fund shall deliver to the Custodian such a Certificate no later
than the business day preceding the availability of any such instrument or
certificate. Prior to such availability, the Custodian shall comply with Section
17(f) of the Investment Company Act of 1940, as amended, in connection with the
purchase, sale, settlement, closing out or writing of Futures Contracts,
Options, or Futures Contract Options by making payments or deliveries specified
in Certificates received by the Custodian in connection with any such purchase,
sale, writing, settlement or closing out upon its receipt from a broker, dealer,
or futures commission merchant of a statement or confirmation reasonably
believed by the Custodian to be in the form customarily used by brokers,
dealers, or futures commission merchants with respect to such Futures Contracts,
Options, or Futures Contract Options, as the case may be, confirming that such
Security is held by such broker, dealer or futures commission merchant, in
book-entry form or otherwise, in the name of the Custodian (or any nominee of
the Custodian) as custodian for the Fund, provided, however, that
notwithstanding the foregoing, payments to or deliveries from the Margin
Account, and payments with respect to Securities to which a Margin Account
relates, shall be made in accordance with the terms and conditions of the Margin
Account Agreement. Whenever any such instruments or certificates are available,
the Custodian shall, notwithstanding any provision in this Agreement to the
contrary, make payment for any Futures Contract, Option, or Futures Contract
Option for which such instruments or such certificates are available only
against the delivery to the Custodian of such instrument or such certificate,
and deliver any Futures Contract, Option or Futures Contract Option for which
such instruments or such certificates are available only against receipt by the
Custodian of payment therefor. Any such instrument or certificate delivered to
the Custodian shall be held by the Custodian hereunder in accordance with, and
subject to, the provisions of this Agreement.
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ARTICLE IV.
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
OTHER THAN OPTIONS, FUTURES CONTRACTS AND
FUTURES CONTRACT OPTIONS
1. Promptly after each purchase of Securities by the Fund, other than a
purchase of an Option, a Futures Contract, or a Futures Contract Option, the
Fund shall deliver to the Custodian (i) with respect to each purchase of
Securities which are not Money Market Securities, a Certificate, and (ii) with
respect to each purchase of Money Market Securities, a Certificate or Oral
Instructions, specifying with respect to each such purchase: (a) the Series to
which such Securities are to be specifically allocated; (b) the name of the
issuer and the title of the Securities; (c) the number of shares or the
principal amount purchased and accrued interest, if any; (d) the date of
purchase and settlement; (e) the purchase price per unit; (f) the total amount
payable upon such purchase; (g) the name of the person from whom or the broker
through whom the purchase was made, and the name of the clearing broker, if any;
and (h) the name of the broker to whom payment is to be made. The Custodian
shall, upon receipt of Securities purchased by or for the Fund, pay to the
broker specified in the Certificate out of the money held for the account of
such Series the total amount payable upon such purchase, provided that the same
conforms to the total amount payable as set forth in such Certificate or Oral
Instructions.
2. Promptly after each sale of Securities by the Fund, other than a
sale of any Option, Futures Contract, Futures Contract Option, or any Reverse
Repurchase Agreement, the Fund shall deliver to the Custodian (i) with respect
to each sale of Securities which are not Money Market Securities, a Certificate,
and (ii) with respect to each sale of Money Market Securities, a Certificate or
Oral Instructions, specifying with respect to each such sale: (a) the Series to
which such Securities were specifically allocated; (b) the name of the issuer
and the title of the Security; (c) the number of shares or principal amount
sold, and accrued interest, if any; (d) the date of sale; (e) the sale price per
unit; (f) the total amount payable to the Fund upon such sale; (g) the name of
the broker through whom or the person to whom the sale was made, and the name of
the clearing broker, if any; and (h) the name of the broker to whom the
Securities are to be delivered. The Custodian shall deliver the Securities
specifically allocated to such Series to the broker specified in the Certificate
against payment of the total amount payable to the Fund upon such sale, provided
that the same conforms to the total amount payable as set forth in such
Certificate or Oral Instructions.
- 10 -
<PAGE>
ARTICLE V.
OPTIONS
1. Promptly after the purchase of any Option by the Fund, the Fund
shall deliver to the Custodian a Certificate specifying with respect to each
Option purchased: (a) the Series to which such Option is specifically allocated;
(b) the type of Option (put or call); (c) the name of the issuer and the title
and number of shares subject to such Option or, in the case of a Stock Index
Option, the stock index to which such Option relates and the number of Stock
Index Options purchased; (d) the expiration date; (e) the exercise price; (f)
the dates of purchase and settlement; (g) the total amount payable by the Fund
in connection with such purchase; (h) the name of the Clearing Member through
whom such Option was purchased; and (i) the name of the broker to whom payment
is to be made. The Custodian shall pay, upon receipt of a Clearing Member's
statement confirming the purchase of such Option held by such Clearing Member
for the account of the Custodian (or any duly appointed and registered nominee
of the Custodian) as custodian for the Fund, out of money held for the account
of the Series to which such Option is to be specifically allocated, the total
amount payable upon such purchase to the Clearing Member through whom the
purchase was made, provided that the same conforms to the total amount payable
as set forth in such Certificate.
2. Promptly after the sale of any Option purchased by the Fund pursuant
to paragraph 1 hereof, the Fund shall deliver to the Custodian a Certificate
specifying with respect to each such sale: (a) the Series to which such Option
was specifically allocated; (b) the type of Option (put or call); (c) the name
of the issuer and the title and number of shares subject to such Option or, in
the case of a Stock Index Option, the stock index to which such Option relates
and the number of Stock Index Options sold; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the Clearing Member through whom the sale was
made. The Custodian shall consent to the delivery of the Option sold by the
Clearing Member which previously supplied the confirmation described in
preceding paragraph 1 of this Article with respect to such Option against
payment to the Custodian of the total amount payable to the Fund, provided that
the same conforms to the total amount payable as set forth in such Certificate.
- 11 -
<PAGE>
3. Promptly after the exercise by the Fund of any Call Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Call Option: (a) the
Series to which such Call Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Call Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid by the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Call Option was exercised.
The Custodian shall, upon receipt of the Securities underlying the Call Option
which was exercised, pay out of the money held for the account of the Series to
which such Call Option was specifically allocated the total amount payable to
the Clearing Member through whom the Call Option was exercised, provided that
the same conforms to the total amount payable as set forth in such Certificate.
4. Promptly after the exercise by the Fund of any Put Option purchased
by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to the
Custodian a Certificate specifying with respect to such Put Option: (a) the
Series to which such Put Option was specifically allocated; (b) the name of the
issuer and the title and number of shares subject to the Put Option; (c) the
expiration date; (d) the date of exercise and settlement; (e) the exercise price
per share; (f) the total amount to be paid to the Fund upon such exercise; and
(g) the name of the Clearing Member through whom such Put Option was exercised.
The Custodian shall, upon receipt of the amount payable upon the exercise of the
Put Option, deliver or direct the Depository to deliver the Securities
specifically allocated to such Series, provided the same conforms to the amount
payable to the Fund as set forth in such Certificate.
5. Promptly after the exercise by the Fund of any Stock Index Option
purchased by the Fund pursuant to paragraph 1 hereof, the Fund shall deliver to
the Custodian a Certificate specifying with respect to such Stock Index Option:
(a) the Series to which such Stock Index Option was specifically allocated; (b)
the type of Stock Index Option (put or call); (c) the number of Options being
exercised; (d) the stock index to which such Option relates; (e) the expiration
date; (f) the exercise price; (g) the total amount to be received by the Fund in
connection with such exercise; and (h) the Clearing Member from whom such
payment is to be received.
6. Whenever the Fund writes a Covered Call Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Covered Call Option: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares for which
the Covered Call Option was written and which underlie the same; (c) the
expiration date; (d) the exercise price; (e) the premium to be received by the
Fund; (f) the date such Covered Call Option was written; and (g) the name of the
Clearing Member through whom the premium is to be received. The Custodian shall
deliver or cause to be delivered, in exchange for receipt of the premium
specified in the Certificate with respect to such Covered Call Option, such
receipts as are required in accordance with the customs prevailing among
Clearing Members dealing in Covered Call Options and shall impose, or direct the
Depository to impose, upon the underlying Securities specified in the
Certificate specifically allocated to such Series such restrictions as may be
required by such receipts. Notwithstanding the foregoing, the Custodian has the
right, upon prior written notification to the Fund, at any time to refuse to
issue any receipts for Securities in the possession of the Custodian and not
deposited with the Depository underlying a Covered Call Option.
- 12 -
<PAGE>
7. Whenever a Covered Call Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate instructing the Custodian to deliver, or
to direct the Depository to deliver, the Securities subject to such Covered Call
Option and specifying: (a) the Series for which such Covered Call Option was
written; (b) the name of the issuer and the title and number of shares subject
to the Covered Call Option; (c) the Clearing Member to whom the underlying
Securities are to be delivered; and (d) the total amount payable to the Fund
upon such delivery. Upon the return and/or cancellation of any receipts
delivered pursuant to paragraph 6 of this Article, the Custodian shall deliver,
or direct the Depository to deliver, the underlying Securities as specified in
the Certificate against payment of the amount to be received as set forth in
such Certificate.
8. Whenever the Fund writes a Put Option, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Put
Option: (a) the Series for which such Put Option was written; (b) the name of
the issuer and the title and number of shares for which the Put Option is
written and which underlie the same; (c) the expiration date; (d) the exercise
price; (e) the premium to be received by the Fund; (f) the date such Put Option
is written; (g) the name of the Clearing Member through whom the premium is to
be received and to whom a Put Option guarantee letter is to be delivered; (h)
the amount of cash, and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Senior Security
Account for such Series; and (i) the amount of cash and/or the amount and kind
of Securities specifically allocated to such Series to be deposited into the
Collateral Account for such Series. The Custodian shall, after making the
deposits into the Collateral Account specified in the Certificate, issue a Put
Option guarantee letter substantially in the form utilized by the Custodian on
the date hereof, and deliver the same to the Clearing Member specified in the
Certificate against receipt of the premium specified in said Certificate.
Notwithstanding the foregoing, the Custodian shall be under no obligation to
issue any Put Option guarantee letter or similar document if it is unable to
make any of the representations contained therein.
- 13 -
<PAGE>
9. Whenever a Put Option written by the Fund and described in the
preceding paragraph is exercised, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Put Option was
written; (b) the name of the issuer and title and number of shares subject to
the Put Option; (c) the Clearing Member from whom the underlying Securities are
to be received; (d) the total amount payable by the Fund upon such delivery; (e)
the amount of cash and/or the amount and kind of Securities specifically
allocated to such Series to be withdrawn from the Collateral Account for such
Series and (f) the amount of cash and/or the amount and kind of Securities,
specifically allocated to such Series, if any, to be withdrawn from the Senior
Security Account. Upon the return and/or cancellation of any Put Option
guarantee letter or similar document issued by the Custodian in connection with
such Put Option, the Custodian shall pay out of the money held for the account
of the Series to which such Put Option was specifically allocated the total
amount payable to the Clearing Member specified in the Certificate as set forth
in such Certificate against delivery of such Securities, and shall make the
withdrawals specified in such Certificate.
10. Whenever the Fund writes a Stock Index Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Stock Index Option: (a) the Series for which such Stock Index Option was
written; (b) whether such Stock Index Option is a put or a call; (c) the number
of options written; (d) the stock index to which such Option relates; (e) the
expiration date; (f) the exercise price; (g) the Clearing Member through whom
such Option was written; (h) the premium to be received by the Fund; (i) the
amount of cash and/or the amount and kind of Securities, if any, specifically
allocated to such Series to be deposited in the Senior Security Account for such
Series; (j) the amount of cash and/or the amount and kind of Securities, if any,
specifically allocated to such Series to be deposited in the Collateral Account
for such Series; and (k) the amount of cash and/or the amount and kind of
Securities, if any, specifically allocated to such Series to be deposited in a
Margin Account, and the name in which such account is to be or has been
established. The Custodian shall, upon receipt of the premium specified in the
Certificate, make the deposits, if any, into the Senior Security Account
specified in the Certificate, and either (1) deliver such receipts, if any,
which the Custodian has specifically agreed to issue, which are in accordance
with the customs prevailing among Clearing Members in Stock Index Options and
make the deposits into the Collateral Account specified in the Certificate, or
(2) make the deposits into the Margin Account specified in the Certificate.
- 14 -
<PAGE>
11. Whenever a Stock Index Option written by the Fund and described in
the preceding paragraph of this Article is exercised, the Fund shall promptly
deliver to the Custodian a Certificate specifying with respect to such Stock
Index Option: (a) the Series for which such Stock Index Option was written; (b)
such information as may be necessary to identify the Stock Index Option being
exercised; (c) the Clearing Member through whom such Stock Index Option is being
exercised; (d) the total amount payable upon such exercise, and whether such
amount is to be paid by or to the Fund; (e) the amount of cash and/or amount and
kind of Securities, if any, to be withdrawn from the Margin Account; and (f) the
amount of cash and/or amount and kind of Securities, if any, to be withdrawn
from the Senior Security Account for such Series; and the amount of cash and/or
the amount and kind of Securities, if any, to be withdrawn from the Collateral
Account for such Series. Upon the return and/or cancellation of the receipt, if
any, delivered pursuant to the preceding paragraph of this Article, the
Custodian shall pay out of the money held for the account of the Series to which
such Stock Index Option was specifically allocated to the Clearing Member
specified in the Certificate the total amount payable, if any, as specified
therein.
12. Whenever the Fund purchases any Option identical to a previously
written Option described in paragraphs, 6, 8 or 10 of this Article in a
transaction expressly designated as a "Closing Purchase Transaction" in order to
liquidate its position as a writer of an Option, the Fund shall promptly deliver
to the Custodian a Certificate specifying with respect to the Option being
purchased: (a) that the transaction is a Closing Purchase Transaction; (b) the
Series for which the Option was written; (c) the name of the issuer and the
title and number of shares subject to the Option, or, in the case of a Stock
Index Option, the stock index to which such Option relates and the number of
Options held; (d) the exercise price; (e) the premium to be paid by the Fund;
(f) the expiration date; (g) the type of Option (put or call); (h) the date of
such purchase; (i) the name of the Clearing Member to whom the premium is to be
paid; and (j) the amount of cash and/or the amount and kind of Securities, if
any, to be withdrawn from the Collateral Account, a specified Margin Account, or
the Senior Security Account for such Series. Upon the Custodian's payment of the
premium and the return and/or cancellation of any receipt issued pursuant to
paragraphs 6, 8 or 10 of this Article with respect to the Option being
liquidated through the Closing Purchase Transaction, the Custodian shall remove,
or direct the Depository to remove, the previously imposed restrictions on the
Securities underlying the Call Option.
- 15 -
<PAGE>
13. Upon the expiration, exercise or consummation of a Closing Purchase
Transaction with respect to any Option purchased or written by the Fund and
described in this Article, the Custodian shall delete such Option from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein,
and upon the return and/or cancellation of any receipts issued by the Custodian,
shall make such withdrawals from the Collateral Account, and the Margin Account
and/or the Senior Security Account as may be specified in a Certificate received
in connection with such expiration, exercise, or consummation.
ARTICLE VI.
FUTURES CONTRACTS
1. Whenever the Fund shall enter into a Futures Contract, the Fund
shall deliver to the Custodian a Certificate specifying with respect to such
Futures Contract, (or with respect to any number of identical Futures
Contract(s)): (a) the Series for which the Futures Contract is being entered;
(b) the category of Futures Contract (the name of the underlying stock index or
financial instrument); (c) the number of identical Futures Contracts entered
into; (d) the delivery or settlement date of the Futures Contract(s); (e) the
date the Futures Contract(s) was (were) entered into and the maturity date; (f)
whether the Fund is buying (going long) or selling (going short) on such Futures
Contract(s); (g) the amount of cash and/or the amount and kind of Securities, if
any, to be deposited in the Senior Security Account for such Series; (h) the
name of the broker, dealer, or futures commission merchant through whom the
Futures Contract was entered into; and (i) the amount of fee or commission, if
any, to be paid and the name of the broker, dealer, or futures commission
merchant to whom such amount is to be paid. The Custodian shall make the
deposits, if any, to the Margin Account in accordance with the terms and
conditions of the Margin Account Agreement. The Custodian shall make payment out
of the money specifically allocated to such Series of the fee or commission, if
any, specified in the Certificate and deposit in the Senior Security Account for
such Series the amount of cash and/or the amount and kind of Securities
specified in said Certificate.
2. (a) Any variation margin payment or similar payment required to be
made by the Fund to a broker, dealer, or futures commission merchant with
respect to an outstanding Futures Contract, shall be made by the Custodian in
accordance with the terms and conditions of the Margin Account Agreement.
(b) Any variation margin payment or similar payment from a
broker, dealer, or futures commission merchant to the Fund with respect to an
outstanding Futures Contract, shall be received and dealt with by the Custodian
in accordance with the terms and conditions of the Margin Account Agreement.
- 16 -
<PAGE>
3. Whenever a Futures Contract held by the Custodian hereunder is
retained by the Fund until delivery or settlement is made on such Futures
Contract, the Fund shall deliver to the Custodian a Certificate specifying: (a)
the Futures Contract and the Series to which the same relates; (b) with respect
to a Stock Index Futures Contract, the total cash settlement amount to be paid
or received, and with respect to a Financial Futures Contract, the Securities
and/or amount of cash to be delivered or received; (c) the broker, dealer, or
futures commission merchant to or from whom payment or delivery is to be made or
received; and (d) the amount of cash and/or Securities to be withdrawn from the
Senior Security Account for such Series. The Custodian shall make the payment or
delivery specified in the Certificate, and delete such Futures Contract from the
statements delivered to the Fund pursuant to paragraph 3 of Article III herein.
4. Whenever the Fund shall enter into a Futures Contract to offset a
Futures Contract held by the Custodian hereunder, the Fund shall deliver to the
Custodian a Certificate specifying: (a) the items of information required in a
Certificate described in paragraph 1 of this Article, and (b) the Futures
Contract being offset. The Custodian shall make payment out of the money
specifically allocated to such Series of the fee or commission, if any,
specified in the Certificate and delete the Futures Contract being offset from
the statements delivered to the Fund pursuant to paragraph 3 of Article III
herein, and make such withdrawals from the Senior Security Account for such
Series as may be specified in such Certificate. The withdrawals, if any, to be
made from the Margin Account shall be made by the Custodian in accordance with
the terms and conditions of the Margin Account Agreement.
5. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a representation
and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such futures commission
merchant.
- 17 -
<PAGE>
ARTICLE VII.
FUTURES CONTRACT OPTIONS
1. Promptly after the purchase of any Futures Contract Option by the
Fund, the Fund shall promptly deliver to the Custodian a Certificate specifying
with respect to such Futures Contract Option: (a) the Series to which such
Option is specifically allocated; (b) the type of Futures Contract Option (put
or call); (c) the type of Futures Contract and such other information as may be
necessary to identify the Futures Contract underlying the Futures Contract
Option purchased; (d) the expiration date; (e) the exercise price; (f) the dates
of purchase and settlement; (g) the amount of premium to be paid by the Fund
upon such purchase; (h) the name of the broker or futures commission merchant
through whom such option was purchased; and (i) the name of the broker, or
futures commission merchant, to whom payment is to be made. The Custodian shall
pay out of the money specifically allocated to such Series, the total amount to
be paid upon such purchase to the broker or futures commissions merchant through
whom the purchase was made, provided that the same conforms to the amount set
forth in such Certificate.
2. Promptly after the sale of any Futures Contract Option purchased by
the Fund pursuant to paragraph 1 hereof, the Fund shall promptly deliver to the
Custodian a Certificate specifying with respect to each such sale: (a) the
Series to which such Futures Contract Option was specifically allocated; (b) the
type of Futures Contract Option (put or call); (c) the type of Futures Contract
and such other information as may be necessary to identify the Futures Contract
underlying the Futures Contract Option; (d) the date of sale; (e) the sale
price; (f) the date of settlement; (g) the total amount payable to the Fund upon
such sale; and (h) the name of the broker or futures commission merchant through
whom the sale was made. The Custodian shall consent to the cancellation of the
Futures Contract Option being closed against payment to the Custodian of the
total amount payable to the Fund, provided the same conforms to the total amount
payable as set forth in such Certificate.
3. Whenever a Futures Contract Option purchased by the Fund pursuant to
paragraph 1 is exercised by the Fund, the Fund shall promptly deliver to the
Custodian a Certificate specifying: (a) the Series to which such Futures
Contract Option was specifically allocated; (b) the particular Futures Contract
Option (put or call) being exercised; (c) the type of Futures Contract
underlying the Futures Contract Option; (d) the date of exercise; (e)the name of
the broker or futures commission merchant through whom the Futures Contract
Option is exercised; (f) the net total amount, if any, payable by the Fund; (g)
the amount, if any, to be received by the Fund; and (h) the amount of cash
and/or the amount and kind of Securities to be deposited in the Senior Security
Account for such Series. The Custodian shall make, out of the money and
Securities specifically allocated to such Series, the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
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<PAGE>
4. Whenever the Fund writes a Futures Contract Option, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to such
Futures Contract Option: (a) the Series for which such Futures Contract Option
was written; (b) the type of Futures Contract Option (put or call); (c) the type
of Futures Contract and such other information as may be necessary to identify
the Futures Contract underlying the Futures Contract Option; (d) the expiration
date; (e) the exercise price; (f) the premium to be received by the Fund; (g)
the name of the broker or futures commission merchant through whom the premium
is to be received; and (h) the amount of cash and/or the amount and kind of
Securities, if any, to be deposited in the Senior Security Account for such
Series. The Custodian shall, upon receipt of the premium specified in the
Certificate, make out of the money and Securities specifically allocated to such
Series the deposits into the Senior Security Account, if any, as specified in
the Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
5. Whenever a Futures Contract Option written by the Fund which is a
call is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Futures Contract Option was
specifically allocated; (b) the particular Futures Contract Option exercised;
(c) the type of Futures Contract underlying the Futures Contract Option; (d) the
name of the broker or futures commission merchant through whom such Futures
Contract Option was exercised; (e) the net total amount, if any, payable to the
Fund upon such exercise; (f) the net total amount, if any, payable by the Fund
upon such exercise; and (g) the amount of cash and/or the amount and kind of
Securities to be deposited in the Senior Security Account for such Series. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in such Certificate make the payments, if any, and the
deposits, if any, into the Senior Security Account as specified in the
Certificate. The deposits, if any, to be made to the Margin Account shall be
made by the Custodian in accordance with the terms and conditions of the Margin
Account Agreement.
6. Whenever a Futures Contract Option which is written by the Fund and
which is a put is exercised, the Fund shall promptly deliver to the Custodian a
Certificate specifying: (a) the Series to which such Option was specifically
allocated; (b) the particular Futures Contract Option exercised; (c) the type of
Futures Contract underlying such Futures Contract Option; (d) the name of the
broker or futures commission merchant through whom such Futures Contract Option
is exercised; (e) the net total amount, if any, payable to the Fund upon such
exercise; (f) the net total amount, if any, payable by the Fund upon such
exercise; and (g) the amount and kind of Securities and/or cash to be withdrawn
from or deposited in, the Senior Security Account for such Series, if any. The
Custodian shall, upon its receipt of the net total amount payable to the Fund,
if any, specified in the Certificate, make out of the money and Securities
specifically allocated to such Series, the payments, if any, and the deposits,
if any, into the Senior Security Account as specified in the Certificate. The
deposits to and/or withdrawals from the Margin Account, if any, shall be made by
the Custodian in accordance with the terms and conditions of the Margin Account
Agreement.
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<PAGE>
7. Whenever the Fund purchases any Futures Contract Option identical to
a previously written Futures Contract Option described in this Article in order
to liquidate its position as a writer of such Futures Contract Option, the Fund
shall promptly deliver to the Custodian a Certificate specifying with respect to
the Futures Contract Option being purchased: (a) the Series to which such Option
is specifically allocated; (b) that the transaction is a closing transaction;
(c) the type of Futures Contract and such other information as may be necessary
to identify the Futures Contract underlying the Futures Option Contract; (d) the
exercise price; (e) the premium to be paid by the Fund; (f) the expiration date;
(g) the name of the broker or futures commission merchant to whom the premium is
to be paid; and (h) the amount of cash and/or the amount and kind of Securities,
if any, to be withdrawn from the Senior Security Account for such Series. The
Custodian shall effect the withdrawals from the Senior Security Account
specified in the Certificate. The withdrawals, if any, to be made from the
Margin Account shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
8. Upon the expiration, exercise, or consummation of a closing
transaction with respect to, any Futures Contract Option written or purchased by
the Fund and described in this Article, the Custodian shall (a) delete such
Futures Contract Option from the statements delivered to the Fund pursuant to
paragraph 3 of Article III herein and, (b) make such withdrawals from and/or in
the case of an exercise such deposits into the Senior Security Account as may be
specified in a Certificate. The deposits to and/or withdrawals from the Margin
Account, if any, shall be made by the Custodian in accordance with the terms and
conditions of the Margin Account Agreement.
- 20 -
<PAGE>
9. Futures Contracts acquired by the Fund through the exercise of a
Futures Contract Option described in this Article shall be subject to Article VI
hereof.
10. Notwithstanding any other provision in this Agreement to the
contrary, the Custodian shall deliver cash and Securities to a futures
commission merchant upon receipt of a Certificate from the Fund specifying: (a)
the name of the futures commission merchant; (b) the specific cash and
Securities to be delivered; (c) the date of such delivery; and (d) the date of
the agreement between the Fund and such futures commission merchant entered
pursuant to Rule 17f-6 under the Investment Company Act 1940, as amended. Each
delivery of such a Certificate by the Fund shall constitute (x) a representation
and warranty by the Fund that the Rule 17f-6 agreement has been duly authorized,
executed and delivered by the Fund and the futures commission merchant and
complies with Rule 17f-6, and (y) an agreement by the Fund that the Custodian
shall not be liable for the acts or omissions of any such futures commission
merchant.
ARTICLE VIII.
SHORT SALES
1. Promptly after any short sales by any Series of the Fund, the Fund
shall promptly deliver to the Custodian a Certificate specifying: (a) the Series
for which such short sale was made; (b) the name of the issuer and the title of
the Security; (c) the number of shares or principal amount sold, and accrued
interest or dividends, if any; (d) the dates of the sale and settlement; (e) the
sale price per unit; (f) the total amount credited to the Fund upon such sale,
if any, (g) the amount of cash and/or the amount and kind of Securities, if any,
which are to be deposited in a Margin Account and the name in which such Margin
Account has been or is to be established; (h) the amount of cash and/or the
amount and kind of Securities, if any, to be deposited in a Senior Security
Account, and (i) the name of the broker through whom such short sale was made.
The Custodian shall upon its receipt of a statement from such broker confirming
such sale and that the total amount credited to the Fund upon such sale, if any,
as specified in the Certificate is held by such broker for the account of the
Custodian (or any nominee of the Custodian) as custodian of the Fund, issue a
receipt or make the deposits into the Margin Account and the Senior Security
Account specified in the Certificate.
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2. In connection with the closing-out of any short sale, the Fund shall
promptly deliver to the Custodian a Certificate specifying with respect to each
such closing out: (a) the Series for which such transaction is being made; (b)
the name of the issuer and the title of the Security; (c) the number of shares
or the principal amount, and accrued interest or dividends, if any, required to
effect such closing-out to be delivered to the broker; (d) the dates of
closing-out and settlement; (e) the purchase price per unit; (f) the net total
amount payable to the Fund upon such closing-out; (g) the net total amount
payable to the broker upon such closing-out; (h) the amount of cash and the
amount and kind of Securities to be withdrawn, if any, from the Margin Account;
(i) the amount of cash and/or the amount and kind of Securities, if any, to be
withdrawn from the Senior Security Account; and (j) the name of the broker
through whom the Fund is effecting such closing-out. The Custodian shall, upon
receipt of the net total amount payable to the Fund upon such closing-out, and
the return and/or cancellation of the receipts, if any, issued by the Custodian
with respect to the short sale being closed-out, pay out of the money held for
the account of the Fund to the broker the net total amount payable to the
broker, and make the withdrawals from the Margin Account and the Senior Security
Account, as the same are specified in the Certificate.
ARTICLE IX.
REVERSE REPURCHASE AGREEMENTS
1. Promptly after the Fund enters into a Reverse Repurchase Agreement
with respect to Securities and money held by the Custodian hereunder, the Fund
shall deliver to the Custodian a Certificate, or in the event such Reverse
Repurchase Agreement is a Money Market Security, a Certificate or Oral
Instructions specifying: (a) the Series for which the Reverse Repurchase
Agreement is entered; (b) the total amount payable to the Fund in connection
with such Reverse Repurchase Agreement and specifically allocated to such
Series; (c) the broker or dealer through or with whom the Reverse Repurchase
Agreement is entered; (d) the amount and kind of Securities to be delivered by
the Fund to such broker or dealer; (e) the date of such Reverse Repurchase
Agreement; and (f) the amount of cash and/or the amount and kind of Securities,
if any, specifically allocated to such Series to be deposited in a Senior
Security Account for such Series in connection with such Reverse Repurchase
Agreement. The Custodian shall, upon receipt of the total amount payable to the
Fund specified in the Certificate or Oral Instructions make the delivery to the
broker or dealer, and the deposits, if any, to the Senior Security Account,
specified in such Certificate or Oral Instructions.
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<PAGE>
2. Upon the termination of a Reverse Repurchase Agreement described in
preceding paragraph 1 of this Article, the Fund shall promptly deliver a
Certificate or, in the event such Reverse Repurchase Agreement is a Money Market
Security, a Certificate or Oral Instructions to the Custodian specifying: (a)
the Reverse Repurchase Agreement being terminated and the Series for which same
was entered; (b) the total amount payable by the Fund in connection with such
termination; (c) the amount and kind of Securities to be received by the Fund
and specifically allocated to such Series in connection with such termination;
(d) the date of termination; (e) the name of the broker or dealer with or
through whom the Reverse Repurchase Agreement is to be terminated; and (f) the
amount of cash and/or the amount and kind of Securities to be withdrawn from the
Senior Securities Account for such Series. The Custodian shall, upon receipt of
the amount and kind of Securities to be received by the Fund specified in the
Certificate or Oral Instructions, make the payment to the broker or dealer, and
the withdrawals, if any, from the Senior Security Account, specified in such
Certificate or Oral Instructions.
ARTICLE X.
LOAN OF PORTFOLIO SECURITIES OF THE FUND
1. Promptly after each loan of portfolio Securities specifically
allocated to a Series held by the Custodian hereunder, the Fund shall deliver or
cause to be delivered to the Custodian a Certificate specifying with respect to
each such loan: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities, (c) the
number of shares or the principal amount loaned, (d) the date of loan and
delivery, (e) the total amount to be delivered to the Custodian against the loan
of the Securities, including the amount of cash collateral and the premium, if
any, separately identified, and (f) the name of the broker, dealer, or financial
institution to which the loan was made. The Custodian shall deliver the
Securities thus designated to the broker, dealer or financial institution to
which the loan was made upon receipt of the total amount designated as to be
delivered against the loan of Securities. The Custodian may accept payment in
connection with a delivery otherwise than through the Book- Entry System or
Depository only in the form of a certified or bank cashier's check payable to
the order of the Fund or the Custodian drawn on New York Clearing House funds
and may deliver Securities in accordance with the customs prevailing among
dealers in securities.
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<PAGE>
2. Promptly after each termination of the loan of Securities by the
Fund, the Fund shall deliver or cause to be delivered to the Custodian a
Certificate specifying with respect to each such loan termination and return of
Securities: (a) the Series to which the loaned Securities are specifically
allocated; (b) the name of the issuer and the title of the Securities to be
returned, (c) the number of shares or the principal amount to be returned, (d)
the date of termination, (e) the total amount to be delivered by the Custodian
(including the cash collateral for such Securities minus any offsetting credits
as described in said Certificate), and (f) the name of the broker, dealer, or
financial institution from which the Securities will be returned. The Custodian
shall receive all Securities returned from the broker, dealer, or financial
institution to which such Securities were loaned and upon receipt thereof shall
pay, out of the money held for the account of the Fund, the total amount payable
upon such return of Securities as set forth in the Certificate.
ARTICLE XI.
CONCERNING MARGIN ACCOUNTS, SENIOR SECURITY
ACCOUNTS, AND COLLATERAL ACCOUNTS
1. The Custodian shall, from time to time, make such deposits to, or
withdrawals from, a Senior Security Account as specified in a Certificate
received by the Custodian. Such Certificate shall specify the Series for which
such deposit or withdrawal is to be made and the amount of cash and/or the
amount and kind of Securities specifically allocated to such Series to be
deposited in, or withdrawn from, such Senior Security Account for such Series.
In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and the number of shares or the principal amount
of any particular Securities to be deposited by the Custodian into, or withdrawn
from, a Senior Securities Account, the Custodian shall be under no obligation to
make any such deposit or withdrawal and shall so notify the Fund.
2. The Custodian shall make deliveries or payments from a Margin
Account to the broker, dealer, futures commission merchant or Clearing Member in
whose name, or for whose benefit, the account was established as specified in
the Margin Account Agreement.
3. Amounts received by the Custodian as payments or distributions with
respect to Securities deposited in any Margin Account shall be dealt with in
accordance with the terms and conditions of the Margin Account Agreement.
4. The Custodian shall have a continuing lien and security interest in
and to any property at any time held by the Custodian in any Collateral Account
described herein. In accordance with applicable law the Custodian may enforce
its lien and realize on any such property whenever the Custodian has made
payment or delivery pursuant to any Put Option guarantee letter or similar
document or any receipt issued hereunder by the Custodian. In the event the
Custodian should realize on any such property net proceeds which are less than
the Custodian's obligations under any Put Option guarantee letter or similar
document or any receipt, such deficiency shall be a debt owed the Custodian by
the Fund within the scope of Article XIV herein.
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<PAGE>
5. On each business day the Custodian shall furnish the Fund with a
statement with respect to each Margin Account in which money or Securities are
held specifying as of the close of business on the previous business day: (a)
the name of the Margin Account; (b) the amount and kind of Securities held
therein; and (c) the amount of money held therein. The Custodian shall make
available upon request to any broker, dealer, or futures commission merchant
specified in the name of a Margin Account a copy of the statement furnished the
Fund with respect to such Margin Account.
6. Promptly after the close of business on each business day in which
cash and/or Securities are maintained in a Collateral Account for any Series,
the Custodian shall furnish the Fund with a statement with respect to such
Collateral Account specifying the amount of cash and/or the amount and kind of
Securities held therein. No later than the close of business next succeeding the
delivery to the Fund of such statement, the Fund shall furnish to the Custodian
a Certificate specifying the then market value of the Securities described in
such statement. In the event such then market value is indicated to be less than
the Custodian's obligation with respect to any outstanding Put Option guarantee
letter or similar document, the Fund shall promptly specify in a Certificate the
additional cash and/or Securities to be deposited in such Collateral Account to
eliminate such deficiency.
ARTICLE XII.
PAYMENT OF DIVIDENDS OR DISTRIBUTIONS
1. The Fund shall furnish to the Custodian a copy of the resolution of
the Board of Directors of the Fund, certified by the Secretary or any Assistant
Secretary, either (i) setting forth with respect to the Series specified therein
the date of the declaration of a dividend or distribution, the date of payment
thereof, the record date as of which shareholders entitled to payment shall be
determined, the amount payable per Share of such Series to the shareholders of
record as of that date and the total amount payable to the Dividend Agent and
any sub-dividend agent or co-dividend agent of the Fund on the payment date, or
(ii) authorizing with respect to the Series specified therein the declaration of
dividends and distributions on a daily basis and authorizing the Custodian to
rely on Oral Instructions or a Certificate setting forth the date of the
declaration of such dividend or distribution, the date of payment thereof, the
record date as of which shareholders entitled to payment shall be determined,
the amount payable per Share of such Series to the shareholders of record as of
that date and the total amount payable to the Dividend Agent on the payment
date.
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<PAGE>
2. Upon the payment date specified in such resolution, Oral
Instructions or Certificate, as the case may be, the Custodian shall pay out of
the money held for the account of each Series the total amount payable to the
Dividend Agent and any sub-dividend agent or co-dividend agent of the Fund with
respect to such Series.
ARTICLE XIII.
SALE AND REDEMPTION OF SHARES
1. Whenever the Fund shall sell any Shares, it shall deliver to the
Custodian a Certificate duly specifying:
(a) the Series, the number of Shares sold, trade date, and
price; and
(b) the amount of money to be received by the Custodian for
the sale of such Shares and specifically allocated to the separate account in
the name of such Series.
2. Upon receipt of such money from the Transfer Agent, the Custodian
shall credit such money to the separate account in the name of the Series for
which such money was received.
3. Upon issuance of any Shares of any Series described in the foregoing
provisions of this Article, the Custodian shall pay, out of the money held for
the account of such Series, all original issue or other taxes required to be
paid by the Fund in connection with such issuance upon the receipt of a
Certificate specifying the amount to be paid.
4. Except as provided hereinafter, whenever the Fund desires the
Custodian to make payment out of the money held by the Custodian hereunder in
connection with a redemption of any Shares, it shall furnish to the Custodian a
Certificate specifying:
(a) the number and Series of Shares redeemed; and
(b) the amount to be paid for such Shares.
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<PAGE>
5. Upon receipt from the Transfer Agent of an advice setting forth the
Series and number of Shares received by the Transfer Agent for redemption and
that such Shares are in good form for redemption, the Custodian shall make
payment to the Transfer Agent out of the money held in the separate account in
the name of the Series the total amount specified in the Certificate issued
pursuant to the foregoing paragraph 4 of this Article.
6. Notwithstanding the above provisions regarding the redemption of any
Shares, whenever any Shares are redeemed pursuant to any check redemption
privilege which may from time to time be offered by the Fund, the Custodian,
unless otherwise instructed by a Certificate, shall, upon receipt of an advice
from the Fund or its agent setting forth that the redemption is in good form for
redemption in accordance with the check redemption procedure, honor the check
presented as part of such check redemption privilege out of the money held in
the separate account of the Series of the Shares being redeemed.
ARTICLE XIV.
OVERDRAFTS OR INDEBTEDNESS
1. If the Custodian, should in its sole discretion advance funds on
behalf of any Series which results in an overdraft because the money held by the
Custodian in the separate account for such Series shall be insufficient to pay
the total amount payable upon a purchase of Securities specifically allocated to
such Series, as set forth in a Certificate or Oral Instructions, or which
results in an overdraft in the separate account of such Series for some other
reason, or if the Fund is for any other reason indebted to the Custodian with
respect to a Series, including any indebtedness to The Bank of New York under
the Fund's Cash Management and Related Services Agreement, (except a borrowing
for investment or for temporary or emergency purposes using Securities as
collateral pursuant to a separate agreement and subject to the provisions of
paragraph 2 of this Article), such overdraft or indebtedness shall be deemed to
be a loan made by the Custodian to the Fund for such Series payable on demand
and shall bear interest from the date incurred at a rate per annum (based on a
360- day year for the actual number of days involved) equal to 1/2% over
Custodian's prime commercial lending rate in effect from time to time, such rate
to be adjusted on the effective date of any change in such prime commercial
lending rate but in no event to be less than 6% per annum. In addition, the Fund
hereby agrees that the Custodian shall have a continuing lien, security
interest, and security entitlement in and to any property including any
investment property or any financial asset specifically allocated to such Series
at any time held by it for the benefit of such Series or in which the Fund may
have an interest which is then in the Custodian's possession or control or in
possession or control of any third party acting in the Custodian's behalf. The
Fund authorizes the Custodian, in its sole discretion, at any time to charge any
such overdraft or indebtedness together with interest due thereon against any
balance of account standing to such Series' credit on the Custodian's books. In
addition, the Fund hereby covenants that on each Business Day on which either it
intends to enter a Reverse Repurchase Agreement and/or otherwise borrow from a
third party, or which next succeeds a Business Day on which at the close of
business the Fund had outstanding a Reverse Repurchase Agreement or such a
borrowing, it shall prior to 9 a.m., New York City time, advise the Custodian,
in writing, of each such borrowing, shall specify the Series to which the same
relates, and shall not incur any indebtedness not so specified other than from
the Custodian.
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<PAGE>
2. The Fund will cause to be delivered to the Custodian by any bank
(including, if the borrowing is pursuant to a separate agreement, the Custodian)
from which it borrows money for investment or for temporary or emergency
purposes using Securities held by the Custodian hereunder as collateral for such
borrowings, a notice or undertaking in the form currently employed by any such
bank setting forth the amount which such bank will loan to the Fund against
delivery of a stated amount of collateral. The Fund shall promptly deliver to
the Custodian a Certificate specifying with respect to each such borrowing: (a)
the Series to which such borrowing relates; (b) the name of the bank, (c) the
amount and terms of the borrowing, which may be set forth by incorporating by
reference an attached promissory note, duly endorsed by the Fund, or other loan
agreement,(d) the time and date, if known, on which the loan is to be entered
into, (e) the date on which the loan becomes due and payable, (f) the total
amount payable to the Fund on the borrowing date, (g) the market value of
Securities to be delivered as collateral for such loan, including the name of
the issuer, the title and the number of shares or the principal amount of any
particular Securities, and (h) a statement specifying whether such loan is for
investment purposes or for temporary or emergency purposes and that such loan is
in conformance with the Investment Company Act of 1940 and the Fund's
prospectus. The Custodian shall deliver on the borrowing date specified in a
Certificate the specified collateral and the executed promissory note, if any,
against delivery by the lending bank of the total amount of the loan payable,
provided that the same conforms to the total amount payable as set forth in the
Certificate. The Custodian may, at the option of the lending bank, keep such
collateral in its possession, but such collateral shall be subject to all rights
therein given the lending bank by virtue of any promissory note or loan
agreement. The Custodian shall deliver such Securities as additional collateral
as may be specified in a Certificate to collateralize further any transaction
described in this paragraph. The Fund shall cause all Securities released from
collateral status to be returned directly to the Custodian, and the Custodian
shall receive from time to time such return of collateral as may be tendered to
it. In the event that the Fund fails to specify in a Certificate the Series, the
name of the issuer, the title and number of shares or the principal amount of
any particular Securities to be delivered as collateral by the Custodian, the
Custodian shall not be under any obligation to deliver any Securities.
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<PAGE>
ARTICLE XV.
INSTRUCTIONS
1. With respect to any software provided by the Custodian to a Fund in
order for the Fund to transmit Instructions to the Custodian (the "Software"),
the Custodian grants to such Fund a personal, nontransferable and nonexclusive
license to use the Software solely for the purpose of transmitting Instructions
to, and receiving communications from, the Custodian in connection with its
account(s). The Fund agrees not to sell, reproduce, lease or otherwise provide,
directly or indirectly, the Software or any portion thereof to any third party
without the prior written consent of the Custodian.
2. The Fund shall obtain and maintain at its own cost and expense all
equipment and services, including but not limited to communications services,
necessary for it to utilize the Software and transmit Instructions to the
Custodian. The Custodian shall not be responsible for the reliability,
compatibility with the Software or availability of any such equipment or
services or the performance or nonperformance by any nonparty to this Custody
Agreement.
3. The Fund acknowledges that the Software, all data bases made
available to the Fund by utilizing the Software (other than data bases relating
solely to the assets of the Fund and transactions with respect thereto), and any
proprietary data, processes, information and documentation (other than which are
or become part of the public domain or are legally required to be made available
to the public) (collectively, the "Information"), are the exclusive and
confidential property of the Custodian. The Fund shall keep the Information
confidential by using the same care and discretion that the Fund uses with
respect to its own confidential property and trade secrets and shall neither
make nor permit any disclosure without the prior written consent of the
Custodian. Upon termination of this Agreement or the Software license granted
hereunder for any reason, the Fund shall return to the Custodian all copies of
the Information which are in its possession or under its control or which the
Fund distributed to third parties.
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<PAGE>
4. The Custodian reserves the right to modify the Software from time to
time upon reasonable prior notice and the Fund shall install new releases of the
Software as the Custodian may direct. The Fund agrees not to modify or attempt
to modify the Software without the Custodian's prior written consent. The Fund
acknowledges that any modifications to the Software, whether by the Fund or the
Custodian and whether with or without the Custodian's consent, shall become the
property of the Custodian.
5. The Custodian makes no warranties or representations of any kind
with regard to the Software or the method(s) by which the Fund may transmit
Instructions to the Custodian, express or implied, including but not limited to
any implied warranties of merchantability or fitness for a particular purpose.
6. Where the method for transmitting Instructions by the Fund involves
an automatic systems acknowledgment by the Custodian of its receipt of such
Instructions, then in the absence of such acknowledgment the Custodian shall not
be liable for any failure to act pursuant to such Instructions, the Fund may not
claim that such Instructions were received by the Custodian, and the Fund shall
deliver a Certificate by some other means.
7. (a) The Fund agrees that where it delivers to the Custodian
Instructions hereunder, it shall be the Fund's sole responsibility to ensure
that only persons duly authorized by the Fund transmit such Instructions to the
Custodian. The Fund will cause all persons transmitting Instructions to the
Custodian to treat applicable user and authorization codes, passwords and
authentication keys with extreme care, and irrevocably authorizes the Custodian
to act in accordance with and rely upon Instructions received by it pursuant
hereto.
(b) The Fund hereby represents, acknowledges and agrees that
it is fully informed of the protections and risks associated with the various
methods of transmitting Instructions to the Custodian and that there may be more
secure methods of transmitting instructions to the Custodian than the method(s)
selected by the Fund. The Fund hereby agrees that the security procedures (if
any) to be followed in connection with the Fund's transmission of Instructions
provide to it a commercially reasonable degree of protection in light of its
particular needs and circumstances.
8. The Fund hereby represents, warrants and covenants to the Custodian
that this Agreement has been duly approved by a resolution of its Board of
Directors, and that its transmission of Instructions pursuant hereto shall at
all times comply with the Investment Company Act of 1940, as amended.
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<PAGE>
9. The Fund shall notify the Custodian of any errors, omissions or
interruptions in, or delay or unavailability of, its ability to send
Instructions as promptly as practicable, and in any event within 24 hours after
the earliest of (i) discovery thereof, (ii) the Business Day on which discovery
should have occurred through the exercise of reasonable care and (iii) in the
case of any error, the date of actual receipt of the earliest notice which
reflects such error, it being agreed that discovery and receipt of notice may
only occur on a business day. The Custodian shall promptly advise the Fund
whenever the Custodian learns of any errors, omissions or interruption in, or
delay or unavailability of, the Fund's ability to send Instructions.
ARTICLE XVI.
DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY
OF ANY SERIES HELD OUTSIDE OF THE UNITED STATES
1. The Custodian is authorized and instructed to employ, as
sub-custodian for each Series' Securities for which the primary market is
outside the United States ("Foreign Securities") and other assets, the foreign
banking institutions and foreign securities depositories and clearing agencies
designated on Schedule I hereto ("Foreign Sub-Custodians") to carry out their
respective responsibilities in accordance with the terms of the sub-custodian
agreement between each such Foreign Sub-Custodian and the Custodian, copies of
which have been previously delivered to the Fund and receipt of which is hereby
acknowledged (each such agreement, a "Foreign Sub-Custodian Agreement"). Upon
receipt of a Certificate, together with a certified resolution acceptable to the
Custodian of the Fund's Board of Directors, the Fund may designate any
additional foreign sub-custodian with which the Custodian has an agreement for
such entity to act as the Custodian's agent, as its sub-custodian and any such
additional foreign sub-custodian shall be deemed added to Schedule I. Upon
receipt of a Certificate from the Fund, the Custodian shall cease the employment
of any one or more Foreign Sub-Custodians for maintaining custody of the Fund's
assets and such Foreign Sub-Custodian shall be deemed deleted from Schedule I.
2. Each Foreign Sub-Custodian Agreement shall be substantially in the
form previously delivered to the Fund and will not be amended in a way that
materially adversely affects the Fund without the Fund's prior written consent.
3. The Custodian shall identify on its books as belonging to each
Series of the Fund the Foreign Securities of such Series held by each Foreign
Sub-Custodian. At the election of the Fund, it shall be entitled to be
subrogated to the rights of the Custodian with respect to any claims by the Fund
or any Series against a Foreign Sub-Custodian as a consequence of any loss,
damage, cost, expense, liability or claim sustained or incurred by the Fund or
any Series if and to the extent that the Fund or such Series has not been made
whole for any such loss, damage, cost, expense, liability or claim.
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<PAGE>
4. Upon request of the Fund, the Custodian will, consistent with the
terms of the applicable Foreign Sub-Custodian Agreement, use reasonable efforts
to arrange for the independent accountants of the Fund to be afforded access to
the books and records of any Foreign Sub-Custodian insofar as such books and
records relate to the performance of such Foreign Sub-Custodian under its
agreement with the Custodian on behalf of the Fund.
5. The Custodian will supply to the Fund from time to time, as mutually
agreed upon, statements in respect of the securities and other assets of each
Series held by Foreign Sub-Custodians, including but not limited to, an
identification of entities having possession of each Series' Foreign Securities
and other assets, and advices or notifications of any transfers of Foreign
Securities to or from each custodial account maintained by a Foreign
Sub-Custodian for the Custodian on behalf of the Series.
6. The Custodian shall transmit promptly to the Fund all notices,
reports or other written information received pertaining to the Fund's Foreign
Securities, including without limitation, notices of corporate action, proxies
and proxy solicitation materials.
7. Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for securities received for the account of any Series and
delivery of securities maintained for the account of such Series may be effected
in accordance with the customary or established securities trading or securities
processing practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivery of securities to the
purchaser thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
8. Notwithstanding any other provision in this Agreement to the
contrary, with respect to any losses or damages arising out of or relating to
any actions or omissions of any Foreign Sub-Custodian the sole responsibility
and liability of the Custodian shall be to take appropriate action at the Fund's
expense to recover such loss or damage from the Foreign Sub-Custodian. It is
expressly understood and agreed that the Custodian's sole responsibility and
liability shall be limited to amounts so recovered from the Foreign
Sub-Custodian.
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<PAGE>
ARTICLE XVII.
FX TRANSACTIONS
1. Whenever the Fund shall enter into an FX Transaction, the Fund shall
promptly deliver to the Custodian a Certificate or Oral Instructions specifying
with respect to such FX Transaction: (a) the Series to which such FX Transaction
is specifically allocated; (b) the type and amount of Currency to be purchased
by the Fund; (c) the type and amount of Currency to be sold by the Fund; (d) the
date on which the Currency to be purchased is to be delivered; (e) the date on
which the Currency to be sold is to be delivered; and (f) the name of the person
from whom or through whom such currencies are to be purchased and sold. Unless
otherwise instructed by a Certificate or Oral Instructions, the Custodian shall
deliver, or shall instruct a Foreign Sub-Custodian to deliver, the Currency to
be sold on the date on which such delivery is to be made, as set forth in the
Certificate, and shall receive, or instruct a Foreign Sub-Custodian to receive,
the Currency to be purchased on the date as set forth in the Certificate.
2. Where the Currency to be sold is to be delivered on the same day as
the Currency to be purchased, as specified in the Certificate or Oral
Instructions, the Custodian or a Foreign Sub-Custodian may arrange for such
deliveries and receipts to be made in accordance with the customs prevailing
from time to time among brokers or dealers in Currencies, and such receipt and
delivery may not be completed simultaneously. The Fund assumes all
responsibility and liability for all credit risks involved in connection with
such receipts and deliveries, which responsibility and liability shall continue
until the Currency to be received by the Fund has been received in full.
3. Any FX Transaction effected by the Custodian in connection with this
Agreement may be entered with the Custodian, any office, branch or subsidiary of
The Bank of New York Company, Inc., or any Foreign Sub-Custodian acting as
principal or otherwise through customary banking channels. The Fund may issue a
standing Certificate with respect to FX Transaction but the Custodian may
establish rules or limitations concerning any foreign exchange facility made
available to the Fund. The Fund shall bear all risks of investing in Securities
or holding Currency. Without limiting the foregoing, the Fund shall bear the
risks that rules or procedures imposed by a Foreign Sub-Custodian or foreign
depositories, exchange controls, asset freezes or other laws, rules, regulations
or orders shall prohibit or impose burdens or costs on the transfer to, by or
for the account of the Fund of Securities or any cash held outside the Fund's
jurisdiction or denominated in Currency other than its home jurisdiction or the
conversion of cash from one Currency into another currency. The Custodian shall
not be obligated to substitute another Currency for a Currency (including a
Currency that is a component of a Composite Currency Unit) whose
transferability, convertibility or availability has been affected by such law,
regulation, rule or procedure. Neither the Custodian nor any Foreign
Sub-Custodian shall be liable to the Fund for any loss resulting from any of the
foregoing events.
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ARTICLE XVIII.
CONCERNING THE CUSTODIAN
1. Except as hereinafter provided, or as provided in Article XVI,
neither the Custodian nor its nominee shall be liable for any loss or damage,
including counsel fees, resulting from its action or omission to act or
otherwise, either hereunder or under any Margin Account Agreement, except for
any such loss or damage arising out of its own negligence or willful misconduct.
In no event shall the Custodian be liable to the Fund or any third party for
special, indirect or consequential damages or lost profits or loss of business,
arising under or in connection with this Agreement, even if previously informed
of the possibility of such damages and regardless of the form of action. The
Custodian may, with respect to questions of law arising hereunder or under any
Margin Account Agreement, apply for and obtain the advice and opinion of counsel
to the Fund, or of its own counsel, at the expense of the Fund, and shall be
fully protected with respect to anything done or omitted by it in good faith in
conformity with such advice or opinion. The Custodian shall be liable to the
Fund for any loss or damage resulting from the use of the Book-Entry System or
any Depository arising by reason of any negligence or willful misconduct on the
part of the Custodian or any of its employees or agents.
2. Without limiting the generality of the foregoing, the Custodian
shall be under no obligation to inquire into, and shall not be liable for:
(a) the validity of the issue of any Securities purchased,
sold, or written by or for the Fund, the legality of the purchase, sale or
writing thereof, or the propriety of the amount paid or received therefor;
(b) the legality of the sale or redemption of any Shares, or
the propriety of the amount to be received or paid therefor;
- 34 -
<PAGE>
(c) the legality of the declaration or payment of any dividend
by the Fund;
(d) the legality of any borrowing by the Fund using Securities
as collateral;
(e) the legality of any loan of portfolio Securities, nor
shall the Custodian be under any duty or obligation to see to it that any cash
collateral delivered to it by a broker, dealer, or financial institution or held
by it at any time as a result of such loan of portfolio Securities of the Fund
is adequate collateral for the Fund against any loss it might sustain as a
result of such loan. The Custodian specifically, but not by way of limitation,
shall not be under any duty or obligation periodically to check or notify the
Fund that the amount of such cash collateral held by it for the Fund is
sufficient collateral for the Fund, but such duty or obligation shall be the
sole responsibility of the Fund. In addition, the Custodian shall be under no
duty or obligation to see that any broker, dealer or financial institution to
which portfolio Securities of the Fund are lent pursuant to Article X of this
Agreement makes payment to it of any dividends or interest which are payable to
or for the account of the Fund during the period of such loan or at the
termination of such loan, provided, however, that the Custodian shall promptly
notify the Fund in the event that such dividends or interest are not paid and
received when due; or
(f) the sufficiency or value of any amounts of money and/or
Securities held in any Margin Account, Senior Security Account or Collateral
Account in connection with transactions by the Fund. In addition, the Custodian
shall be under no duty or obligation to see that any broker, dealer, futures
commission merchant or Clearing Member makes payment to the Fund of any
variation margin payment or similar payment which the Fund may be entitled to
receive from such broker, dealer, futures commission merchant or Clearing
Member, to see that any payment received by the Custodian from any broker,
dealer, futures commission merchant or Clearing Member is the amount the Fund is
entitled to receive, or to notify the Fund of the Custodian's receipt or
non-receipt of any such payment.
- 35 -
<PAGE>
3. The Custodian shall not be liable for, or considered to be the
Custodian of, any money, whether or not represented by any check, draft, or
other instrument for the payment of money, received by it on behalf of the Fund
until the Custodian actually receives and collects such money directly or by the
final crediting of the account representing the Fund's interest at the
Book-Entry System or the Depository.
4. The Custodian shall have no responsibility and shall not be liable
for ascertaining or acting upon any calls, conversions, exchange offers,
tenders, interest rate changes or similar matters relating to Securities held in
the Depository, unless the Custodian shall have actually received timely notice
from the Depository. In no event shall the Custodian have any responsibility or
liability for the failure of the Depository to collect, or for the late
collection or late crediting by the Depository of any amount payable upon
Securities deposited in the Depository which may mature or be redeemed, retired,
called or otherwise become payable. However, upon receipt of a Certificate from
the Fund of an overdue amount on Securities held in the Depository the Custodian
shall make a claim against the Depository on behalf of the Fund, except that the
Custodian shall not be under any obligation to appear in, prosecute or defend
any action, suit or proceeding in respect to any Securities held by the
Depository which in its opinion may involve it in expense or liability, unless
indemnity satisfactory to it against all expense and liability be furnished as
often as may be required.
5. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount due to the Fund from the Transfer
Agent of the Fund nor to take any action to effect payment or distribution by
the Transfer Agent of the Fund of any amount paid by the Custodian to the
Transfer Agent of the Fund in accordance with this Agreement.
6. The Custodian shall not be under any duty or obligation to take
action to effect collection of any amount if the Securities upon which such
amount is payable are in default, or if payment is refused after due demand or
presentation, unless and until (i) it shall be directed to take such action by a
Certificate and (ii) it shall be assured to its satisfaction of reimbursement of
its costs and expenses in connection with any such action.
7. The Custodian may in addition to the employment of Foreign
Sub-Custodians pursuant to Article XVI appoint one or more banking institutions
as Depository or Depositories, as Sub-Custodian or Sub- Custodians, or as
Co-Custodian or Co-Custodians including, but not limited to, banking
institutions located in foreign countries, of Securities and money at any time
owned by the Fund, upon such terms and conditions as may be approved in a
Certificate or contained in an agreement executed by the Custodian, the Fund and
the appointed institution.
8. The Custodian shall not be under any duty or obligation (a) to
ascertain whether any Securities at any time delivered to, or held by it or by
any Foreign Sub-Custodian, for the account of the Fund and specifically
allocated to a Series are such as properly may be held by the Fund or such
Series under the provisions of its then current prospectus, or (b) to ascertain
whether any transactions by the Fund, whether or not involving the Custodian,
are such transactions as may properly be engaged in by the Fund.
- 36 -
<PAGE>
9. The Custodian shall be entitled to receive and the Fund agrees to
pay to the Custodian all out-of-pocket expenses and such compensation as may be
agreed upon from time to time between the Custodian and the Fund. The Custodian
may charge such compensation and any expenses with respect to a Series incurred
by the Custodian in the performance of its duties pursuant to such agreement
against any money specifically allocated to such Series. Unless and until the
Fund instructs the Custodian by a Certificate to apportion any loss, damage,
liability or expense among the Series in a specified manner, the Custodian shall
also be entitled to charge against any money held by it for the account of a
Series such Series' pro rata share (based on such Series, net asset value at the
time of the charge to the aggregate net asset value of all Series at that time)
of the amount of any loss, damage, liability or expense, including counsel fees,
for which it shall be entitled to reimbursement under the provisions of this
Agreement. The expenses for which the Custodian shall be entitled to
reimbursement hereunder shall include, but are not limited to, the expenses of
sub-custodians and foreign branches of the Custodian incurred in settling
outside of New York City transactions involving the purchase and sale of
Securities of the Fund.
10. The Custodian shall be entitled to rely upon any Certificate,
notice or other instrument in writing received by the Custodian and reasonably
believed by the Custodian to be a Certificate. The Custodian shall be entitled
to rely upon any Oral Instructions actually received by the Custodian
hereinabove provided for. The Fund agrees to forward to the Custodian a
Certificate or facsimile thereof confirming such Oral Instructions in such
manner so that such Certificate or facsimile thereof is received by the
Custodian, whether by hand delivery, telecopier or other similar device, or
otherwise, by the close of business of the same day that such Oral Instructions
are given to the Custodian. The Fund agrees that the fact that such confirming
instructions are not received, or that contrary instructions are received, by
the Custodian shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the Fund. The Fund
agrees that the Custodian shall incur no liability to the Fund in acting upon
Oral Instructions given to the Custodian hereunder concerning such transactions
provided such instructions reasonably appear to have been received from an
Authorized Person.
- 37 -
<PAGE>
11. The Custodian shall be entitled to rely upon any instrument,
instruction or notice received by the Custodian and reasonably believed by the
Custodian to be given in accordance with the terms and conditions of any Margin
Account Agreement. Without limiting the generality of the foregoing, the
Custodian shall be under no duty to inquire into, and shall not be liable for,
the accuracy of any statements or representations contained in any such
instrument or other notice including, without limitation, any specification of
any amount to be paid to a broker, dealer, futures commission merchant or
Clearing Member.
12. The books and records pertaining to the Fund which are in the
possession of the Custodian shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the Investment Company
Act of 1940, as amended, and other applicable securities laws and rules and
regulations. The Fund, or the Fund's authorized representatives, shall have
access to such books and records during the Custodian's normal business hours.
Upon the reasonable request of the Fund, copies of any such books and records
shall be provided by the Custodian to the Fund or the Fund's authorized
representative, and the Fund shall reimburse the Custodian its expenses of
providing such copies. Upon reasonable request of the Fund, the Custodian shall
provide in hard copy or on micro-film, whichever the Custodian elects, any
records included in any such delivery which are maintained by the Custodian on a
computer disc, or are similarly maintained, and the Fund shall reimburse the
Custodian for its expenses of providing such hard copy or micro-film.
13. The Custodian shall provide the Fund with any report obtained by
the Custodian on the system of internal accounting control of the Book- Entry
System, the Depository or O.C.C., and with such reports on its own systems of
internal accounting control as the Fund may reasonably request from time to
time.
14. The Fund agrees to indemnify the Custodian against and save the
Custodian harmless from all liability, claims, losses and demands whatsoever,
including attorney's fees, howsoever arising or incurred because of or in
connection with this Agreement, including the Custodian's payment or non-payment
of checks pursuant to paragraph 6 of Article XIII as part of any check
redemption privilege program of the Fund, except for any such liability, claim,
loss and demand arising out of the Custodian's own negligence or willful
misconduct.
15. Subject to the foregoing provisions of this Agreement, including,
without limitation, those contained in Article XVI and XVII the Custodian may
deliver and receive Securities, and receipts with respect to such Securities,
and arrange for payments to be made and received by the Custodian in accordance
with the customs prevailing from time to time among brokers or dealers in such
Securities. When the Custodian is instructed to deliver Securities against
payment, delivery of such Securities and receipt of payment therefor may not be
completed simultaneously. The Fund assumes all responsibility and liability for
all credit risks involved in connection with the Custodian's delivery of
Securities pursuant to instructions of the Fund, which responsibility and
liability shall continue until final payment in full has been received by the
Custodian.
- 38 -
<PAGE>
16. The Custodian shall have no duties or responsibilities whatsoever
except such duties and responsibilities as are specifically set forth in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
ARTICLE XIX.
TERMINATION
1. Either of the parties hereto may terminate this Agreement by giving
to the other party a notice in writing specifying the date of such termination,
which shall be not less than sixty (60) days after the date of giving of such
notice. In the event such notice is given by the Fund, it shall be accompanied
by a copy of a resolution of the Board of Directors of the Fund, certified by
the Secretary or any Assistant Secretary, electing to terminate this Agreement
and designating a successor custodian or custodians, each of which shall be a
bank or trust company having not less than $2,000,000 aggregate capital, surplus
and undivided profits. In the event such notice is given by the Custodian, the
Fund shall, on or before the termination date, deliver to the Custodian a copy
of a resolution of the Board of Directors of the Fund, certified by the
Secretary or any Assistant Secretary, designating a successor custodian or
custodians. In the absence of such designation by the Fund, the Custodian may
designate a successor custodian which shall be a bank or trust company having
not less than $2,000,000 aggregate capital, surplus and undivided profits. Upon
the date set forth in such notice this Agreement shall terminate, and the
Custodian shall upon receipt of a notice of acceptance by the successor
custodian on that date deliver directly to the successor custodian all
Securities and money then owned by the Fund and held by it as Custodian, after
deducting all fees, expenses and other amounts for the payment or reimbursement
of which it shall then be entitled.
2. If a successor custodian is not designated by the Fund or the
Custodian in accordance with the preceding paragraph, the Fund shall upon the
date specified in the notice of termination of this Agreement and upon the
delivery by the Custodian of all Securities (other than Securities held in the
Book-Entry System which cannot be delivered to the Fund) and money then owned by
the Fund be deemed to be its own custodian and the Custodian shall thereby be
relieved of all duties and responsibilities pursuant to this Agreement, other
than the duty with respect to Securities held in the Book Entry System which
cannot be delivered to the Fund to hold such Securities hereunder in accordance
with this Agreement.
- 39 -
<PAGE>
ARTICLE XX.
MISCELLANEOUS
1. Annexed hereto as Appendix A is a Certificate signed by two of the
present Authorized Persons of the Fund under its seal, setting forth the names
and the signatures of the present Authorized Persons of the Fund. The Fund
agrees to furnish to the Custodian a new Certificate in similar form in the
event that any such present Authorized Person ceases to be an Authorized Person
of the Fund, or in the event that other or additional Authorized Persons are
elected or appointed. Until such new Certificate shall be received, the
Custodian shall be fully protected in acting under the provisions of this
Agreement or Oral Instructions upon the signatures of the Authorized Persons as
set forth in the last delivered Certificate.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Custodian, shall be sufficiently given if
addressed to the Custodian and mailed or delivered to it at its offices at 90
Washington Street, New York, New York 10286, or at such other place as the
Custodian may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if addressed
to the Fund and mailed or delivered to it at its office at the address for the
Fund first above written, or at such other place as the Fund may from time to
time designate in writing.
4. This Agreement may not be amended or modified in any manner except
by a written agreement executed by both parties with the same formality as this
Agreement and approved by a resolution of the Board of Directors of the Fund.
5. This Agreement shall extend to and shall be binding upon the parties
hereto, and their respective successors and assigns; provided, however, that
this Agreement shall not be assignable by the Fund without the written consent
of the Custodian, or by the Custodian without the written consent of the Fund,
authorized or approved by a resolution of the Fund's Board of Directors.
6. This Agreement shall be construed in accordance with the laws of the
State of New York without giving effect to conflict of laws principles thereof.
Each party hereby consents to the jurisdiction of a state or federal court
situated in New York City, New York in connection with any dispute arising
hereunder and hereby waives its right to trial by jury.
- 40 -
<PAGE>
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
[SEAL] By:_______________________
Attest:
- -----------------------
THE BANK OF NEW YORK
[SEAL] By:_______________________
Name:
Title:
Attest:
- -----------------------
- 41 -
<PAGE>
APPENDIX A
I, , and
I, ,
of NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation
(the "Fund"), do hereby certify that:
The following persons have been duly authorized in conformity with the
Fund's Declaration of Trust and By-Laws to execute any Certificate, instruction,
notice or other instrument on behalf of the Fund, and the signatures set forth
opposite their respective names are their true and correct signatures:
Name Position Signature
- -------------------- ------------------- ---------------------
<PAGE>
APPENDIX B
SERIES
KENNEDY CABOT MONEY MARKET PORTFOLIO
KENNEDY CABOT U.S. GOVERNMENT PORTFOLIO
KENNEDY CABOT MUNICIPAL PORTFOLIO
<PAGE>
APPENDIX C
I, Vincent Blazewicz, a Vice President with THE BANK OF NEW YORK do
hereby designate the following publications:
The Bond Buyer
Depository Trust Company Notices
Financial Daily Card Service
JJ Kenney Municipal Bond Service
London Financial Times
New York Times
Standard & Poor's Called Bond Record
Wall Street Journal
<PAGE>
EXHIBIT A
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of NATIONAL INVESTORS CASH MANAGEMENT
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to deposit in the
Book-Entry System, as defined in the Custody Agreement, all securities
eligible for deposit therein, regardless of the Series to which the
same are specifically allocated, and to utilize the Book-Entry System
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT B
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of NATIONAL INVESTORS CASH MANAGEMENT
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Depository, as defined in the Custody
Agreement, all securities eligible for deposit therein, regardless of
the Series to which the same are specifically allocated, and to
utilize the Depository to the extent possible in connection with its
performance thereunder, including, without limitation, in connection
with settlements of purchases and sales of securities, loans of
securities, and deliveries and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT B-1
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of NATIONAL INVESTORS CASH MANAGEMENT
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary to deposit in the Participants Trust Company as Depository,
as defined in the Custody Agreement, all securities eligible for
deposit therein, regardless of the Series to which the same are
specifically allocated, and to utilize the Participants Trust Company
to the extent possible in connection with its performance thereunder,
including, without limitation, in connection with settlements of
purchases and sales of securities, loans of securities, and deliveries
and returns of securities collateral.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT C
CERTIFICATION
The undersigned, , hereby certifies that he or she is
the duly elected and acting of NATIONAL INVESTORS CASH MANAGEMENT
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
.
RESOLVED, that The Bank of New York, as Custodian pursuant to
a Custody Agreement between The Bank of New York and the Fund dated as
of , 1998, (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis until such time as it
receives a Certificate, as defined in the Custody Agreement, to the
contrary, to accept, utilize and act with respect to Clearing Member
confirmations for Options and transaction in Options, regardless of
the Series to which the same are specifically allocated, as such terms
are defined in the Custody Agreement, as provided in the Custody
Agreement.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
EXHIBIT D
The undersigned, , hereby certifies that he or she is
the duly elected and acting of NATIONAL INVESTORS CASH MANAGEMENT
FUND, INC., a Maryland corporation (the "Fund"), and further certifies that the
following resolution was adopted by the Board of Directors of the Fund at a
meeting duly held on , 1998, at which a quorum was at all times
present and that such resolution has not been modified or rescinded and is in
full force and effect as of the date hereof.
RESOLVED, that The Bank of New York, as Custodian pursuant to
the Custody Agreement between The Bank of New York and the Fund dated
as of , 1998 (the "Custody Agreement") is authorized and
instructed on a continuous and ongoing basis to act in accordance with,
and to rely on Instructions (as defined in the Custody Agreement).
RESOLVED, that the Fund shall establish access codes and grant
use of such access codes only to Authorized Persons of the Fund as
defined in the Custody Agreement, shall establish internal safekeeping
procedures to safeguard and protect the confidentiality and
availability of user and access codes, passwords and authentication
keys, and shall use Instructions only in a manner that does not
contravene the Investment Company Act of 1940, as amended, or the rules
and regulations thereunder.
IN WITNESS WHEREOF, I have hereunto set my hand and the seal of
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., as of the day of
, 1998.
[SEAL]
<PAGE>
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT made as of February 26, 1998 between National Investors Cash
Management Fund, Inc. (the "Fund") and The Bank of New York ("BNY").
W I T N E S S E T H:
WHEREAS, the Fund desires to appoint BNY as a Foreign Custody Manager
on the terms and conditions contained herein;
WHEREAS, BNY desires to serve as a Foreign Custody Manager and perform
the duties set forth herein on the terms and condition contained herein;
NOW THEREFORE, in consideration of the mutual promises hereinafter
contained in this Agreement, the Fund and BNY hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following meanings:
1. "Board" shall mean the board of directors or board of trustees, as
the case may be, of the Fund.
2. "Eligible Foreign Custodian" shall have the meaning provided in the
Rule.
3. "Monitoring System" shall mean a system established by BNY to
fulfill the Responsibilities specified in clauses 1(d) and 1(e) of Article III
of this Agreement.
4. "Qualified Foreign Bank" shall have the meaning provided in the
Rule.
5. "Responsibilities" shall mean the responsibilities delegated to BNY
as a Foreign Custody Manager with respect to each Specified Country and each
Eligible Foreign Custodian selected by BNY, as such responsibilities are more
fully described in Article III of this Agreement.
6. "Rule" shall mean Rule 17f-5 under the Investment Company Act of
1940, as amended, as such Rule became effective on June 16, 1997, and as may
hereafter be amended from time to time.
7. "Securities Depository" shall mean any securities depository or
clearing agency within the meaning of Section (a)(1)(ii) or (a)(1)(iii) of the
Rule.
8. "Specified Country" shall mean each country listed on Schedule I
attached hereto and each country, other than the United States, constituting the
primary market for a security with respect to which the Fund has given
settlement instructions to The Bank of New York as custodian (the "Custodian")
under its Custody Agreement with the Fund.
- 1 -
<PAGE>
ARTICLE II
BNY AS A FOREIGN CUSTODY MANAGER
1. The Fund on behalf of its Board hereby delegates to BNY with respect
to each Specified Country the Responsibilities.
2. BNY accepts the Board's delegation of Responsibilities with respect
to each Specified Country and agrees in performing the Responsibilities as a
Foreign Custody Manager to exercise reasonable care, prudence and diligence such
as a person having responsibility for the safekeeping of the Fund's assets would
exercise.
3. BNY shall provide to the Board at such times as the Board deems
reasonable and appropriate based on the circumstances of the Fund's foreign
custody arrangements, but not less frequently than quarterly, written reports
notifying the Board of the placement of assets of the Fund with a particular
Eligible Foreign Custodian within a Specified Country and of any material change
in the arrangements (including, in the case of Qualified Foreign Banks, any
material change in any contract governing such arrangements and in the case of
Securities Depositories, any material change in the established practices or
procedures of such Securities Depositories) with respect to assets of the Fund
with any such Eligible Foreign Custodian.
ARTICLE III
RESPONSIBILITIES
1. Subject to the provisions of this Agreement, BNY shall with respect
to each Specified Country select an Eligible Foreign Custodian. In connection
therewith, BNY shall: (a) determine that assets of the Fund held by such
Eligible Foreign Custodian will be subject to reasonable care, based on the
standards applicable to custodians in the relevant market in which such Eligible
Foreign Custodian operates, after considering all factors relevant to the
safekeeping of such assets, including, without limitation, those contained in
Section (c)(1) of the Rule; (b) determine that the Fund's foreign custody
arrangements with each Qualified Foreign Bank are governed by a written contract
with the Custodian (or, in the case of a Securities Depository, by such a
contract, by the rules or established practices or procedures of the Securities
Depository, or by any combination of the foregoing) which will provide
reasonable care for the Fund's assets based on the standards specified in
paragraph (c)(1) of the Rule; (c) determine that each contract with a Qualified
Foreign Bank shall include the provisions specified in paragraph (c)(2)(i)(A)
through (F) of the Rule or, alternatively, in lieu of any or all of such
(c)(2)(i)(A) through (F) provisions, such other provisions as BNY determines
will provide, in their entirety, the same or a greater level of care and
protection for the assets of the Fund as such specified provisions; (d) monitor
pursuant to the Monitoring System the appropriateness of maintaining the assets
of the Fund with a particular Eligible Foreign Custodian pursuant to paragraph
(c)(1) of the Rule and in the case of a Qualified Foreign Bank, any material
change in the contract governing such arrangement and in the case of a
Securities Depository, any material change in the established practices or
procedures of such Securities Depository; and (e) advise the Fund promptly
whenever an arrangement (including, in the case of a Qualified Foreign Bank, any
material change in the contract governing such arrangement and in the case of a
Securities Depository, any material change in the established practices or
procedures of such Securities Depository) described in preceding clause (d) no
longer meets the requirements of the Rule. Anything in this Agreement to the
contrary notwithstanding, BNY shall in no event be deemed to have selected any
Securities Depository the use of which is mandatory by law or regulation or
because securities cannot be withdrawn from such Securities Depository, or
because maintaining securities outside the Securities Depository is not
consistent with prevailing custodial practices in the relevant market (each, a
- 2 -
<PAGE>
"Compulsory Depository"); it being understood however, that for each Compulsory
Depository utilized or intended to be utilized by the Fund, BNY shall provide
the Fund from time to time with information addressing the factors set forth in
Section (c)(1) of the Rule and BNY's opinions with respect thereto so that the
Fund may determine the appropriateness of placing Fund assets therein. BNY shall
also provide to the Fund or its designee such other information relating to the
Specified Countries as may reasonably be requested by the Fund to assist in the
Fund's evaluation of Country Risk, including without limitation, information
relating to each Specified Country's custody and settlement practices.
2. (a) For purposes of Clauses (a) and (b) of preceding Section 1 of
this Article, with respect to Securities Depositories, it is understood that
such determination shall be made on the basis of, and limited by, publicly
available information with respect to each such Securities Depository.
(b) For purposes of clause (d) of preceding Section 1 of this Article,
BNY's determination of appropriateness shall not include, nor be deemed to
include, any evaluation of Country Risks associated with investment in a
particular country. For purposes hereof, "Country Risks" shall mean systemic
risks of holding assets in a particular country including, but not limited to,
(a) the use of Compulsory Depositories, (b) such country's financial
infrastructure, (c) such country's prevailing custody and settlement practices,
(d) nationalization, expropriation or other governmental actions, (e) regulation
of the banking or securities industry, (f) currency controls, restrictions,
devaluations or fluctuations, and (g) market conditions which affect the orderly
execution of securities transactions or affect the value of securities.
ARTICLE IV
REPRESENTATIONS
1. The Fund hereby represents that: (a) this Agreement has been duly
authorized, executed and delivered by the Fund, constitutes a valid and legally
binding obligation of the Fund enforceable in accordance with its terms, and no
statute, regulation, rule, order, judgment or contract binding on the Fund
prohibits the Fund's execution or performance of this Agreement; (b) this
Agreement has been approved and ratified by the Board at a meeting duly called
and at which a quorum was at all times present; and (c) the Board or its
investment advisor has considered the Country Risks associated with investment
in each Specified Country and will have considered such risks prior to any
settlement instructions being given to the Custodian with respect to any other
Specified Country.
2. BNY hereby represents that: (a) BNY is duly organized and existing
under the laws of the State of New York, with full power to carry on its
businesses as now conducted, and to enter into this Agreement and to perform its
obligations hereunder; (b) this Agreement has been duly authorized, executed and
delivered by BNY, constitutes a valid and legally binding obligation of BNY
enforceable in accordance with its terms, and no statute, regulation, rule,
order, judgment or contract binding on BNY prohibits BNY's execution or
performance of this Agreement; and (c) BNY has established the Monitoring
System.
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<PAGE>
ARTICLE V
CONCERNING BNY
1. BNY shall not be liable for any costs, expenses, damages,
liabilities or claims, including attorneys' and accountants' fees, sustained or
incurred by, or asserted against, the Fund except to the extent the same arises
out of the failure of BNY to exercise the care, prudence and diligence required
by Section 2 of Article II hereof. In no event shall BNY be liable to the Fund,
the Board, or any third party for special, indirect or consequential damages, or
for lost profits or loss of business, arising in connection with this Agreement.
2. The Fund shall indemnify BNY and hold it harmless from and against
any and all costs, expenses, damages, liabilities or claims, including
reasonable attorneys' and accountants' fees, sustained or incurred by, or
asserted against, BNY by reason or as a result of any action or inaction, or
arising out of BNY's performance hereunder, provided that the Fund shall not
indemnify BNY to the extent any such costs, expenses, damages, liabilities or
claims arises out of BNY's failure to exercise the reasonable care, prudence and
diligence required by Section 2 of Article II hereof, including without
limitation, in the event of BNY's negligence or willful misconduct.
3. For its services hereunder, the Fund agrees to pay to BNY such
compensation and out-of-pocket expenses as shall be mutually agreed.
4. BNY shall have only such duties as are expressly set forth herein.
In no event shall BNY be liable for any Country Risks associated with
investments in a particular country.
ARTICLE VI
MISCELLANEOUS
1. This Agreement constitutes the entire agreement between the Fund and
BNY, and no provision in the Custody Agreement between the Fund and the
Custodian shall affect the duties and obligations of BNY hereunder, nor shall
any provision in this Agreement affect the duties or obligations of the
Custodian under the Custody Agreement.
2. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to BNY, shall be sufficiently given if received by it
at its offices at 90 Washington Street, New York, New York 10286, or at such
other place as BNY may from time to time designate in writing.
3. Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Fund shall be sufficiently given if received
by it at its offices at 100 Wall Street, New York, New York 10005 or at such
other place as the Fund may from time to time designate in writing.
4. In case any provision in or obligation under this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
thereby. This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties. This Agreement shall extend to and
shall be binding upon the parties hereto, and their respective successors and
assigns; provided however, that this Agreement shall not be assignable by either
party without the written consent of the other.
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<PAGE>
5. This Agreement shall be construed in accordance with the substantive
laws of the State of New York, without regard to conflicts of laws principles
thereof. The Fund and BNY hereby consent to the exclusive jurisdiction of a
state or federal court situated in New York City, New York in connection with
any dispute arising hereunder. The Fund and BNY each hereby irrevocably waives
any and all rights to trial by jury in any legal proceeding arising out of or
relating to this Agreement.
6. The parties hereto agree that in performing hereunder, BNY is acting
solely on behalf of the Fund and no contractual or service relationship shall be
deemed to be established hereby between BNY and any other person.
7. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts shall,
together, constitute only one instrument.
8. This Agreement shall terminate simultaneously with the termination
of the Custody Agreement between the Fund and the Custodian, and may otherwise
be terminated by either party giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than thirty
(30) days after the date of such notice.
- 5 -
<PAGE>
IN WITNESS WHEREOF, the Fund and BNY have caused this Agreement to be
executed by their respective officers, thereunto duly authorized, as of the date
first above written.
NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC.
By: /s/ Richard W. Ingram
-----------------------------
Title: President
Title:
Tax Identification No.:
THE BANK OF NEW YORK
By: /s/ Jorge Ramos
-----------------------------
Title: Vice President
- 6 -
<PAGE>
FOREIGN CUSTODY MANAGER AGREEMENT
SCHEDULE 1
Argentina
Australia
Austria
Bangladesh
Belgium
Bermuda
Botswana
Brazil
Bulgaria
Canada
Chile
China
Columbia
Cyprus
Czech Republic
Denmark
Easdaq
Ecuador
Egypt
Estonia
Finland
France
Germany
Ghana
Greece
Hong Kong
Hungary
India
Indonesia
Ireland
Israel
Italy
Ivory Coast
Japan
Jordan
Kenya
Korea
Latvia
Lebanon
Lithuania
Luxembourg
Malaysia
Mauritius
Mexico
Morocco
Namibia
Netherlands
New Zealand
Nigeria
Norway
Pakistan
Peru
Philippines
Poland
Portugal
Russia
Singapore
Slovenia
South Africa
Spain
Sri Lanka
Swaziland
Sweden
Switzerland
Taiwan
Thailand
Tunisia
Turkey
Ukraine
United Kingdom
United States
Uruguay
Venezuela
Zambia
Zimbabwe
- 7 -
<PAGE>
TRANSFER AGENCY AND DIVIDEND
DISBURSING AGENCY AGREEMENT
AGREEMENT made as of the 26th day of February, 1998 by and between
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation (the
Fund), on its own behalf and on behalf of its Kennedy Cabot Money Market
Portfolio, Kennedy Cabot U.S. Government Portfolio and Kennedy Cabot Municipal
Portfolio (each, a Portfolio), and NATIONAL INVESTOR SERVICES CORP. (NISC).
WITNESSETH:
WHEREAS, the Fund is an open-end, diversified management investment company
registered as such under the Investment Company Act of 1940, as amended,
currently comprised of three separate investment Portfolios; and
WHEREAS, the Fund desires to appoint NISC to be the Transfer Agent and
Dividend Disbursing Agent for each Portfolio of the Fund upon, and subject to,
the terms and provisions of this Agreement; and
WHEREAS, NISC desires to accept such appointment upon, and subject to, such
terms and provisions.
NOW, THEREFORE, in consideration of the premises and mutual convenants
hereinafter contained, the Fund and NISC agree as follows:
1. Appointment of NISC as Transfer Agent and Dividend Disbursing Agent.
(a) The Fund hereby appoints NISC to act as Transfer Agent and Dividend
Disbursing Agent for each Portfolio of the Fund upon, and subject to, the terms
and provisions of this Agreement.
(b) NISC hereby accepts the appointment as Transfer Agent and Dividend
Disbursing Agent for each Portfolio of the Fund, and agrees to act as such upon,
and subject to, the terms and provisions of this Agreement.
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<PAGE>
2. Definitions. In this Agreement:
(1) The term Act means the Investment Company Act
of 1940, as amended, and any rule or regulation
thereunder;
(2) The term Account means any account of a
Shareholder, or, if the shares are held in an account in the
name of Waterhouse Securities, Inc. or other broker-dealer
for benefit of an identified customer, such account, and
includes any Plan Account;
(3) The term application means an application made by
a Shareholder or prospective Shareholder respecting the
opening of an Account;
(4) The term Instruction means an instruction in
writing given on behalf of the Fund to NISC, and signed on
behalf of the Fund by the President, any Vice President,
the Secretary or the Treasurer of the Fund or other
authorized person;
(5) The term Plan Account means an account opened by
a Shareholder or prospective Shareholder in respect of a
sweep account (in each case by whatever name referred
to in the Prospectus), and may also include an account
relating to any other plan if and when provision is made
for such plan in the Prospectus;
(6) The term Prospectus includes the Prospectus(es)
and the Statements of Additional Information of the Fund
as from time to time in effect;
(7) The term Shareholder means a holder of record of
Shares;
(8) The term Shares means shares of stock of the
Fund, irrespective of Portfolio.
3. Duties of NISC as Transfer Agent and Dividend Disbursing Agent.
(a) Subject to the other provisions of the Agreement, NISC hereby agrees to
perform the following functions as Transfer Agent and Dividend Disbursing Agent
for each Portfolio: (i) processing the issuance, transfer and redemption of
Shares, and recording the same in the appropriate Accounts; (ii) opening,
maintaining, servicing and closing Accounts; (iii) acting as agent for the
Shareholders and/or customers of
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<PAGE>
Waterhouse Securities, Inc. or other broker-dealer in connection with Plan
Accounts, upon the terms and subject to the conditions contained in the
Prospectus and application relating to the specific Plan Account; (iv)
exchanging the investment of an investor into or from the Shares of one or more
Portfolios of the Fund if and to the extent permitted by the Prospectus at the
direction of such investor; (v) examining and approving legal transfers; (vi)
replacing lost, stolen or destroyed certificates, if any, representing Shares,
in accordance with, and subject to, procedures and conditions adopted by the
Fund; (vii) furnishing confirmations of purchases and sales relating to Shares
as required by applicable law; (viii) furnishing appropriate periodic and year
end statements relating to Accounts, together with additional enclosures,
including appropriate income tax information and income tax forms duly
completed, as required by applicable law; (ix) mailing annual, semi-annual and
quarterly reports and dividend notices prepared by or on behalf of the Fund, and
mailing new Prospectuses upon their issue to Shareholders as required by
applicable law; (x) furnishing such periodic statements of transactions effected
by NISC, reconciliations, balances and summaries as the Fund may reasonably
request; (xi) withholding taxes on non-resident alien Accounts, and preparing
and filing U.S. Treasury Department Form 1099 and other appropriate forms as
required by applicable law with respect to dividends and distributions; and
(xii) processing dividend and distribution payments, including reinvesting
dividends for full and fractional shares and disbursing cash dividends, as
applicable.
(b) NISC agrees to act as proxy agent in connection with the holding
of annual, if any, and special meetings of Shareholders, mailing such notices,
proxies and proxy statements in connection with the holding of such meetings as
may be required by applicable law, receiving and tabulating votes cast by proxy
and communicating to the Funds the results of such tabulation accompanied by
appropriate certificates, and preparing and furnishing to the Fund certified
lists of Shareholders (of the Fund or one or more of its Portfolios, as
appropriate) as of such date, in such form and containing such information as
may be required by the Fund.
3
<PAGE>
(c) NISC agrees to deal with, and answer in a timely manner, all
correspondence and inquires relating to the functions of NISC under this
Agreement with respect to Accounts.
(d) NISC agrees to furnish to the Fund or its designated agent such
information at such intervals as is necessary for the Fund to comply with the
registration and/or the reporting requirements (including applicable escheat
laws) of the Securities and Exchange Commission, state securities or Blue Sky
authorities or other governmental authorities.
(e) NISC agrees to provide to the Fund such information as may reasonably
be required to enable the Fund to reconcile the number of outstanding Shares of
each Portfolio between NISCs records and the account books of the Fund.
(f) Notwithstanding anything in the foregoing provisions of this section 3,
NISC agrees to perform its functions thereunder subject to such modification
(whether in respect of particular cases or in any particular class of cases) as
may from time to time be contained in an Instruction.
(g) In providing for any or all of the services indicated in this section
3, and in satisfaction of its obligations to provide such services, NISC may
enter into agreements with one or more other persons to provide such services to
the Fund, provided that any such agreement shall have been approved by the Board
of Directors of the Fund, provided further that NISC shall be as fully
responsible to the Fund for the acts and omissions of such persons as it would
be for its own acts or omissions hereunder.
4. Compensation. For the services provided to the Fund by NISC pursuant to
this Agreement, each Portfolio shall pay NISC on the first business day of each
calendar month a fee for the previous month at an annual rate equal to .20 of 1%
of such Portfolios average daily net assets. The value of each Portfolios net
assets shall be computed at the times and in the manner specified in the Funds
registration statement on Form N-1A, as amended from time to time (the
Registration Statement). Compensation by each Portfolio of the Fund shall
commence on the date of the first receipt by such Portfolio of the proceeds of
the sale of its Shares as described in the Registration Statement, and the fee
for the period from the date such Portfolio shall first receive the proceeds of
the sale of its Shares as
4
<PAGE>
aforesaid to the end of the month during which such proceeds are so received,
shall be pro-rated according to the proportion that such period bears
to the full monthly period. Upon termination of this Agreement before the end of
a month, the fee for such part of that month shall be pro-rated according to the
proportion that such period bears to the full monthly period and shall be
payable within seven (7) days after the date of termination of this Agreement.
5. Maintenance of Records, Right of Inspection. In connection with the
performance of its duties hereunder, NISC shall maintain such books and records
relating to transactions effected by NISC as are required by the Act, or by any
other applicable provision of law, rule or regulation, to be maintained by the
Fund or its transfer agent with respect to transactions. NISC shall preserve, or
cause to be preserved, any such books and records for such periods as may be
required by any such law, rule or regulation and as may be agreed upon from time
to time between NISC and the Fund. In addition, NISC agrees to maintain and
preserve master files and historical computer tapes on a daily basis in multiple
separate locations a sufficient distance apart to insure preservation of at
least one copy of such information. NISC agrees that it will, in a timely
manner, make available to and permit, any officer, accountant, attorney or
authorized agent of the Fund to examine and make transcripts and copies
(including photocopies and computer or other electronic information storage
media and print-outs) of any and all of the books and records which are
maintained pursuant to this Agreement.
6. Confidential Relationship. NISC agrees that it will, on behalf of itself
and its officers and employees, treat all transactions contemplated by this
Agreement, and all information germane thereto, as confidential and not to be
disclosed to any person (other than the Shareholder concerned, or the Fund, or
as may be disclosed in the examination of any books or records by any person
lawfully entitled to examine the same) except as may be authorized by the Fund
by way of an Instruction.
7. Indemnification.
(a) NISC shall not be liable to the Fund or any Portfolio for any error of
judgment or mistake of law or for any loss arising out of any act or omission by
NISC in the performance of its duties hereunder. Nothing herein contained shall
be construed to protect
5
<PAGE>
NISC against any liability to the Fund, a Portfolio, Shareholders or any
investment adviser to the Fund to which NISC shall otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of its duties, or by reckless disregard of its obligations and duties hereunder.
(b) The Fund, on behalf of each Portfolio, agrees to indemnify and hold
harmless NISC from and against all charges, claims, expenses (including
reasonable legal fees) and liabilities reasonably incurred by NISC in connection
with the performance of its duties hereunder, except such as may arise from
NISCs willful misfeasance, bad faith, gross negligence in the performance of its
duties or by reckless disregard of its obligations and duties hereunder. Subject
to the requirements of the Act, such expenses shall be paid by the Fund in
advance of the final disposition of any matter upon invoice by NISC and receipt
by the Fund of an undertaking from NISC to repay such amounts if it shall
ultimately be established that NISC is not entitled to payment of such expenses
hereunder.
(c) As used in this section 7, the term NISC shall include any affiliates
of NISC performing services for the Fund contemplated hereby and directors,
officers, agents and employees of NISC and such affiliates.
8. Regarding NISC
(a) NISC warrants and represents that its officers and supervisory
personnel or agents (including any sub-transfer agents or sub-dividend
disbursing agents) charged with carrying out its functions as Transfer Agent and
Dividend Disbursing Agent for the Fund possess the special skill and technical
knowledge appropriate for that purpose. NISC shall at all times exercise due
care and diligence in the performance of its functions as Transfer Agent and
Dividend Disbursing Agent for the Fund. NISC agrees that, in determining whether
it has exercised due care and diligence, its conduct shall be measured by the
standard applicable to persons possessing such special skill and technical
knowledge.
(b) NISC warrants and represents that it is duly authorized and permitted
to act as Transfer Agent and Dividend Disbursing Agent under all applicable laws
and that it will immediately notify the Fund of any revocation of such authority
or permission or of the commencement of any proceeding or other action which may
lead to such revocation.
9. Termination.
6
<PAGE>
(a) This Agreement shall become effective as of the date first above
written and shall thereafter continue from year to year. This Agreement may be
terminated by the Fund or NISC (without penalty to the Fund or NISC) provided
that the terminating party gives the other party written notice of such
termination at least sixty (60) days in advance, except that the Fund may
terminate this Agreement immediately upon written notice to the Bank if the
authority or permission of NISC to act as Transfer Agent and Dividend Disbursing
Agent has been revoked of if any proceeding or other action which the Fund
reasonably believes will lead to such revocation has been commenced.
(b) Upon termination of this Agreement, the Bank shall deliver all unissued
and canceled stock certificates representing Shares, if any, remaining in its
possession, and all Shareholder records, books, stock ledgers, instruments and
other documents (including computer or other electronically stored information)
made or accumulated in the performance of its duties as Transfer Agent and
Dividend Disbursing Agent for the Fund along with a certified locator document
clearly indicating the complete contents therein, to such successor as may be
specified in a notice to termination or Instruction. The Fund assumes all
responsibility for failure thereafter to produce any paper, record or document
so delivered and identified in the locator document, if and when required to be
produced.
10. Amendment. Except to the extent that the performance by NISC of its
functions under this Agreement may from time to time be modified by an
Instruction, this Agreement may be amended or modified by the parties hereto
only if such amendment is specifically approved by the Board of Directors of the
Fund, including a majority of the Fund who are not interested persons of the
Fund within the meaning of the Act and who have no direct or indirect interest
in this Agreement, and such amendment is set forth in a written instrument
executed by each of the parties hereto.
11. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
7
<PAGE>
12. Counterparts. This Agreement may be executed by the parties hereto in
counterparts and if executed in more than one counterpart the separate
instruments shall constitute one agreement.
13. Notices. All notices or other communications hereunder to either party
shall be in writing and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid. Notice shall be addressed: (a) if to NISC,
to: President, National Investor Services Corp., 55 Water Street, New York, New
York 10041 or (b) if to the Fund, to: President, National Investors Cash
Management Fund, Inc., 60 State Street, Suite 1300, Boston, Massachusetts 02109
or at such other address as either party may designate by written notice to the
other. Notice also shall be deemed sufficient if given by telex, telecopier,
telegram or similar means of same day delivery (with a confirming copy by mail
as provided herein).
14. Separate Portfolios. This Agreement shall be construed to be made by
the Fund as a separate agreement with respect to each Portfolio, and under no
circumstances shall the rights, obligations or remedies with respect to a
particular Portfolio be deemed to constitute a right, obligation or remedy
applicable to any other Portfolio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the day and year above
written.
NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC.
By: /s/ Richard W. Ingram
---------------------------------
NATIONAL INVESTOR SERVICES CORP.
By: /s/ Richard H. Neiman
----------------------------------
8
ACCOUNTING SERVICES AGREEMENT
AGREEMENT dated as of February 26, 1998 between Waterhouse Securities,
Inc. ("WSI"), a Delaware corporation, and Countrywide Fund Services, Inc.
("Countrywide"), an Ohio corporation.
WHEREAS, National Investors Cash Management Fund, Inc. (the "Fund") is an
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), currently comprised of three separate investment
portfolios (the "Portfolios"); and
WHEREAS, WSI wishes to employ the services of Countrywide to provide the
Fund with certain accounting and pricing services; and
WHEREAS, Countrywide wishes to provide such services under the
conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained in this Agreement, WSI and Countrywide agree as follows:
1. APPOINTMENT.
WSI hereby appoints and employs Countrywide as agent to perform
those services described in this Agreement for the Fund. Countrywide shall act
under such appointment and perform the obligations thereof upon the terms and
conditions hereinafter set forth.
2. CALCULATION OF NET ASSET VALUE.
Countrywide will calculate the net asset value of each Portfolio
of the Fund and the per share net asset value of each Portfolio of the Fund, in
accordance with the Fund's current prospectus and statement of additional
information, twice daily as of the times selected by the Fund's Board of
Directors. Countrywide will prepare and maintain a valuation of all securities
and other assets of the Fund in accordance with instructions from a designated
officer of the Fund or WSI and in the manner set forth in the Fund's prospectus
and statement of additional information as in effect from time to time. In
valuing securities of the Fund, Countrywide may contract with, and rely upon
market quotations provided by, outside services.
3. BOOKS AND RECORDS.
Countrywide will maintain and keep current the general ledger
for each Portfolio of the Fund, recording all income and expenses, capital share
activity and security transactions of the Fund. Countrywide will maintain such
further books and records as are necessary to enable it to perform its duties
under this Agreement, and will periodically provide reports to the Fund and its
authorized agents regarding share purchases and redemptions and trial balances
1
<PAGE>
of each Portfolio of the Fund. Countrywide will prepare and maintain complete,
accurate and current records with respect to the Fund required to be maintained
by the Fund pursuant to applicable statues, rules and regulations, including
without limitation, under the Internal Revenue Code of 1986, as amended, (the
Code) and under the rules and regulations of the 1940 Act, and will preserve
said records in the manner and for the periods prescribed therein. The retention
of such records shall be at the expense of the Fund.
All of the records prepared and maintained by Countrywide pursuant to
this Section 3 which are required to be maintained by the Fund under the Code
and the 1940 Act will be the property of WSI, on behalf of the Fund, and
Countrywide agrees to make such records available for inspection by the Fund, by
any designated affiliate or agent of the Fund, and by the Securities and
Exchange Commission, at reasonable times, and otherwise to keep confidential all
records and other information relative to the Fund, except when requested to
divulge such information by duly constituted authorities and court process. In
the event this Agreement is terminated, all such records shall be delivered to
WSI at WSI's expense, and Countrywide shall be relieved of responsibility for
the preparation and maintenance of any such records delivered to the Fund. In
the event this Agreement is terminated by reason of Countrywide's failure to
comply with any provision hereof, WSI shall not pay expenses of Countrywide in
connection with its duties in this paragraph.
4. PAYMENT OF FUND EXPENSES.
Countrywide shall process each request received from the Fund or
WSI for payment of the Fund's expenses. Upon receipt of written instructions
signed by two officers or other authorized agents of the Fund or WSI,
Countrywide shall prepare checks in the appropriate amounts which shall be
signed by an authorized officer of Countrywide and mailed to the appropriate
party.
5. FORM N-SAR.
Countrywide shall maintain such records within its control and
shall be requested to assist the Fund in fulfilling the requirements of Form
N-SAR.
6. COOPERATION WITH ACCOUNTANTS.
Countrywide shall cooperate with the Fund's independent auditors
and shall take all reasonable action in the performance of its obligations under
this Agreement to assure that the necessary information is made available to
such auditors for the expression of their unqualified opinion where required for
any document for the Fund.
7. FURTHER ACTIONS.
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
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<PAGE>
8. FEES.
For the performance of the services under this Agreement, WSI
shall pay Countrywide a monthly fee in accordance with the schedule attached
hereto as Schedule A. The fees with respect to any month shall be paid to
Countrywide on the last business day of such month. WSI shall also promptly
reimburse Countrywide for the cost of external pricing services utilized by
Countrywide. If this Agreement becomes effective subsequent to the first day of
a month, or is terminated before the last day of a month, fees for the part of
the month is Agreement is in effect shall be pro rated accordingly.
9. COMPLIANCE WITH GOVERNMENTAL RULES AND REGULATIONS.
The parties hereto acknowledge and agree that nothing contained
herein shall be construed to require Countrywide to perform any services for the
Fund which services could cause Countrywide to be deemed an "investment adviser"
of the Fund within the meaning of Section 2(a)(20) of the 1940 Act or to
supersede or contravene the Fund's prospectus or statement of additional
information or any provisions of the 1940 Act and the rules thereunder. Except
as otherwise provided in this Agreement and except for the accuracy and
completeness of information furnished to it by Countrywide, the Fund assumes
full responsibility for complying with all applicable requirements of the 1940
Act, the Securities Act of 1933, as amended, and any other laws, rules and
regulations of governmental authorities having jurisdiction over the Fund.
10. INDEMNIFICATION OF COUNTRYWIDE.
A. Countrywide may rely on information reasonably believed by it to be
accurate and reliable. Except as may otherwise be required by the 1940 Act and
the rules thereunder, neither Countrywide nor its officers, directors,
employees, agents, control persons or affiliates of any thereof shall be subject
to any liability for, or any damages, expenses or losses incurred by the Fund or
WSI in connection with, any error of judgment, mistake of law, any act or
omission connected with or arising out of any services rendered under or
payments made pursuant to this Agreement or any other matter to which this
Agreement relates, except by reason of willful misfeasance, bad faith or
negligence on the part of any such persons in the performance of the duties of
Countrywide under this Agreement or by reason of reckless disregard by any of
such persons of the obligations and duties of Countrywide under this Agreement.
B. Any person, even though also a director, officer, employee, or agent
of Countrywide, or any of its affiliates, who may be or become an officer,
director, employee or agent of the Fund, shall be deemed, when rendering
services to the Fund or acting on any business of the Fund, to be rendering such
services to or acting solely as an officer, director, employee or agent of the
Fund and not as a director, officer, employee, shareholder or agent of or one
under the control or direction of Countrywide or any of its affiliates, even
though paid by one of those entities.
3
<PAGE>
C. WSI shall indemnify and hold harmless Countrywide, its directors,
officers, employees, agents, control persons and affiliates from and against any
and all claims, demands, expenses and liabilities of any and every nature which
Countrywide may sustain or incur or which may be asserted against Countrywide by
any person by reason of, or as a result of: (i) any action taken or omitted to
be taken by Countrywide in good faith in reliance upon any certificate,
instrument, order or share certificate reasonably believed by it to be genuine
and to be signed, countersigned or executed by any duly authorized person, upon
the oral instructions or written instructions of an authorized person of the
Fund or WSI or upon the opinion of legal counsel for the Fund or WSI or its own
counsel; or (ii) any action taken or omitted to be taken by Countrywide in
connection with its appointment in good faith in reliance upon any law, act,
regulation or interpretation of the same even though the same may thereafter
have been altered, changed, amended or repealed. However, indemnification under
this subparagraph shall not apply to actions or omissions of Countrywide or its
directors, officers, employees, shareholders or agents in cases of its or their
own negligence, willful misconduct, bad faith, or reckless disregard of its or
their own duties hereunder.
11. INDEMNIFICATION OF FUND AND WSI.
Countrywide shall indemnify and hold harmless the Fund and WSI,
and their respective directors, officers, employees, agents, control persons and
affiliates from and against any and all claims, demands, expenses and
liabilities of any and every nature which the Fund or WSI or such persons may
sustain or incur by reason of, or as a result of Countrywide's negligence,
willful misconduct, bad faith, or reckless disregard of its duties hereunder.
12. TERMINATION.
A. The provisions of this Agreement shall be effective on the
date first above written, shall continue in effect for an initial two-year term
and shall continue in force from year to year thereafter, but only so long as
such continuance is approved (1) by Countrywide, (2) by vote, cast in person at
a meeting called for the purpose, of a majority of the Fund's directors who are
not parties to this Agreement or interested persons (as defined in the 1940 Act)
of any such party, and (3) by vote of a majority of the Fund's Board of
Directors or a majority of the Fund's outstanding voting securities.
B. Either party, or the Fund, may terminate this Agreement on
any date by giving all parties at least sixty (60) days' prior written notice of
such termination specifying the date fixed therefor. Upon termination of this
Agreement, WSI shall pay to Countrywide such compensation as may be due as of
the date of such termination, and shall likewise reimburse Countrywide for any
out-of-pocket expenses and disbursements reasonably incurred by Countrywide to
such date.
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C. In the event that in connection with the termination of this
Agreement a successor to any of Countrywide's duties or responsibilities under
this Agreement is designated by WSI by written notice to Countrywide,
Countrywide shall, promptly upon such termination and at the expense of WSI,
transfer to the Fund or its successor, as indicated by such notice, all records
maintained by Countrywide under this Agreement and shall cooperate in the
transfer of such duties and responsibilities, including provision for assistance
from Countrywide's cognizant personnel in the establishment of books, records
and other data by such successor. In the event this Agreement is terminated by
reason of Countrywide's failure to comply with any provision hereof, WSI shall
not pay any expenses of Countrywide in connection with its duties in this
paragraph.
13. SERVICES FOR OTHERS.
Nothing in this Agreement shall prevent Countrywide or any
affiliated person (as defined in the 1940 Act) of Countrywide from providing
services for any other person, firm or corporation (including other investment
companies); provided, however, that Countrywide expressly represents that it
will undertake no activities which, in its judgment, will adversely affect the
performance of its obligations to WSI under this Agreement.
14. SEVERABILITY.
In the event any provision of this Agreement is determined to be
void or unenforceable, such determination shall not affect the remainder of this
Agreement, which shall continue to be in force.
15. QUESTIONS OF INTERPRETATION.
This Agreement shall be governed by the laws of the State of New
York. Any question of interpretation of any term or provision of this Agreement
having a counterpart in or otherwise derived from a term or provision of the
1940 Act shall be resolved by reference to such term or provision of the 1940
Act and to interpretations thereof, if any, by the United States Courts or in
the absence of any controlling decision of any such court, by rules, regulations
or orders of the Securities and Exchange Commission issued pursuant to the 1940
Act. In addition, where the effect of a requirement of the 1940 Act, reflected
in any provision of this Agreement, is revised by rule, regulation or order of
the Securities and Exchange Commission, such provision shall be deemed to
incorporate the effect of such rule, regulation or order.
16. NOTICES.
All notices, requests, consents and other communications
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
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To WSI and the Fund: Waterhouse Securities, Inc.
100 Wall Street
New York, NY 10005
Attention: Michele R. Teichner
To Countrywide: Countrywide Fund Services, Inc.
312 Walnut Street, 21st Floor
Cincinnati, Ohio 45202
Attention: Robert G. Dorsey
or to such other address as any party may designate by notice complying with the
terms of this Section 16. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date telecommunicated if by
telegraph; (c) on the date of transmission with confirmed answer back if by
telex, telefax or other telegraphic method; and (d) on the date upon which the
return receipt is signed or delivery is refused or the notice is designated by
the postal authorities as not deliverable, as the case may be, if mailed.
17. AMENDMENT.
This Agreement may not be amended or modified except by a
written agreement executed by both parties and approved by the Fund's Board of
Directors.
18. BINDING EFFECT.
Each of the undersigned expressly warrants and represents that
he has the full power and authority to sign this Agreement on behalf of the
party indicated, and that his signature will operate to bind the party indicated
to the foregoing terms.
19. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
20. FORCE MAJEURE.
If Countrywide shall be delayed in its performance of services
or prevented entirely or in part from performing services due to causes or
events beyond its control, including and without limitation, acts of God,
interruption of power or other utility, transportation or communication
services, acts of civil or military authority, sabotages, national emergencies,
explosion, flood, accident, earthquake or other catastrophe, fire, strike or
other labor problems, legal action, present or future law, governmental order,
rule or regulation, or shortages of suitable parts, materials, labor or
transportation, such delay or non-performance shall be excused and a reasonable
time for performance in connection with this Agreement shall be extended to
include the period of such delay or non-performance.
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21. MISCELLANEOUS.
The captions in this Agreement are included for convenience of
reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
WATERHOUSE SECURITIES, INC.
By: /s/ John Chapel
-----------------------------
Its: President
COUNTRYWIDE FUND SERVICES, INC.
By: /s/ Richard Ingram
-----------------------------
Its: President
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Schedule A
COMPENSATION
Countrywide will receive a monthly fee with respect to each Portfolio, based
upon the average net assets of such Portfolio during such month, in accordance
with the following schedule:
Average Monthly Net Assets Monthly Fee
Less than $100,000,000 $2,000
$100,000,000 - $250,000,000 3,000
$250,000,000 - $400,000,000 4,000
$400,000,000 - $500,000,000 4,500
$500,000,000 - $600,000,000 5,000
Over $600,000,000 6,000 + .001%
The fee of .001% on assets over $600 million represents the asset based fee
Countrywide is charged by SunGard.
The Portfolios will reimburse Countrywide for the cost of external pricing
services used by the Portfolios.
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STATE FILING SERVICES AGREEMENT
THIS AGREEMENT is made as of the ________ day of ___________, 1998 by
and between National Investors Cash Management Fund, Inc. (the "Fund") and
Automated Business Development Corporation ("ABD"), a Massachusetts corporation
on behalf of ClearSky ("ClearSky"), a division of ABD.
W I T N E S S E T H:
WHEREAS, the Fund is an investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), and,
WHEREAS, the Fund wishes to retain ClearSky to provide certain
administration services, and ClearSky is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints ClearSky to provide certain
administration services for the period and on the terms set forth in this
Agreement. ClearSky accepts such appointment and agrees to furnish the services
herein set forth in return for the compensation as provided in Paragraph 4 of
this Agreement. In the event that the Fund decides to add one or more new
portfolio series or classes, with respect to which it wishes to retain ClearSky
to provide services hereunder, the Fund or its Administrator, Waterhouse Asset
Management, Inc. ("Waterhouse") on its behalf, shall notify ClearSky in writing.
If ClearSky is willing to render such services, it shall notify the Fund in
writing of any terms and compensation that differ from the provisions of this
Agreement, and upon acceptance by the Fund, such portfolio or class shall become
a Fund hereunder.
2. Delivery of Documents. The Fund or Waterhouse will furnish ClearSky
with copies of each of the following:
(a) A listing of all jurisdictions in which the Fund is lawfully
available for sale as of the date of this Agreement and in which the Fund
desires ClearSky to effect such notice filing;
(b) The Fund's most recent Post-Effective Amendment under the
Securities Act of 1933 and under the 1940 Act as filed with the Securities and
Exchange Commission (the "SEC") and all amendments thereto;
(c) The Fund's most recent prospectus and statement of additional
information and all amendments and supplements thereto (the "Prospectus"); and
The Fund's most recent annual and semi-annual reports.
The Fund will furnish ClearSky from time to time with copies of all
amendments of or supplements to the foregoing, if any.
3. Services and Duties. Subject to the supervision and control of the
Fund, ClearSky undertakes to perform the following specific services:
(a) Effecting and maintaining, as the case may be, the qualification of
shares of the Fund for sale under the securities laws of the jurisdictions
indicated for the Fund on the list furnished to ClearSky pursuant to Paragraph
2(a) of this Agreement;
<PAGE>
(b) Filing with each appropriate jurisdiction, as required, the
appropriate materials relating to the Fund, such filings to be made promptly
after receiving such materials from the Fund: Post Effective Amendments to the
Fund's Registration Statements; definitive copies of the Fund's Prospectuses and
Statements of Additional Information and any Supplements thereto; Annual and
Semi-Annual Reports; and Notices of Special Meetings of Shareholders and related
Proxy materials which propose the merger, reorganization or liquidation of the
Fund;
(c) Conveying to the Fund or Waterhouse any comments received on such
filings and, if desired by the Fund, responding to such comments in such manner
as authorized by the Fund or Waterhouse; and
(d) In connection with the foregoing, receiving limited power of
attorney on behalf of the Fund to sign all Blue Sky filings and other related
documents.
Subject to payment to ClearSky in advance, ClearSky will remit to the
respective jurisdictions notice filing fees for the shares of the Fund, and any
fees for qualifying or continuing the qualification of the Fund, The Fund will,
from time to time as specifically agreed between the parties, wire transfer
funds to ClearSky for the payment of said fees payable pursuant to this
provision promptly upon request by ClearSky. ClearSky will request the funds
necessary for the payment of fees in advance of the date the fees become due.
Upon receipt of the funds by ClearSky, it will issue checks for the payment of
fees.
In performing its duties under this Agreement, ClearSky will act in
accordance with the instructions and directions of the Fund.
The Fund or Waterhouse will provide ClearSky with the appropriate
number of copies of each document which must be filed pursuant to this
provision.
4. Compensation. For the services provided by ClearSky under this
Agreement, the Fund will pay to ClearSky a monthly fee based upon the number of
state securities notice filings (permits). The fee shall be based upon the rate
of $125.00 per state securities notice filings per year and billed monthly in
arrears. When the number of state securities notice filings (permits) reaches
300, the fee will be based upon the rate of $100.00 per state securities notice
filings (permits) per year and billed monthly in arrears. There will be not
retroactive credit for permits which were previously maintained at $125.00.
5. Limitations of Liability and Indemnification. ClearSky shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates, so long
as it acts in good faith and with due diligence and is not negligent or guilty
of any willful misconduct. Without in any way limiting the foregoing, ClearSky
shall have no liability for failing to file on a timely basis any material to be
provided by the Fund or Waterhouse that it has not received on a timely basis
from the Fund or Waterhouse; ClearSky shall have no responsibility to review the
accuracy or adequacy of materials it receives from the Fund or Waterhouse for
filing or bear any liability arising out of the timely filing of such materials.
The Fund agrees and acknowledges that ClearSky has not prior to the
date hereof assumed, and will not assume, any obligations or liabilities arising
out of the conduct of the Fund prior to the date hereof of those duties which
ClearSky has agreed to perform pursuant to this Agreement. The Fund further
agrees to indemnify ClearSky against any losses, claims, damages or liabilities
to which ClearSky may become subject in connection with the conduct by the Fund
of such duties prior to the date hereof.
The Fund represents and warrants to ClearSky that as of the date hereof
it is lawfully available for sale in each jurisdiction indicated on the list
furnished to ClearSky pursuant to Paragraph 2(a) of this Agreement.
<PAGE>
6. Service to Other Companies or Accounts. The Fund understands that
the persons employed by ClearSky to assist in the performance of ClearSky's
duties hereunder will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of ClearSky or
any affiliate of ClearSky to engage in and devote time and attention to other
businesses or to render services of whatever kind or nature.
7. Notices. Any notice or other instrument or materials authorized or
required by this Agreement to be given in writing to the Fund or to ClearSky
shall be sufficiently given if addressed to such party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
TO the Fund:
National Investors Cash Management Fund, Inc.
100 Wall Street
New York, NY 10005
Attention: Michele Teichner
TO ClearSky:
ClearSky
529 Main Street
Schrafft Center Annex
Boston, MA 02129
Attention: Elizabeth A. Nystedt
8. Files. All files maintained by ClearSky with respect to the Funds
shall be the property of the Fund and shall be returned to the Fund at the
termination of this Agreement or as mutually agreeable to ClearSky and the Fund.
9. Duration and Termination. This Agreement shall continue thereafter
until termination by the Fund or ClearSky on 60 days written notice.
10. Conversion. There will be no charge for system conversion provided
the Fund allow ClearSky to administrate complete Blue Sky filing services for a
period of at least six months. In the event the Fund terminates this Agreement
prior to this six month obligation, a one time conversion fee equivalent to
$10/permit shall be applied.
11. Amendment to this Agreement. No provision of this Agreement may be
changed, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, discharge or
termination is sought.
12. Governing Law. This Agreement shall be governed by the laws of the
State of New York.
13. Confidentiality. ClearSky agrees to maintain all information
about the the Fund that ClearSky acquires pursuant to this Agreement in
confidence, and ClearSky agrees not to use, or permit the use of, any such
information for any purpose except that set forth herein, or to disclose any
such information to any person, without the prior written consent of the Fund
or Waterhouse.
14. Miscellaneous. 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 constructions or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the date and year first above
written.
Attest: National Investors Cash Management Fund, Inc.
- --------------------------- ----------------------------
Attest: Automated Business
Development Corporation
- --------------------------- -----------------------------
<PAGE>
ADMINISTRATION AGREEMENT
AGREEMENT made as of the 26th day of February, 1998 by and between NATIONAL
INVESTORS CASH MANAGEMENT FUND, INC., a Maryland corporation (the "Company"), on
its own behalf and on behalf of its Kennedy Cabot Money Market Portfolio,
Kennedy Cabot U.S. Government Portfolio and Kennedy Cabot Municipal Portfolio
(each, a "Portfolio"), and WATERHOUSE SECURITIES, INC., a Delaware corporation
(the "Administrator").
WITNESSETH:
WHEREAS, the Company is an open-end diversified management investment
company registered as such under the Investment Company Act of 1940, as amended
(the 1940 Act), currently comprised of three separate investment Portfolios; and
WHEREAS, the Company desires to retain the Administrator to render or
otherwise provide for administrative services in the manner and on the terms and
conditions hereafter set forth; and
WHEREAS, the Administrator desires to be so retained on said terms and
conditions.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Company and the Administrator agree as follows:
1. Duties of the Administrator.
(a) The Company hereby retains the Administrator to act as administrator of
the Company and its Portfolios (each reference herein to the Company shall also
be understood to refer to the separate Portfolios, as appropriate), subject to
the supervision and direction of the Board of Directors of the Company, as
hereinafter set forth. The Administrator shall perform or arrange for the
performance of the following administrative and clerical services: (i) maintain
and preserve the books and records, including financial and corporate records,
of the Company as required by law or otherwise for the proper operation of the
Company; (ii) prepare and, subject to approval by the Company, file registration
statements, notices, reports and other
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documents required by U.S. Federal, state and other applicable laws and
regulations (other than state "blue sky" laws), including proxy materials and
periodic reports to Company shareholders, oversee the preparation and filing of
registration statements, notices, reports and other documents required by state
"blue sky" laws, and oversee the monitoring of sales of shares of the Company
for compliance with state securities laws; (iii) calculate and publish, or
arrange for the calculation and publication of, the net asset value of the
Company's shares; (iv) calculate, or arrange for the calculation of, dividends
and distributions and performance data, and prepare other financial information
regarding the Company; (v) oversee and assist in the coordination of, and, as
the Board may reasonably request or deem appropriate, make reports and
recommendations to the Board on, the performance of administrative and
professional services rendered to the Company by others, including the
custodian, registrar, transfer agent and dividend disbursing agent, shareholder
servicing agents, accountants, attorneys, underwriters, brokers and dealers,
corporate fiduciaries, insurers, banks and such other persons in any such other
capacity deemed to be necessary or desirable; (vi) furnish secretarial services
to the Company, including, without limitation, preparation of materials
necessary in connection with meetings of the Company's Board of Directors,
including minutes, notices of meetings, agendas and other Board materials; (vii)
provide the Company with the services of an adequate number of persons competent
to perform the administrative and clerical functions described herein; (viii)
provide the Company with administrative office and data processing facilities;
(ix) arrange for payment of the Company's expenses; (x) provide routine
accounting services to the Company, and consult with the Company's officers,
independent accountants, legal counsel, custodian, accounting agent and transfer
and dividend disbursing agent in establishing the accounting policies of the
Company; (xi) prepare such financial information and reports as may be required
by any banks from which the Company borrows funds; (xii) develop and implement
procedures to monitor the Company's compliance with regulatory requirements and
with the Company's investment policies and restrictions as set forth in the
Company's currently effective Prospectus and Statement of Additional Information
filed under the Securities Act of 1933, as amended; (xiii) arrange for the
services of persons who may be appointed as officers of the Company, including
the President, Vice Presidents, Treasurer, Secretary and one or more assistant
officers; and (xiv) provide such assistance to the investment manager, the
custodian, other Company
2
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service providers and the Company's counsel and auditors as generally may
be required to carry on properly the business and operations of the Company. The
Company agrees to cause the investment manager to deliver to the Administrator,
on a timely basis, such information as may be necessary or appropriate for the
Administrator's performance of its duties and responsibilities hereunder,
including but not limited to, shareholder reports, records of transactions,
valuations of investments (which may be based on information provided by a
pricing service) and records of expenses borne by the Company, and the
Administrator shall be entitled to rely on the accuracy and completeness of such
information in performing its duties hereunder. Notwithstanding anything to the
contrary herein contained, the Company, and not the Administrator, shall be
responsible for and bear the cost of any third party pricing services or any
third party blue sky services.
(b) In providing for any or all of the services indicated in section l(a)
hereof, and in satisfaction of its obligations to provide such services, the
Administrator may enter into agreements with one or more other persons to
provide such services to the Company, provided that any such agreement shall
have been approved by the Board of Directors of the Company, and provided
further that the Administrator shall be as fully responsible to the Company for
the acts and omissions of any such service providers as it would be for its own
acts or omissions hereunder.
2. Expenses of the Administrator. The Administrator assumes the expenses of
and shall pay for maintaining the staff and personnel necessary to perform its
obligations under this Agreement, and shall at its own expense provide office
space, facilities, equipment and the necessary personnel which it is obligated
to provide under section 1 hereof, except that the Company shall pay the
expenses of legal counsel and accountants as provided in section 4(b) of this
Agreement. In addition, the Administrator shall be responsible for the payment
of any persons engaged pursuant to section l(b) hereof. The Company shall assume
and pay or cause to be paid all other expenses of the Company.
3. Compensation of the Administrator. For the services provided to the
Company and each Portfolio by the Administrator pursuant to this Agreement, each
Portfolio shall pay the Administrator on the first business day of each calendar
month a fee for the previous month at an annual rate equal to .10 of 1% of such
Portfolio's average daily net assets. The value of each
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Portfolio's net assets shall be computed at the times and in the manner
specified in the Company's registration statement on Form N-lA, as amended from
time to time (the Registration Statement). Compensation by each Portfolio of the
Administrator shall commence on the date of the first receipt by such Portfolio
of the proceeds of the sale of its shares as described in the Registration
Statement, and the fee for the period from the date such Portfolio shall first
receive the proceeds of the sale of its shares as aforesaid to the end of the
month during which such proceeds are so received, shall be pro-rated according
to the proportion that such period bears to the full monthly period. Upon
termination of this Agreement before the end of a month, the fee for such part
of that month shall be pro-rated according to the proportion that such period
bears to the full monthly period and shall be payable within seven (7) days
after the date of termination of this Agreement.
4. Limitation of Liability of the Administrator; Indemnification.
(a) The Administrator shall not be liable to the Company or any Portfolio
for any error of judgment or mistake of law or for any loss arising out of any
act or omission by the Administrator in the performance of its duties hereunder.
Nothing herein contained shall be construed to protect the Administrator against
any liability to the Company, a Portfolio, or shareholders to which the
Administrator shall otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of its duties, or reckless
disregard of its obligations and duties hereunder.
(b) The Administrator may, at the expense of the Company, (i) with respect
to questions of law, apply for and obtain the advice and opinion of counsel to
the Company, and (ii) with respect to the application of generally accepted
accounting principles or Federal tax accounting principles, apply for and obtain
the advice and opinion of the independent auditors of the Company. The
Administrator shall be fully protected with respect to any action taken or
omitted by it in good faith in conformity with such advice or opinion.
(c) The Company, on behalf of each Portfolio, agrees to indemnify and hold
harmless the Administrator from and against all charges, claims, expenses
(including legal fees) and liabilities reasonably incurred by the Administrator
in connection with the performance of its duties hereunder, except such as may
arise from the Administrator's willful misfeasance, bad faith, gross negligence
in the performance of its duties or reckless disregard of its obligations
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<PAGE>
and duties hereunder. Subject to requirements of applicable laws, such
expenses shall be paid by the Company in advance of the final disposition of any
matter upon invoice by the Administrator and receipt by the Company of an
undertaking from the Administrator to repay such amounts if it shall ultimately
be established that the Administrator is not entitled to payment of such
expenses hereunder.
(d) As used in this section 4, the term "Administrator" shall include any
affiliates of the Administrator performing services for the Company contemplated
hereby and directors, officers, agents and employees of the Administrator and
such affiliates.
5. Activities of the Administrator. The services of the Administrator under
this Agreement are not to be deemed exclusive, and the Administrator and any
person controlled by or under common control with the Administrator shall be
free to render similar services to others and services to the Company in other
capacities.
6. Duration and Termination of this Agreement.
(a) This Agreement shall become effective as of the date first above
written and shall continue in effect with respect to each Portfolio for an
initial two-year term, and thereafter from year to year so long as such
continuation is specifically approved at least annually by the Board of
Directors of the Company, including a majority of the directors who are not
interested persons of the Company within the meaning of the 1940 Act and who
have no direct or indirect interest in this Agreement; provided, however, that
this Agreement may be terminated at any time without the payment of any penalty,
on behalf of any or all of the Portfolios, by the Company, by the Board or, with
respect to any Portfolio, by vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of that Portfolio, or by the
Administrator on not less than 60 days' written notice to the other party. This
Agreement shall automatically terminate in the event of its assignment as
defined in the 1940 Act.
(b) The Administrator hereby agrees that the books and records prepared
hereunder with respect to the Company are the property of the Company and
further agrees that upon the termination of this Agreement or otherwise upon
request the Administrator will surrender promptly to the Company copies of the
books and records maintained hereunder.
7. Amendments of this Agreement. This Agreement may be amended by the
parties hereto only if such amendment is specifically approved by the Board of
Directors of the
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<PAGE>
Company and such amendment is set forth in a written instrument executed by
each of the parties hereto.
8. Governing Law. The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New York as at the time
in effect and the applicable provisions of the 1940 Act. To the extent that the
applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the 1940 Act, the latter shall
control.
9. Counterparts. This Agreement may be executed by the parties hereto in
counterparts and if executed in more than one counterpart the separate
instruments shall constitute one agreement.
10. Notices. All notices or other communications hereunder to either party
shall be in writing and shall be deemed to be received on the earlier of the
date actually received or on the fourth day after the postmark if such notice is
mailed first class postage prepaid. Notice shall be addressed:
(a) if to the Administrator, to: President, Waterhouse Securities, Inc.,
100 Wall Street, New York, New York 10005; or
(b) if to the Company, to: President, National Investors Cash Management
Fund, Inc., 60 State Street, Suite 1300, Boston, Massachusetts 02109.
11. Separate Portfolios. This Agreement shall be construed to be made by
the Company as a separate agreement with respect to each Portfolio, and under no
circumstances shall the rights, obligations or remedies with respect to a
particular Portfolio be deemed to constitute a right, obligation or remedy
applicable to any other Portfolio.
12. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes any prior
arrangements, agreements or understandings.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NATIONAL INVESTORS CASH MANAGEMENT
FUND, INC.
By: /s/ Richard W. Ingram
-----------------------------------
Title: President
WATERHOUSE SECURITIES, INC.
By: /s/ Michele R. Teichner
-----------------------------------
Title: Senior Vice President
6
<PAGE>
SUB-ADMINISTRATION AGREEMENT
SUB-ADMINISTRATION AGREEMENT made this 26th day of February, 1998 between
Waterhouse Securities, Inc. ("Waterhouse"), a Delaware corporation, and Funds
Distributor, Inc. ("FDI"), a Massachusetts corporation.
WHEREAS, Waterhouse provides certain administrative services for certain
open-end management investment companies registered under the Investment Company
Act of 1940, as amended ("the 1940 Act") (the "Company"), and to certain
portfolios of the Company (each a "Portfolio", collectively, the "Portfolios")
as listed on Schedule A, as such Schedule shall be automatically amended from
time to time, subject to Board of Director approval;
WHEREAS, Waterhouse serves as administrator for the Company pursuant to an
Administration Agreement dated as of February 26, 1998, as amended from time to
time;
WHEREAS, Waterhouse desires to retain FDI to assist it in performing
administrative services with respect to the shares of the common stock (the
Shares) of the Company and FDI is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual agreements herein contained, the
parties agree as follows:
1. Services Provided by FDI. FDI will assist Waterhouse by providing
services to the Portfolios of the Company, as listed in Exhibit A.
2. Services Provided by Waterhouse. In furtherance of the
responsibilities under this Agreement Waterhouse will:
(a) cause the Company's service providers to furnish any and all
information and assist FDI in taking any other actions that may be reasonably
necessary in connection with FDI providing those services listed in Exhibit A;
(b) cause the Company's blue sky administrator to monitor sales
of the Shares to assure compliance with applicable state securities
and Blue Sky laws;
(c) cause the Company's transfer agent to give necessary information for
the preparation of quarterly reports in a form satisfactory to FDI regarding
Rule 12b-1 fees, front-end sales loads, back-end sales loads, if applicable, and
other data regarding sales and sales loads as required by the 1940 Act or as
requested by the Board of Directors of the Company;
(d) cause the Company's transfer agent to provide FDI with all necessary
historical information so that FDI can calculate the maximum sales charges
payable by the Company pursuant to the Conduct Rules of the National Association
of Securities Dealers, Inc. ("NASD") and the actual sales charges paid by the
Company, if applicable;
1
<PAGE>
cause the Company's transfer agent to provide FDI with all of the necessary
information so that FDI can calculate the maximum sales charges payable by the
Company pursuant to the Conduct Rules of the NASD and the actual sales charges
paid by the Company, if applicable; and cause the Companys transfer agent to
provide such information in a form satisfactory to FDI no less often than
monthly for every Company and on a daily basis for any Company where FDI
determines that the remaining limit is approaching zero, if applicable; and
(e) provide FDI with copies of, or access to, any documents that FDI may
reasonably request and will notify FDI as soon as possible of any matter
materially affecting FDIs performance of its services under this Agreement.
3. Compensation; Reimbursement of Expenses. For the services rendered by FDI
hereunder, FDI shall receive a fee from Waterhouse as agreed by Waterhouse and
FDI from time to time as set forth in Schedule B attached hereto. This fee will
be payable in equal monthly installments on the second business day of each
month.
4. Effective Date and Term. This Agreement shall become effective with respect
to a Company as of the date first written above (or, if a particular Company is
not in existence on that date, on the date Funds Distributor, Inc. becomes
sub-administrator to the Company; Schedule A to this Agreement shall be deemed
amended to include such Company from and after such date).
This Agreement shall become effective as of the date hereof and will continue
for an initial two-year term and will continue thereafter so long as such
continuance is specifically approved at least annually (i) by the Company's
Board or (ii) by a vote of a majority (as defined in the 1940 Act) of the Shares
of the Company or the relevant Portfolio, as the case may be, provided that in
either event its continuance also is approved by a majority of the Board members
who are not interested persons (as defined in the 1940 Act) of any party to this
Agreement and who have no direct or indirect financial interest in this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable with respect to any Portfolio or
any Company, without penalty, on not less than sixty days notice, by the
Company's Board of Directors, by vote of a majority (as defined in the 1940 Act)
of the outstanding voting securities of such Company, or by you. This Agreement
shall terminate automatically in the event of its assignment (as defined in the
1940 Act). This Agreement may be terminated by either party, on not less than 60
days written notice, upon any material breach of this Agreement by the other
party. If FDI ceases to be the Sub-Administrator of any Company before the fifth
anniversary of the date the Company began its investment activities, Waterhouse
shall reimburse FDI an amount equal to the number resulting from multiplying the
Company's total unamortized organizational expenses by a fraction, the numerator
of which is equal to the number of initial shares redeemed by FDI or its
affiliate and the denominator of which is equal to the number of initial shares
still outstanding as of the date of such redemption, as long as the
administrative position of the staff of the Securities and Exchange Commission
requires FDI to reimburse the Company such amount. (Initial shares shall mean
the shares purchased by FDI or an affiliate to provide the initial seed capital
to a Company pursuant to Section 14 of the 1940 Act.)
2
<PAGE>
5. Standard of Care and Indemnification.
(a) Waterhouse will indemnify and hold harmless FDI, its officers, employees and
agents and any persons who control FDI (together FDI and its employees) and hold
each of them harmless from any losses, claims, damages or liabilities, or
actions in respect thereof, to which FDI and its employees may become subject,
including amounts paid in settlement with the prior written consent of
Waterhouse, insofar as such losses, claims, damages or liabilities, or actions
in respect thereof, arise out of or result from the failure of Waterhouse to
comply with the terms of this Agreement;
(b) FDI will indemnify and hold harmless Waterhouse, its officers, employees and
agents and any persons who control Waterhouse (together Waterhouse and its
employees) and hold each of them harmless from any losses, claims, damages or
liabilities, or actions in respect thereof, to which Waterhouse and its
employees may become subject, including amounts paid in settlement with the
prior written consent of FDI, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or result from the
failure of FDI to comply with the terms of this Agreement;
Waterhouse will reimburse FDI and its employees for reasonable legal or other
expenses reasonably incurred by FDI and its employees in connection with
investigating or defending against any such loss, claim, damage, liability or
action. Waterhouse shall not be liable to FDI for any action taken or omitted by
FDI in bad faith, with willful misfeasance or gross negligence, or with reckless
disregard by FDI of its obligations and duties hereunder. The indemnities in
this Section shall, upon the same terms and conditions, extend to and inure to
the benefit of each of the employees of FDI that serve as officers or directors
of the Company and to each of the directors and officers of FDI and any person
controlling FDI within the meaning of Section 15 of the Securities Act of 1933
("1933 Act") or Section 20 of the Securities Exchange Act of 1934 ("1934 Act").
FDI will reimburse Waterhouse for reasonable legal or other expenses reasonably
incurred by Waterhouse in connection with investigating or defending against any
such loss, claim, damage, liability or action. FDI shall not be liable to
Waterhouse for any action taken or omitted by Waterhouse in bad faith, with
willful misfeasance or gross negligence, or with reckless disregard by
Waterhouse of its obligations and duties hereunder. The indemnities in this
Section shall, upon the same terms and conditions, extend to and inure to the
benefit of each of the directors and officers of Waterhouse and any person
controlling Waterhouse within the meaning of Section 15 for the 1933 Act or
Section 20 of the 1934 Act.
(c) (i) Promptly after an indemnified party (or, if such indemnified party is
not a natural person, a responsible officer of such indemnified party) receives
notice or otherwise becomes aware of the commencement of any action or other
assertion of any losses, claims, damages or liabilities by any third party, such
indemnified party shall, if a claim in respect thereof is to be made pursuant to
this Section 5, notify the indemnitor of the same in writing (such notice, a
"claim notice"); but the omission so to notify the indemnitor will not relieve
the indemnitor from any liability that it may have to such indemnified party
otherwise than under this Section 5. In the event that the indemnified party
notifies the indemnitor in writing of its waiver of any right to indemnification
pursuant to this Section 5 in respect of
3
<PAGE>
any losses, claims, damages or liabilities or portion thereof, the
provisions of clause (ii) of this Section 5(c) shall not apply.
(ii) Promptly following receipt of a claim notice, the indemnitor, upon request
of the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnitor may designate in contesting such losses, claims, damages or
liabilities and shall pay the reasonable fees and disbursements of such counsel
related to such contest. In any such contest, any indemnified party shall have
the right to retain its own counsel, but the reasonable fees and expenses of
such counsel shall be at the expense of such indemnified party unless (A) the
indemnitor and the indemnified party shall have mutually agreed to the retention
of such counsel or (B) the named parties to any such contest (including any
impleaded parties) include both the indemnitor and the indemnified party and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
indemnitor shall not, in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the reasonable fees and expenses of more
than one firm for all such indemnified parties. The indemnitor may, at its
option, at any time upon written notice to the indemnified party, assume the
responsibility for contesting any losses, claims, damages or liabilities and may
designate counsel satisfactory to the indemnitor in connection therewith
provided that the counsel so designated would have no actual or potential
conflict of interest in connection with such representation. Unless it shall
assume the responsibility for contesting any losses, claims, damages or
liabilities, the indemnitor shall not be liable for any settlement or compromise
of such losses, claims, damages or liabilities or portion thereof which
settlement or compromise is effected without its written consent, but if settled
or compromised with such consent or if there be a final judgment for the
plaintiff asserting such losses, claims or liabilities, the indemnitor agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement, compromise or judgment. If the indemnitor assumes
responsibility for contesting any losses, claims, damages or liabilities, it
shall be entitled to settle or compromise such losses, claims, damages or
liabilities or portion thereof with the consent of the indemnified party or, if
such settlement or compromise provides for release of the indemnified party in
connection with all matters relating to such losses, claims, damages or
liabilities, or, with respect to the settlement or compromise of a portion of
such losses, claims, damages or liabilities, all matters relating to such
portion of such losses, claims, damages or liabilities, that have been asserted
against the indemnified party by the other parties to such settlement or
compromise, without the consent of the indemnified party. In the event that any
expense paid by the indemnitor pursuant to this Section 6(c) is subsequently
determined to not be required to be borne by the indemnitor, the indemnified
party that received such payment shall promptly refund the amount so paid to the
indemnitor. If the indemnitor assumes responsibility for contesting any losses,
claims, damages or liabilities, the indemnitor shall keep the indemnified party
apprised, on a current basis, of matters concerning such contest, including
without limitation (i) providing the indemnified party with reasonable notice of
and opportunity to be present in person and/or by counsel at proceedings or
discussions of settlement or compromise; (ii) providing the indemnified party
with copies of and opportunity to comment on filings, papers or settlement
agreements proposed to be filed or served by or on behalf of the indemnitor; and
(iii) providing the indemnified party with
4
<PAGE>
copies of filings, papers and proposed settlement agreements received by
the indemnitor from or on behalf of persons asserting such losses, claims,
damages or liabilities.
(d) The obligation to indemnify and provide contribution pursuant to this
Section 6 shall survive the termination of this Agreement.
7. Record Retention and Confidentiality. FDI shall keep and maintain on behalf
of the Company all books and records which the Company and FDI are, or may be,
required to keep and maintain in connection with the services to be provided
hereunder pursuant to any applicable statutes, rules and regulations, including
without limitation Rules 31a-1 and 31a-2 under the 1940 Act. FDI further agrees
that all such books and records shall be the property of the Company and to make
such books and records available for inspection by the Company, by Waterhouse,
or by the Securities and Exchange Commission at reasonable times and otherwise
to keep confidential all books and records and other information relative to the
Company and its shareholders; except when requested to divulge such information
by duly-constituted authorities or court process.
8. Rights of Ownership. All computer programs and procedures
developed to perform the services to be provided by FDI under this
Agreement are the property of FDI.
9. Return of Records. FDI may at its option at any time, and shall promptly upon
the demand of Waterhouse and/or the Company, turn over to Waterhouse and/or the
Company and cease to retain FDIs files, records and documents created and
maintained by FDI pursuant to this Agreement so long as FDI shall be able to
retain photocopies of such documents to the extent needed by FDI in the
performance of its services or for its legal protection. If not so turned over
to Waterhouse and/or the Company, such documents and records will be retained by
FDI for six years from the end of the fiscal year of the Company for which they
were created. At the end of such six-year period, such records and documents
will be turned over to Waterhouse and/or the Company unless the Company
authorizes in writing the destruction of such records and documents.
10. Representations of Waterhouse. Waterhouse represents and warrants to FDI
that this Agreement has been duly authorized by Waterhouse and, when executed
and delivered by Waterhouse, will constitute a legal, valid and binding
obligation of Waterhouse, enforceable against Waterhouse 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.
11. Representations of FDI. FDI represents and warrants that this Agreement has
been duly authorized by FDI and, when executed and delivered by FDI, will
constitute a legal, valid and binding obligation of FDI, enforceable against FDI
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.
12. Notices. All notices or other communications hereunder to either party shall
be in writing and shall be deemed sufficient if mailed to Waterhouse at the
following address: Waterhouse Securities, Inc., 100 Wall Street, New York, New
York 10005, Attention: President;
5
<PAGE>
and to FDI at the following address: 60 State Street, Suite 1300, Boston,
MA 02109, Attention: President with a copy to General Counsel or at such other
address as such party may designate by written notice to the other, or in either
case if sent by telex, telecopier, telegram or similar means of same day
delivery (with a confirming copy by mail as provided herein).
13. Headings. Paragraph headings in this Agreement are included for
convenience only and are not to be used to construe or interpret this
Agreement.
14. Assignment. This Agreement and the rights and duties hereunder
shall not be assignable by either of the parties hereto except by the
specific written consent of the other party.
15. Governing Law. This Agreement shall be governed by and provisions
shall be construed in accordance with the laws of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed all as of the day and year first above written.
WATERHOUSE SECURITIES, INC.
By: /s/ Michele R. Teichner
----------------------------
Title: Senior Vice President
----------------------------
FUNDS DISTRIBUTOR, INC.
By: /s/ Richard W. Ingram
----------------------------
Title: Exec. Vice President
----------------------------
6
<PAGE>
Dated: February 26, 1998
SCHEDULE A
TO THE AGREEMENT
BETWEEN
WATERHOUSE SECURITIES, INC.
AND
FUNDS DISTRIBUTOR, INC.
NAME OF COMPANY
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
Kennedy Cabot Money Market Portfolio
Kennedy Cabot U.S. Government Portfolio
Kennedy Cabot Municipal Portfolio
WATERHOUSE SECURITIES, INC.
By: /s/ Michele R. Teichner
----------------------------
Title: Senior Vice President
----------------------------
FUNDS DISTRIBUTOR, INC.
By: Richard W. Ingram
----------------------------
Title: Exec. Vice President
----------------------------
7
<PAGE>
Dated: February 26, 1998
SCHEDULE B
TO THE AGREEMENT
BETWEEN
WATERHOUSE SECURITIES, INC.
AND
FUNDS DISTRIBUTOR, INC.
FDI's annual fee charged to and payable by Waterhouse as defined below is its
share of an annual complex-wide charge. The annual complex-wide charge is:
(a) an annual fee of $250,000 for all Covered Entities for Routine
Administrative Services, as defined in Exhibit A, payable in equal monthly
installments on the second business day of each month; and
(b) for Extraordinary Administrative Services, as defined in Exhibit A, for
any Covered Entity:
(i) a flat fee to be negotiated after the scope of the project has been
accurately and completely defined; or
(ii) a fee for a particular project based on a blended hourly rate of
$75.00 per person. Only personnel with an Assistant Vice President title or
higher with FDI would bill on an hourly basis.
Except as previously set forth, compensation under this Agreement shall be
calculated and accrued daily and the amounts of the daily accruals shall be paid
monthly in arrears. If this Agreement becomes effective subsequent to the first
day of a month or shall terminate before the last day of a month, compensation
for that part of the month this Agreement is in effect shall be prorated in a
manner consistent with the calculation of the fees as set forth above. In
addition, Waterhouse agrees to reimburse FDI for FDIs reasonable out-of-pocket
expenses as mutually agreed to by the parties from time to time.
A Covered Entity is any series of Waterhouse Investors Family of Funds,
Inc. and National Investors Cash Management Fund, Inc. and each other
future mutual fund (or series thereof) for which FDI provides
administrative services.
8
<PAGE>
EXHIBIT A
Administrative Services
Funds Distributor will provide the following administrative services:
Corporate and Secretarial Services
* Provide Secretary and the necessary complement of Assistant
Secretaries for the fund. These services will be provided consistent with the
procedures listed in Exhibit B.
* Maintain general corporate calendar. Track all legal and
compliance requirements through annual cycles.
* Four quarterly board meetings per year:
* Prepare agenda and background materials for legal
approval
* Make presentations
* Monitor annual approval requirements
* Prepare extensive background material for
annual review of advisory fees
* Prepare minutes
* Follow-up on matters raised at meetings
* Maintain Articles of Incorporation and By-Laws of the Corporation
* Prepare organizational board meeting materials
* Draft contracts, assisting in negotiation and planning, as
appropriate. For example negotiate, draft and keep current the
following contracts: (i) investment advisory and sub-advisory
contracts; (ii) Distribution Agreement; (iii) Bank Agreements;
(iv) Broker Dealer Agreements; (v) Transfer Agency Agreement;
(vi) Custody Agreement; (vii) Administration Agreement and Sub-
Administration Agreement; (viii) 12b-1 Plans and related
agreements; (ix) Shareholder Servicing Plans and Related
Agreements; (x) IRA Custodian Agreements; (xi) Bi-Party
Repurchase Agreements; (xii) Tri-Party Repurchase Agreements;
(xiii) Futures Account Agreement and Procedural Safekeeping
Agreement; (xiv) loan agreements; and (xv) various other
agreements and amendments.
SEC and Public Disclosure Assistance
* Prepare and file one annual amendment to the Companys
registration statement, including updating prospectuses and SAIs.
9
<PAGE>
* Coordinate/monitor, with assistance from the fund administrator
and fund accountant and any other relevant fund service
providers, EDGAR (Electronic Data Gathering Analysis and
Retrieval System) on-line filings related to post-effective
amendments, N-SARs, 24f-2, annual and semi-annual shareholders
reports.
* Review annual and semi-annual Shareholder Reports.
* Provide legal assistance for shareholder communications.
* Shareholder Meetings
* Draft Proxies
* Organize, attend and keep minutes
* Work with the Transfer Agent on Solicitations and Vote
Tabulation
* Provide legal presence at meetings
* Draft Proxy/Solicitation Documents on Form N-14 (Fund Mergers).
* Monitor and participate in the preparation of documents for
Exemptive Orders (e.g., Joint Repurchase Account), Revenue
Rulings (e.g., Multi-Class) and other state specific regulator
orders (e.g., Florida Request for Technical Assistance).
* Filing advertising and sales literature with the appropriate
regulatory entities and providing all compliance review of
such materials.
Legal Consulting and Planning
* Provide general legal advice on matters relating to portfolio
management, fund operations, mutual fund sales, development of
advertising materials, changing or improving prospectus
disclosure, and any potential changes in the funds investment
policies, operations, or structure.
* Maintain a continuing awareness of significant emerging
regulatory and legislative developments which may affect the
fund, update the advisor on those developments, and provide
related planning assistance.
* Develop or assist in developing guidelines and procedures to
improve overall compliance by the fund and its various agents.
* Provide advice with regard to fund litigation matters, routine
fund examinations and investigations by regulatory agencies.
10
<PAGE>
* Provide advice regarding long term planning for the Company
including the creation of new funds or portfolios, corporate
structural changes, mergers, acquisitions, and other asset
gathering plans including new distribution methods.
* Maintain effective communications with fund counsel, counsel to
the non-interested board members and to the funds local counsel.
* Create and implement timing and responsibility system for
outside legal counsel when necessary to implement major projects
and the legal management of such projects.
* Monitor activities and billing practices of outside counsel
performing services for the fund or in connection with related
fund activities.
Compliance
* Review of all testing that is done by fund accountant to assist
the advisor in complying with fund prospectus guidelines and
limitations, 1940 Act requirements, and Internal Revenue Code
requirements.
* Review of monthly testing and compliance report created by fund
accountant including:
* Tax compliance testing for gross income, short three,
diversification, and single issuer,
* 5% diversification testing for tax and 1940 Act
compliance based on current market value and
acquisition cost testing, if required,
* Income available for distribution report, which includes
capital gains and interest income,
* Net investment income calculated on per-share basis each
month, and
* Prospectus and 1940 Act compliance testing-tests are
tailored to each individual funds prospectus and tests
against the type and amount of securities held.
* Jointly create Compliance Manuals and workshops for advisory
personnel with the fund accountant.
* Consultation and advice for resolution of compliance questions
along with the investment advisor, the fund administrator, the
fund counsel and the fund accountant.
* Be actively involved with the management of SEC and other
regulatory examinations.
<PAGE>
* Review with the investment advisor and fund administrator
summary reports created by the fund accountant of all compliance
issues to assure immediate compliance adjustments.
* Assist portfolio managers with compliance matters including
reviewing the Compliance Manual on a regular basis and
attending compliance meetings with the portfolio managers.
* Assist in developing guidelines and procedures to improve
overall compliance by the fund and its various agents.
* Maintain legal liaison with and provide legal advice and counsel
to fund regarding its relationships, contractual or otherwise,
with the various fund agents, such as the adviser, custodian,
transfer agents, and auditors with respect to their activities
on behalf of the fund.
* Advice regarding all fund distribution arrangements for
compliance with applicable banking and broker-dealer
regulations.
* Provide other fund officers as requested (e.g. President and
Vice President).
* Maintaining the funds code of ethics.
Treasury Services
* Providing the Companys Treasurer and the appropriate complement
of Assistant Treasurers to assume certain specified
responsibilities (these functions will be based upon the day to
day work completed by knowledgeable staff assembled by
Waterhouse including the fund accountant).
* Determining properly chargeable expenses and authorizing payment
of bills for each fund.
* Monitoring and recommending changes to expense accrual rates.
* Coordinate/monitor, with assistance from the investment adviser,
the fund accountant and any other relevant fund service
provider, all required financial materials for review by the
board (for example, items required by SEC Rule 2a-7, 10f-3,
17a-7, and 17e-1 reports, repurchase agreements, dealer lists,
securities transactions).
* Recommending dividends to be voted by the board
* Reviewing and monitoring mark-to-market comparisons for money
market funds that are generated by the fund accountant.
* Reviewing, signing off and filing all fund tax returns after
such returns have been prepared and signed by the funds
independent auditors.
* Assisting (along with the fund accountant) the funds advisor in
valuing securities which are not readily salable.
* Function as a liaison with the funds custodian, fund accountant,
outside auditors and regulators, including managing the
planning and conducting of audits and examinations.
12
<PAGE>
1
EXHIBIT B
SIGNATURE/OVERSIGHT PROCEDURES
RULE 24e(2)/24f(2) SHARE REGISTRATION
Documents pertaining to filing of fund share registration statements pursuant to
Rule 24e(2) or 24f(2) will be prepared by the fund accountant. The fund
accountant will provide FDI with certain financial information contained in such
filing. After the filing documents have been prepared and reviewed by
Waterhouse, the following will occur:
* Filing documents, accompanied by a completed signature request form (see
copy attached), will be forwarded to appropriate fund officer for
signature.*
* Financial statements providing the basis for the financial information
contained in the filing documents will be provided in "blueprint" form to
Funds Distributor by the fund accountant.
* Documents will be reviewed by Funds Distributor utilizing the financial
statements.
* Completed signature request form will be reviewed by Funds Distributor
for proper authorization.
* Any questions that may arise during review will be directed to Waterhouse
or the fund accountant as appropriate.
* If not in order, Funds Distributor will contact the appropriate entities
or persons with an explanation and, if necessary, documents will be
returned to Waterhouse and/or the fund accountant, as appropriate, with
explanation.
* If in order, documents will be signed by fund officer and returned to the
Waterhouse Legal Department by the request date specified in the
completed signature request form.
* To the extent that Funds Distributor must provide an opinion letter to
which another Company service provider is the source of knowledge, that
service provider must provide Fund Distributor with an opinion letter
supporting the date that it provides Funds Distributor.
*Contact Persons:
<PAGE>
2
SIGNATURE/OVERSIGHT PROCEDURES
FORM N-SAR SEMI-ANNUAL REPORT
Semi-annual report on form N-SAR will be prepared for filing by the fund
accountant. The fund accountant will provide Waterhouse and Funds Distributor
with certain financial information required on Form N-SAR. After form has been
completed, the following will occur:
* Form N-SAR, accompanied by completed signature request form (see copy
attached), will be forwarded to Funds Distributor for fund officer
signature.*
* Form will be reviewed by Funds Distributor and Waterhouse.
* Completed Signature Request form will be reviewed for proper
authorization.
* Any questions that may arise during review will be directed to Waterhouse
or the fund accountant appropriate.
* If not in order, Funds Distributor will contact the appropriate entities
or persons with an explanation and, if necessary, form will be returned
to Waterhouse and/or the fund accountant, as appropriate, with
explanation.
* If in order, form will be signed by fund officer and returned to
Waterhouse by the request date specified in the completed signature
request form.
*Contact Person:
<PAGE>
3
SIGNATURE/OVERSIGHT PROCEDURES
TAX RETURNS
All tax and information returns will be prepared and reviewed by the fund's
auditor. When returns are completed and reviewed, the following will occur:
* Tax and information returns, signed by independent auditors and
accompanied by a completed signature request form (see copy attached),
will be forwarded to Funds Distributor for fund officer signature.*
* All returns will be reviewed by Funds Distributor and Waterhouse.
* Completed signature request form will be reviewed for proper
authorization.
* Any questions that arise during review will be directed to the funds
auditor.
* If not in order, returns will be returned to the funds auditor with
explanation.
* If in order, returns will be signed by fund officer and returned to the
fund auditor.
*Contact Persons:
<PAGE>
4
SIGNATURE/OVERSIGHT PROCEDURES
SEC EXAMINATION/INQUIRIES
When the Securities and Exchange Commission conducts a periodic examination of
the Company or makes written inquiries for specific information, the following
will occur:
* Waterhouse* will promptly inform Funds Distributor* of such examination
or written inquiry.
* Waterhouse will inform Funds Distributor of the specific nature of the
information requested for examination or by inquiry.
* Funds Distributor will be actively involved with any SEC examinations.
* Waterhouse will submit to Funds Distributor the response to SEC-written
inquiries.
* Waterhouse will forward to Funds Distributor and each fund officer a copy
of the comment letter received from the SEC upon completion of
examination.
* Waterhouse will forward to Funds Distributor and each officer a copy of
the response to the comment letter.
*Contact Person:
<PAGE>
5
SIGNATURE/OVERSIGHT PROCEDURES
AUDIT REPRESENTATION LETTER
The process of examining financial statements of the Company by independent
auditors includes the receipt of a letter from the Company in which various
representations are made. This letter will be prepared by the independent
auditors. Upon completion of this letter, the following will occur:
* Letter will be reviewed and signed by Waterhouse authorized signatory.
* Letter will be sent to Funds Distributor for review and fund officer
signature.*
* Letter will be reviewed by Fund Distributor.
* To the extent that Funds Distributor must provide an audit representation
letter to which another Company service provider is the source of
knowledge (i.e. the fund auditor), that service provider must provide
Funds Distributor with an opinion letter supporting the audit
representation letter or any other data that it provides Funds
Distributor.
* If not in order, letter will be returned to Waterhouse or the fund
auditor with explanation.
* If in order, letter will be signed by fund officer and returned to
independent auditors.
*Contact Persons:
<PAGE>
6
SIGNATURE/OVERSIGHT PROCEDURES
VALUATION OF MUTUAL FUND PORTFOLIO SECURITIES
In connection with the valuation of mutual fund portfolio securities, it is
sometimes necessary to convene a meeting of the Company's Portfolio Securities
Pricing Committee to place a value on a portfolio security for the purpose of
calculating NAV per share.
* Funds Distributor and a find officer will be present at meeting, either
in person or by conference call.
* Meeting minutes or memo of Pricing Committee decisions will be sent to
Funds Distributor.
In addition, because of the complexities or large universe of various portfolio
securities (i.e., GNMA and Tax-Exempt Securities), an independent pricing
service is utilized to price such securities.
* Waterhouse will inform Funds Distributor of any change of independent
pricing service.
In connection with money market funds, it is necessary to monitor any deviation
of a fund's net asset value per share calculated using market values from the
fund's net asset value per share calculated using amortized cost prices.
* Waterhouse or the fund accountant will send Funds Distributor,* on a
daily basis, a schedule that indicates each money market fund's net asset
value per share calculated at amortized cost and market value.
* Waterhouse or the fund accountant will send Fund Distributor,* on a
monthly basis, a schedule for each fund, indicating the fund's total net
assets, dividend per share and net asset value per share calculated at
amortized cost and market value.
* Waterhouse will notify Funds Distributor* when Waterhouse intends to
apprise a fund's Board of Directors of information concerning the fund's
net asset value per share.
<PAGE>
7
SIGNATURE/OVERSIGHT PROCEDURES
CHANGE IN NET ASSET VALUE PER SHARE
If a funds net asset value per share changes after the day of calculation and
shareholder account processing, the following will occur:
* Waterhouse or the fund accountant will send Funds Distributor* a schedule that
will indicate the fund and change in net asset value per share.
* Waterhouse or the fund accountant will document the change in net asset value
per share and forward the documentation to Funds Distributor* accompanied by
completed signature request form (see copy attached).
* Contact Persons:
<PAGE>
8
CHANGE IN NET ASSET VALUE PER SHARE
SIGNATURE REQUEST FORM
TO: ____________________________________________________________________________
FROM: __________________________________________________________________________
Tel. #: ___________________________ Fax # __________________________
Date: __________________________________________________________________________
RIC/Company Name:_______________________________________________________________
Restated NAV Per Share:_________________________________________________________
Documentation of Change in NAV:_________________________________________________
Waterhouse Approval:
Signature: Date:
---------------------------------- ---------------
Name:
Title:
Funds Distributor Approval:
Signature: Date:
---------------------------------- ---------------
Company Officer
Waterhouse Authorized Signatories Fund Distributor Contact Persons
- ---------------------------------- --------------------------------
<PAGE>
9
SIGNATURE/OVERSIGHT PROCEDURES
RECLAIM OF TAXES
WITHHELD FORM DIVIDENDS ON FOREIGN SECURITIES
Forms necessary to reclaim taxes withheld from dividends paid on foreign
securities are coordinated by the fund's auditor. When these forms require the
signature of a fund officer, the following will occur:
* Completed forms, accompanied by completed signature request form (see copy
attached), will be forwarded to Funds Distributor for fund officer
signature.*
* Funds Distributor will review the form
* Funds Distributor will review the completed form for proper authorization.
* Any questions that arise during review will be directed to the fund's
auditor.
* If not in order, form will be returned to the fund's auditor with
explanation.
* If in order, form will be signed by fund officer and returned to the fund's
auditor.
* Contact Persons:
<PAGE>
NATIONAL INVESTORS CASH MANAGEMENT FUND, INC.
SHAREHOLDER SERVICING PLAN (PLAN)
Section 1. Upon the recommendation of Waterhouse Asset Management, Inc.
("Waterhouse"), the investment manager of National Investors Cash Management
Fund, Inc. (the "Fund"), any officer of the Fund is authorized to execute and
deliver, in the name and on behalf of the Fund, written agreements based
substantially on the forms attached hereto as Appendix A or any other form duly
approved by the Fund's Board of Directors ("Agreements") with securities
dealers, financial institutions, and other industry professionals that are
dealers of record or holders of record or that have a servicing relationship
with the beneficial owners of Fund shares ("Service Organizations") in any of
the Fund's portfolios offering such shares (the "Portfolios") provided that any
modifications of services listed in the Agreement shall be presented for
approval or ratification by the Directors at the next regularly scheduled Board
Meeting. Pursuant to such Agreements, Service Organizations shall provide
shareholder support services as set forth therein to their clients who
beneficially own shares of the Portfolios in consideration of a fee, computed
monthly in the manner set forth in the Agreements, at an annual rate of up to
.25% of the average daily net asset value of the Fund shares beneficially owned
by or attributable to such clients. Certain affiliates of Waterhouse, including
Waterhouse Securities, Inc., are eligible to become Service Organizations and to
receive fees under this Plan. All expenses incurred by a Portfolio in connection
with the Agreements and the implementation of this Plan shall be borne entirely
by the holders of the shares of the particular Portfolio involved.
Section 2. Waterhouse shall monitor the arrangements pertaining to the
Funds Agreements with Service Organizations. Waterhouse shall not, however, be
obligated by this Plan to recommend, and the Fund shall not be obligated to
execute, any Agreement with any qualifying Service Organization.
Section 3. Unless sooner terminated, this Plan shall continue in effect
for a period of one year from its date of execution and shall continue
thereafter for successive annual periods, provided that such continuance is
specifically approved by a majority of the Board of Directors, including a
majority of the Directors who are not interested persons, as defined in the
Investment Company Act of 1940, as amended (the "Act"), of the Fund and have no
direct or indirect financial interest in the operation of this Plan or in any
Agreement related to this Plan (the "Disinterested Directors").
Section 4. This Plan may be amended at any time with respect to any
Portfolio by the Fund's Board of Directors, provided that any material amendment
of the terms of this Plan (including a material increase of the fee payable
hereunder) shall become effective only upon the approval of a majority of the
Disinterested Directors.
Section 5. This Plan is terminable at any time with respect to any
Portfolio by vote of a majority of the Disinterested Directors.
<PAGE>
Section 6. The Fund will preserve copies of this Plan, Agreements, and any
written reports regarding this Plan presented to the Board of Directors
(collectively, "Records") for a period of not less than six years from the end
of the fiscal year in which such Records were made and each such Record shall be
kept in an easily accessible place for the first two years of said
recordkeeping.
<PAGE>
FORM OF SHAREHOLDER SERVICES AGREEMENT
Dear Sirs:
You wish to enter into an Agreement with National Investors Cash Management
Fund, Inc. (hereinafter referred to as the "Fund"), a registered investment
company, as defined in the Investment Company Act of 1940, as amended (the
"Act"), with certain portfolios (each a "Portfolio", collectively the
"Portfolios"), for servicing shareholders of, and administering shareholder
accounts in the Fund.
The terms and conditions of this Agreement are as follows:
1. You agree to provide shareholder and administrative services for your clients
who own shares of the Fund ("clients"), which services may include, without
limitation: providing general shareholder liaison services, including responding
to shareholder inquiries; assisting to the extent necessary with the
transmission of semi-annual and annual reports and annual tax reporting
information to shareholders; assisting clients in changing dividend options,
account designations and addresses; performing sub-accounting; establishing and
maintaining shareholder accounts and records; providing periodic statements
and/or reports showing a clients account balance and integrating such statements
with those of other transactions and balances in the clients other accounts
serviced by you; arranging for bank wires; and providing such other information
and services as the Fund reasonably may request, to the extent you are permitted
by applicable statute, rule or regulation. You represent and warrant to, and
agree with the Fund, that the compensation payable to you hereunder, together
with any other compensation payable to you by clients in connection with the
investment of their assets in shares of the Fund, will be properly disclosed by
you to your clients, will be authorized by your clients and will not result in
an excessive or unauthorized fee to you. You will act solely as agent for, upon
the order of, and for the account of, your clients.
2. You shall provide such office space and equipment, telephone facilities and
personnel (which may be all or any part of the space, equipment and facilities
currently used in your business, or all or any personnel employed by you) as is
necessary or beneficial for providing information and services to the Fund's
shareholders, and to assist the Fund in servicing accounts of clients. You shall
transmit promptly to clients all communications sent to you for transmittal to
clients by or on behalf of the Fund, or the Funds investment adviser,
distributor, custodian or transfer or dividend disbursing agent.
3. You agree that neither you nor any of your employees or agents are authorized
to make any representation concerning the Fund, the Portfolios or the shares of
the Fund, except those contained in the then current Prospectus or Statement of
Additional Information ("SAI") for such Fund, copies of which will be supplied
by the Fund to you in reasonable quantities upon request. You shall have no
authority to act as agent for the Fund.
<PAGE>
4. This agreement may be amended only by written instruments signed by both
parties. The Fund reserves the right, at its discretion and without notice, to
suspend the sale of shares or withdraw the sale of shares of any or all of the
Portfolios.
5. This Agreement is terminable without penalty, at any time, by a majority of
the Fund's Directors who are not interested persons (as defined in the Act) and
have no direct or indirect financial interest in this Agreement. This Agreement
is terminable without penalty upon 15 days notice by either party. In addition,
the Fund may terminate this Agreement as to any or all Portfolios immediately,
without penalty, if the present investment adviser of such Portfolio(s) ceases
to serve the Portfolio(s) in such capacity. Notwithstanding anything contained
herein, if you fail to perform the shareholder servicing and administrative
functions contemplated herein by the Fund, this Agreement shall be terminable
effective upon receipt of notice thereof by you. This Agreement also shall
terminate automatically in the event of its assignment (as defined in the Act).
6. In consideration of the services and facilities described herein, you shall
be entitled to receive from the Fund, and the Fund agrees to pay to you, the
fees described as payable to you in the Funds Shareholder Services Plan and
Prospectus and related Statement of Additional Information. You understand that
any payments pursuant to this Agreement shall be paid only so long as this
Agreement and such Plan are in effect. You agree that no Director, officer or
shareholder of the Fund shall be liable individually for the performance of the
obligations hereunder or for any such payments.
7. You agree to comply with and to provide to the Fund such information relating
to your services hereunder as may be required to be maintained by the Fund,
under applicable federal or state laws, and the rules, regulations, requirements
or conditions of applicable regulatory and self-regulatory agencies or
authorities.
8. This Agreement shall not constitute either party the legal representative of
the other, nor shall either party have the right or authority to assume, create
or incur any liability or any obligation of any kind, express or implied,
against or in the name of or in the name of or on behalf of the other party.
9. All notices or other communications hereunder to either party shall be in
writing and shall be deemed sufficient if mailed to such party at the address of
such party set forth on page four of this Agreement or at such other address as
such party may be designated by written notice to the other or by telex,
telecopier, telegram or similar means of same day delivery (with a confirming
copy by mail as provided herein).
10. This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of laws.
<PAGE>
For National Investors Cash Management Fund, Inc.
100 Wall Street
New York, NY 10005
- ----------------------------------------- -----------------------
By: Date
For:--------------------------------------------------------------------
- ------------------------------------------------------------------------
Address of Principal Office
- ------------------------------------------------------------------------
City State Zip Code
By:---------------------------- Its:--------------- -----------------
Authorized Signature Title Date
- -------------------------------
Print Name
<PAGE>
FORM OF SHAREHOLDER SERVICES AGREEMENT
FOR WATERHOUSE AFFILIATED BROKER/DEALERS
Dear Sirs:
You wish to enter into an Agreement with National Investors Cash Management
Fund, Inc. (hereinafter referred to as the "Fund"), a registered investment
company, as defined in the Investment Company Act of 1940, as amended (the
"Act"), with certain portfolios (each a "Portfolio", collectively the
"Portfolios"), for servicing shareholders of, and administering shareholder
accounts in the Fund.
The terms and conditions of this Agreement are as follows:
1. You agree to provide shareholder and administrative services for your clients
who own shares of the Fund ("clients"), which services may include, without
limitation: providing general shareholder liaison services, including responding
to shareholder inquiries; assisting to the extent necessary with the
transmission of semi-annual and annual reports and annual tax reporting
information to shareholders; assisting clients in changing dividend options,
account designations and addresses; performing sub-accounting; establishing and
maintaining shareholder accounts and records; providing periodic statements
and/or reports showing a clients account balance and integrating such statements
with those of other transactions and balances in the clients other accounts
serviced by you; arranging for bank wires; and providing such other information
and services as the Fund reasonably may request, to the extent you are permitted
by applicable statute, rule or regulation. You represent and warrant to, and
agree with the Fund, that the compensation payable to you hereunder, together
with any other compensation payable to you by clients in connection with the
investment of their assets in shares of the Fund, will be properly disclosed by
you to your clients, will be authorized by your clients and will not result in
an excessive or unauthorized fee to you. You will act solely as agent for, upon
the order of, and for the account of, your clients.
2. You shall provide such office space and equipment, telephone facilities and
personnel (which may be all or any part of the space, equipment and facilities
currently used in your business, or all or any personnel employed by you) as is
necessary or beneficial for providing information and services to the Fund's
shareholders, and to assist the Fund in servicing accounts of clients. You shall
transmit promptly to clients all communications sent to you for transmittal to
clients by or on behalf of the Fund, or the Funds investment adviser,
distributor, custodian or transfer or dividend disbursing agent.
3. You agree that neither you nor any of your employees or agents are authorized
to make any representation concerning the Fund, the Portfolios or the shares of
the Fund, except those contained in the then current Prospectus or Statement of
Additional Information ("SAI") for
<PAGE>
such Fund, copies of which will be supplied by the Fund to you in
reasonable quantities upon request. You shall have no authority to act as agent
for the Fund.
4. The Fund reserves the right, at its discretion and without notice, to suspend
the sale of shares or withdraw the sale of shares of any or all of the
Portfolios. This agreement may be amended only by written instruments signed by
both parties.
5. You acknowledge that this Agreement shall become effective for a Fund only
following approval when approved by a vote of a majority of (i) the Fund's Board
of Directors or Trustees or Managing General Partners, as the case may be
(collectively "Directors", individually "Director"), and (ii) Directors who are
not interested persons (as defined in the 1940 Act) of the Fund and have no
direct or indirect financial interest in this Agreement.
6. This Agreement shall continue until the last day of the calendar year next
following the date of execution, continue for an initial two year term
commencing on the date hereof, and thereafter shall continue automatically for
successive annual periods ending on the last day of each calendar year. Such
continuance must be approved specifically at least annually by a vote of a
majority of (i) the Fund's Board of Directors and (ii) Directors who are not
interested persons (as defined in the Act) of the Fund and have no direct or
indirect financial interest in this Agreement. This Agreement is terminable
without penalty, at any time, by a majority of the Fund's Directors who are not
interested persons (as defined in the Act) and have no direct or indirect
financial interest in this Agreement. This Agreement is terminable without
penalty upon 15 days notice by either party. In addition, the Fund may terminate
this Agreement as to any or all Portfolios immediately, without penalty, if the
present investment adviser of such Portfolio(s) ceases to serve the Portfolio(s)
in such capacity. Notwithstanding anything contained herein, if you fail to
perform the shareholder servicing and administrative functions contemplated
herein by the Fund, this Agreement shall be terminable effective upon receipt of
notice thereof by you. This Agreement also shall terminate automatically in the
event of its assignment (as defined in the Act).
7. In consideration of the services and facilities described herein, you shall
be entitled to receive from the Fund, and the Fund agrees to pay to you, the
fees described as payable to you in the Funds Shareholder Services Plan and
Prospectus and related Statement of Additional Information. You understand that
any payments pursuant to this Agreement shall be paid only so long as this
Agreement and such Plan are in effect. You agree that no Director, officer or
shareholder of the Fund shall be liable individually for the performance of the
obligations hereunder or for any such payments.
8. You agree to comply with and to provide to the Fund such information relating
to your services hereunder as may be required to be maintained by the Fund
under, applicable federal or state laws, and the rules, regulations,
requirements or conditions of applicable regulatory and self-regulatory agencies
or authorities.
9. This Agreement shall not constitute either party the legal representative of
the other, nor shall either party have the right or authority to assume, create
or incur any liability or any
<PAGE>
obligation of any kind, express or implied, against or in the name of or in
the name of or on behalf of the other party.
10. All notices or other communications hereunder to either party shall be in
writing and shall be deemed sufficient if mailed to such party at the address of
such party set forth on page four of this Agreement or at such other address as
such party may be designated by written notice to the other or by telex,
telecopier, telegram or similar means of same day delivery (with a confirming
copy by mail as provided herein).
11. This Agreement shall be construed in accordance with the internal laws of
the State of New York, without giving effect to principles of conflict of laws.
For National Investors Cash Management Fund, Inc.
100 Wall Street
New York, NY 10005
- ----------------------------------------------------------------
By: Date
For:
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Address of Principal Office
- ----------------------------------------------------------------
City State Zip Code
By:---------------------------- Its:-------------- ------------
Authorized Signature Title Date
- -------------------------------
Print Name
<PAGE>
LICENSE AGREEMENT
LICENSE AGREEMENT, dated as of this _____ day of
_____________, 1998, by and between Waterhouse Securities, Inc. (hereinafter
referred to as "Licensor"), a corporation organized and existing under the laws
of the State of New York, having an office at 100 Wall Street, New York, New
York 10005, and National Investors Cash Management Fund, Inc. (hereinafter
referred to as "User"), an open-end, diversified, management investment company
organized and existing under the laws of the State of Maryland, having an office
at 100 Wall Street, New York, New York 10005.
WHEREAS, User has adopted Articles of Incorporation dated
August 19, 1996, as amended March 13, 1998 (collectively, the "Articles"), a
copy of which are on file with the Secretary of State of Maryland and the
Securities and Exchange Commission (the "Commission");
WHEREAS, User initially consists of three portfolios, namely
the Kennedy Cabot Money Market Portfolio, the Kennedy Cabot U.S. Government
Portfolio and the Kennedy Cabot Municipal Portfolio (each a "Portfolio" and,
collectively, the "Portfolios"), and the Directors of the User are authorized
from time to time to create additional portfolios which shall be deemed
"Portfolios" under this Agreement unless User receives from Licensor written
notice to the contrary within fifteen (15) days of the creation of such
additional portfolios;
WHEREAS, Licensor is the owner, in the United States and
elsewhere, of certain trademarks as set out on Schedule A hereto (hereinafter,
the "Marks");
WHEREAS, User wishes to use the Marks, pursuant to the terms
and conditions hereinafter set forth, in connection with the issuance, marketing
and promotion of the Portfolios;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises hereinafter set forth, the parties agree as follows:
1. Grant of License
Except as hereinafter provided, Licensor hereby grants to User
a non-exclusive, non-transferrable, royalty-free license, subject to the terms
and conditions set forth herein, to use the Marks during the term of this
License Agreement solely in connection with the issuance, marketing and
promotion of the Portfolios and in accordance with the criteria and standards
established by the Licensor and User accepts the license subject to such terms
and conditions.
<PAGE>
2. Licensor's Concurrent Right to Use the Marks
Notwithstanding any of the provisions of Sections 1 of this
License Agreement, Licensor shall retain the right to use the Marks in
connection with its own business activities in the United States and throughout
the world. In addition, Licensor reserves the right to grant to any other person
or entity the rights to use the the Marks, and no consent or permission of the
User shall be necessary, but, if required by an applicable law of any state,
User agrees that it will forthwith grant all requisite consents.
3. Term
a. This License Agreement may be executed in counterparts by
the parties hereto and shall become effective and binding upon the parties at
such time as each of the parties has signed and delivered to the other party one
or more counterparts of this License Agreement (the "Effective Date").
b. This License Agreement shall continue in force and effect
unless and until terminated in accordance with the provisions in Sections 9 and
10 of this License Agreement.
4. Ownership of Marks
User acknowledges the ownership of the Marks in Licensor,
agrees that it will do nothing inconsistent with such ownership and that all use
of the Marks by User shall inure to the benefit of Licensor. User agrees that
nothing in this License Agreement shall give User any right, title or interest
in the the Marks other than the right to use such designations in accordance
with this License Agreement.
5. Quality Standards
User agrees that the nature and quality of all goods sold and
services rendered by User in connection with the Marks shall conform to
reasonable standards set by, and be under the control of, the Licensor. Licensor
may make reasonable amendments to these standards from time to time and shall
give the User ninety (90) days advance notice in writing of such amendments.
- 2 -
<PAGE>
6. Quality Maintenance
a. User agrees to cooperate with the Licensor in facilitating
Licensor's control of such nature and quality, to permit reasonable inspection
of User's operations and activities, and to supply the Licensor with specimens
of all uses of the the Marks. Prior to disseminating any sales literature,
promotional material or other printed matter using the Marks, User shall submit
all such materials to Licensor in draft form for approval, allowing sufficient
time for review by Licensor and its counsel prior to any deadline for printing.
If Licensor does not notify the User in writing of any objections to the
materials within ten (10) business days after they are received by Licensor, the
materials shall be deemed approved. The User shall not distribute any materials
to which the Licensor has objected in accordance with this Section unless and
until Licensor delivers to User a written approval of the materials.
b. User shall comply with all applicable laws and regulations
and obtain appropriate government approvals pertaining to the sale, distribution
and advertising of services covered by this License Agreement.
7. Form of Use
User agrees to use the Marks only in the form and manner and
with appropriate legends as prescribed from time to time by the Licensor, and
not to use any other trademark or service mark in combination with the Marks
without prior written approval of the Licensor.
8. Infringement Proceedings
a. User agrees to notify the Licensor of any
unauthorized use of the Marks by others promptly as it comes to User's
attention.
b. The Licensor shall have the right, in its sole discretion,
to bring infringement or unfair competition proceedings involving the Marks at
Licensor's expense and to take all reasonable steps to prevent the unauthorized
use of the Marks (hereinafter called "Enforcement Proceedings"). Licensor shall
be entitled to any money damages or settlement payments ("Damages") recovered as
the result of a judgment or settlement of Enforcement Proceedings initiated by
the Licensor. User shall cooperate fully in the prosecution of any Enforcement
Proceedings initiated by Licensor.
9. Termination
a. Except as otherwise provided herein, Licensor shall give
User written notice of any material breach of this License Agreement, whereupon
User shall have sixty (60) days from the date such notice is received to cure
such breach (the "Cure Period"). If a complete cure is not effected within the
Cure Period, or if at any time User indicates that it is unwilling or unable to
cure the breach, the License Agreement shall then terminate automatically
without the necessity of any further notice to User.
- 3 -
<PAGE>
b. This License Agreement shall terminate immediately and
automatically, without the necessity of any notice to the User, in the event
that User undertakes to license or assign the Marks to any person or entity
without the prior written consent of the Licensor. The cure provisions of
Section 9(a) shall not apply to any termination under this Section 9(b).
c. To the extent permitted by law, Licensor shall have the
right to terminate this License Agreement immediately upon written notice to
User in the event of any affirmative act of insolvency by User, or upon the
appointment of any receiver or trustee to take possession of the properties of
User or upon the winding-up, sale, consolidation, merger or any sequestration by
governmental authority of User. The cure provisions of Section 9(a) shall not
apply to any termination under this Section 9(c).
d. This License Agreement shall terminate ninety (90) days
after written notice terminating this License Agreement is received by the User.
The cure provisions of Section 9(a) shall not apply to any termination under
this Section 9(d).
10. Effect of Expiration or Termination
a. Upon expiration or termination of this License Agreement
for any reason, User agrees: (i) to discontinue immediately the preparation and
manufacture of any sales literature, promotional material or other materials
using the Marks or any marks confusingly similar thereto; and (ii) to
discontinue immediately the use of any signage displaying the Marks or any other
use of such designations.
b. Within 90 days after the expiration or termination of this
License Agreement for any reason, User agrees (i) to cease to use in any manner,
including but not limited to use in any sales literature, promotional material
or other materials, any of the Marks or any marks confusingly similar thereto;
and (ii) to deliver to Licensor all materials using the Marks.
11. Legal Relationship of the Parties and Indemnification
a. The parties shall act solely as independent entities under
this License Agreement and nothing contained herein shall create or be construed
as creating a partnership, joint venture, agency, or any other relationship
between the parties other than one of licensor and licensee of the Marks.
b. Licensor assumes no liability to User or to third parties
with respect to the performance of the services rendered by User in connection
with the Marks. User agrees to protect, exonerate, defend, indemnify and hold
Licensor harmless from any and all losses, costs, damages, claims, liabilities
or expenses, joint or several, incurred by Licensor, including reasonable
attorneys' fees, based upon or arising out of User's services or out of User's
use or misuse of the Marks.
- 4 -
<PAGE>
12. Notices
All notices or other communications hereunder to either party
shall be in writing and shall be addressed to the respective parties at the
addresses as set forth above. Notice shall also be deemed sufficient if given by
telex, telecopier, telegram or similar means of delivery.
13. Interpretation of License Agreement and Assignment
a. This License Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflicts of laws provisions.
b. Any purported assignment of rights or delegation of duties
by the User under this License Agreement, in whole or in part, without the prior
written approval by the Licensor shall be null and void and totally without
effect.
IN WITNESS WHEREOF, the parties hereto have caused this
License Agreement to be executed as of the day and year first above written.
WATERHOUSE SECURITIES, INC. NATIONAL INVESTORS CASH
MANAGEMENT FUND, INC.
By: By:
Title: Title:
- 5 -
<PAGE>
SCHEDULE A
THE MARKS
1. The designation "Kennedy Cabot & Co."
- 6 -
<PAGE>
SUBSCRIPTION AGREEMENT
National Investors Cash Management Fund, Inc. (the "Company"), a Maryland
corporation, and FDI Distribution Services, Inc. ("FDI"), a Delaware
corporation, hereby agree with each other as follows:
1. The Company hereby offers FDI and FDI hereby purchases 60,000 shares
(par value $.0001 per share) of the Kennedy Cabot Money Market Portfolio, 20,000
shares (par value $.0001 per share) of the Kennedy Cabot U.S. Government
Portfolio, and 20,000 shares (par value $.0001 per share) of the Kennedy Cabot
Municipal Portfolio of the Company (collectively known as "shares") at a price
of $1.00 per share.
2. FDI represents and warrants to the Company that the shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
3. FDI agrees that if it or any direct or indirect transferee of any of
the shares redeems any of the shares prior to the fifth anniversary of the date
the Company begins its investment activities, FDI will pay to the Company an
amount equal to the number resulting from multiplying the Company's total
unamortized organizational expenses by a fraction, the numerator of which is
equal to the number of shares redeemed by FDI or such transferee and the
denominator of which is equal to the number of shares outstanding as of the date
of such redemption, as long as the administrative position of the staff of the
Securities and Exchange Commission requires such reimbursement.
4. FDI is authorized and otherwise duly qualified to purchase and hold
shares and to enter into this Subscription Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ___ day of _____, 1998.
(SEAL) National Investors Cash Management
Fund, Inc.
ATTEST:
______________________________ By: ______________________________
(SEAL) FDI Distribution Services, Inc.
ATTEST:
______________________________ By: ______________________________
1
<PAGE>
Custody Agreement
Waterhouse
Securities
Where
Investors
Who Expect
Value
Feel Right
At Home
IRA Custodial Agreements
Traditional IRA Agreement
Roth IRA Agreement
[GRAPHIC OMITTED]
<PAGE>
Traditional IRA
WATERHOUSE NATIONAL BANK
TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL ACCOUNT AGREEMENT
(Under Section 408(a) of the Internal Revenue Code)
Please save this agreement for future reference.
Article I
1.01 The Custodian may accept additional cash contributions on behalf of the
Depositor for a tax year of the Depositor. The total cash contributions are
limited to $2,000 for the tax year unless the contribution is a rollover
contribution described in section 402(c) (but only after December 31, 1992),
403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to a simplified
employee pension plan as described in section 408(k). Rollover contributions
before January 1, 1993, include rollovers described in section 402(a)(5),
402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8), 408(d)(3), or an employer
contribution to a simplified employee pension plan described in section 408(k).
Article II
2.01 The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article III
3.01 No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
3.02 No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
Article IV
4.01 Notwithstanding any provision of this agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be made
in accordance with the following requirements and shall otherwise comply with
section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are herein incorporated by reference.
4.02 Unless otherwise elected by the time distributions are required to begin to
the Depositor under section 4.03, or to the surviving spouse under section 4.04,
other than in the case of a life annuity, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Depositor
and the surviving spouse and shall apply to all subsequent years. The life
expectancy of a nonspouse beneficiary may not be recalculated.
4.03 The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, April 1 following
the calendar year end in which the Depositor reaches age 70 1/2. By that date,
the Depositor may elect, in a manner acceptable to the trustee, to have the
balance in the custodial account distributed in :
(a) A single sum payment.
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Depositor.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Depositor and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period that
may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified period that
may not be longer than the joint life and last survivor expectancy of the
Depositor and his or her designated beneficiary.
4.04 If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her interest has
begun, distribution must continue to be made in accordance with section 4.03.
(b) If the Depositor dies before distribution of his or her interest has begun,
the entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Depositor's death, or
(ii) Be distributed in equal or substantially equal payments over the life
or life expectancy of the designated beneficiary or beneficiaries starting by
December 31 of the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving spouse, then this
distribution is not required to begin before December 31 of the year in which
the Depositor would have turned age 70 1/2.
(c) Except where distribution in the form of an annuity meeting the requirements
of section 408(b)(3) and its related regulations has irrevocably commenced,
distributions are treated as having begun on the Depositor's required beginning
date, even though payments may actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been distributed
and if the beneficiary is other than the surviving spouse, no additional cash
contributions or rollover contributions may be accepted in the account.
4.05 In the case of a distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment for
each year, divide the Depositor's entire interest in the Custodial account as of
the close of business on December 31 of the preceding year by the life
expectancy of the Depositor (or the joint life
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and last survivor expectancy of the Depositor and the Depositor's designated
beneficiary, or the life expectancy of the designated beneficiary, whichever
applies). In the case of distributions under section 4.03, determine the initial
life expectancy (or joint life and last survivor expectancy) using the attained
ages of the Depositor and designated beneficiary as of their birthdays in the
year the Depositor reaches age 70 1/2. In the case of a distribution in
accordance with section 4.04(b)(ii), determine life expectancy using the
attained age of the designated beneficiary as of the beneficiary's birthday in
the year distributions are required to commence.
4.06 The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
Article V
5.01 The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under section 408(i) and
Regulations section 1.408-5 and 1.408-6.
5.02 The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
Article VI
6.01 Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and related
regulations will be invalid.
Article VII
7.01 This agreement will be amended from time to time to comply with the
provisions of the Code and related regulations. Other amendments may be made
with the consent of the persons whose signatures appear below.
Article VIII
8.01 Representations and Responsibilities. The Depositor represents and warrants
that any information provided with respect to this Agreement shall be complete
and accurate. Further, the Depositor agrees that any directions given or actions
taken will be proper under this Agreement and that the Custodian shall be
entitled to rely on such information or directions. The Custodian shall not be
responsible for losses of any kind that may result from the Depositor's
directions, actions or failures to act and the Depositor agrees to reimburse the
Custodian for any loss it may incur as a result of such directions, actions or
failures to act. The Custodian shall not be responsible for any taxes,
penalties, judgments or expenses incurred by the Depositor in connection with
this IRA. The Custodian shall have no duty to determine whether contributions or
distributions comply with the Code, regulations, rulings or this Agreement. The
Depositor shall be responsible for all tax consequences originating from
contributions to and distributions from this IRA and acknowledges that no tax
advice has been provided by the Custodian.
8.02 Accounting. The Custodian shall, at least annually, provide the Depositor
or Beneficiary (in the case of death) with an accounting of such Depositor's
account which accounting may consist of regularly issued brokerage statements.
Such accounting shall be deemed to be accepted by the Depositor, if the
Depositor or Beneficiary does not object in writing within 60 days after the
mailing of such accounting statement.
8.03 Amendment. The Depositor irrevocably delegates to the Custodian the right
and power to amend this Custodial Agreement. Except as hereafter provided, the
Custodian will give the Depositor 30 days prior written notice of any amendment.
In case of a retroactive amendment required by law, the Custodian will provide
written notice to the Depositor of the amendment within 30 days after the
amendment is made, or if later, by the time that notice of the amendment is
required to be given under regulations or other guidance provided by the IRS.
The Depositor shall be deemed to have consented to any such amendment unless the
Depositor notifies the Custodian to the contrary within 30 days after notice to
the Depositor and requests a distribution or transfer of the balance in the
account.
8.04 Resignation and Removal of Custodian.
(a) The Custodian may resign at any time by giving at least 30 days notice to
the Depositor. The Custodian may resign and appoint a successor trustee or
custodian to serve under this agreement or under another governing instrument
selected by the successor trustee or custodian by giving the Depositor written
notice at least 30 days prior to the effective date of such resignation and
appointment, which notice shall also include a copy of such other governing
instrument, if applicable, and the related disclosure statement. The Depositor
shall then have 30 days from the date of such notice to either request a
complete distribution of the account balance or designate a different successor
trustee or custodian. If the Depositor does not request distribution of the
account or designate a different successor within such 30 days, the Depositor
shall be deemed to have consented to the appointment of the successor trustee or
custodian and the terms of any new governing instrument, and neither the
Depositor nor the successor shall be required to execute any written document to
complete the transfer of the account to the successor trustee or custodian. The
successor trustee or custodian may rely on any information, including
beneficiary designations, previously provided by the Depositor.
(b) The Depositor may at any time remove the Custodian and replace the Custodian
with a successor trustee or custodian of the Depositor's choice by giving 30
days written notice to the Custodian. In such event, the Custodian shall then
deliver the assets of the account as directed by the Depositor. However, the
Custodian may retain a portion of the assets of the IRA as a reserve for payment
of any anticipated remaining fees and expenses, and shall pay over any remainder
of this reserve to the successor trustee or custodian upon satisfaction of such
fees and expenses.
(c) The Custodian shall not be liable for any actions or failures to act on the
part of any successor Custodian nor for any tax consequences incurred by the
Depositor as a result of the transfer or distribution of assets pursuant to this
section.
8.05 Custodian's Fees and Expenses.
(a) The Depositor agrees to pay the Custodian any and all fees specified in the
Custodian's current published fee schedule for establishing and maintaining this
IRA, including any fees for distributions from, transfers from, and terminations
of this IRA. The Custodian may change its fee schedule at any time by giving the
Depositor 30 days prior written notice. In addition, the Depositor agrees to pay
any brokerage commissions attributable to the purchase or sale of assets.
(b) The Depositor agrees to pay any expenses incurred by the Custodian in the
performance of its duties in connection with the account. Such expenses include,
but are not limited to, administrative expenses, such as legal and accounting
fees, and any taxes of any kind whatsoever that may be levied or assessed with
respect to such account.
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(c) All such fees, taxes, and other administrative expenses charged to the
account shall be collected either from the assets in the account or from any
contributions to or distributions from such account if not paid by the
Depositor, but the Depositor shall be responsible for any deficiency.
(d) In the event that for any reason the Custodian is not certain as to who is
entitled to receive all or part of the Custodial Funds, the Custodian reserves
the right to withhold any payment from the Custodial account, to request a court
ruling to determine the disposition of the Custodial account assets, and to
charge the Custodial account for any expenses incurred in obtaining such legal
determination.
8.06 Withdrawal Requests. All requests for withdrawal shall be in writing on the
form provided by the Custodian. Such written notice must also contain the reason
for the withdrawal and the method of distribution being requested. Any
withdrawals shall be subject to applicable tax and other laws and regulations
including possible early withdrawal penalties and withholding requirements.
8.07 Age 70 1/2 Default Provisions.
(a) Unless the Custodian (or the Depositor, if the Custodian permits) elects
otherwise, life expectancies for purposes of calculating the required minimum
distribution shall be recalculated.
(b) If the Depositor does not choose any of the distribution methods under
Section 4.03 of this Custodial Agreement by April 1st following the calendar
year in which he/she reaches age 70 1/2, distribution shall be made to the
Depositor based on such Depositor's single life expectancy.
8.08 Death Benefit Default Provisions. Unless the Custodian (or the Beneficiary,
if the Custodian permits) elects otherwise, life expectancies for purposes of
calculating the required minimum death distribution shall be recalculated. If
the Depositor dies before his or her required beginning date and the beneficiary
does not select a method of distribution described in section 4.04(b)(i) or (ii)
by December 31st following the year of death, then distributions will be made
pursuant to proposed regulation 1.401(a)(9)-1.
8.09 Designation of Beneficiary. Except as may be otherwise required by State
law, in the event of the Depositor's death, the balance in the account shall be
paid to the beneficiary or beneficiaries designated by the Depositor on a
beneficiary designation acceptable to and filed with the Custodian. The
Depositor may change the Depositor's beneficiary or beneficiaries at any time by
filing a new beneficiary designation with the Custodian. If no beneficiary
designation is in effect, if none of the named beneficiaries survive the
Depositor, or if the Custodian cannot locate any of the named beneficiaries
after reasonable search, any balance in the account will be payable to the
Depositor's estate.
8.10 Governing Law. This Agreement shall be construed, regulated and
administered under the laws of the State of New York, and any court accounting
shall be in the courts of New York.
8.11 Arbitration. The Depositor agrees that all controversies which arise under
this Agreement or in connection with the Depositor's account shall be governed
by the Depositor's Customer Agreement with the Broker. Notwithstanding any other
provision in the document, any arbitration provision shall be subject to the
interpretation of the Code and regulations thereunder.
8.12 Inquiries. The Depositor authorizes the Custodian to furnish upon request
(i) to the Broker all information relating to the Depositor's IRA and (ii) to
the issuer of securities the Depositor's name, address and securities positions
relating to the securities of such issuer.
Article IX Self-Directed IRA Provisions
9.01 Investment of Contributions. At the direction of the Depositor, the
Custodian shall invest all contributions to the account and earnings thereon in
investments acceptable to the Custodian, which may include marketable securities
traded on a recognized exchange or "over the counter" (excluding any securities
issued by the Custodian), covered call options, certificates of deposit, and
other investments to which the Custodian consents, in such amounts as are
specifically selected and specified by Depositor in orders to the Custodian in
such form as may be acceptable to the Custodian, without any duty to diversify
and without regard to whether such property is authorized by the laws of any
jurisdiction as a trust investment. The Custodian shall be responsible for the
execution of such orders and for maintaining adequate records thereof. However,
if any such orders are not received as required, or, if received, are unclear in
the opinion of the Custodian, all or a portion of the contribution may be held
uninvested without liability for loss of income or appreciation, and without
liability for interest pending receipt of such orders or clarification, or the
contribution may be returned. The Custodian may, but need not, establish
programs under which cash deposits in excess of a minimum set by it will be
periodically and automatically invested in interest-bearing investment funds.
The Custodian shall have no duty other than to follow the written investment
directions of the Depositor, and shall be under no duty to question said
instructions and shall not be liable for any investment losses sustained by the
Depositor. All transactions shall be subject to any and all applicable Federal
State or self-regulatory organization laws and regulations, the rules,
regulations, customs and usages of any exchange, market or clearing house where
the transaction is executed and to the Custodian's prevailing policies and
practices.
9.02 Registration. All assets of the account shall be registered in the name of
the Custodian or of a suitable nominee. The same nominee may be used with
respect to assets of other investors whether or not held under agreements
similar to this one or in any capacity whatsoever. However, each Depositor's
account shall be separate and distinct; a separate account therefor shall be
maintained by the Custodian, and the assets thereof shall be held by the
Custodian in individual or bulk segregation either in the Custodian's vaults or
in depositories approved by the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
9.03 Investment Advisor. The Depositor may appoint an Investment Advisor,
qualified under Section 3(38) of the Employee Retirement Income Security Act of
1974, to direct the investment of his IRA. The Depositor shall notify the
Custodian in writing of any such appointment by providing the Custodian a copy
of the instruments appointing the Investment Advisor and evidencing the
Investment Advisor's acceptance of such appointment, an acknowledgement by the
Investment Advisor that it is a fiduciary of the account, and a certificate
evidencing the Investment Advisor's current registration under the Investment
Advisor's Act of 1940. The Custodian shall comply with any investment directions
furnished to it by the Investment Advisor, unless and until it receives written
notification from the Depositor that the Investment Advisor's appointment has
been terminated. The Custodian shall have no duty other than to follow the
written investment directions of such Investment Advisor and shall be under no
duty to question said instructions, and the Custodian shall not be liable for
any investment losses sustained by the Depositor.
9.04 No Investment Advice. The Custodian does not assume any responsibility for
rendering advice with respect to the investment and reinvestment of Depositor's
account and shall not be liable for any loss which results from Depositor's
exercise of control over his account. The
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Depositor shall have and exercise exclusive responsibility for control over the
investment of the assets of his account, and the Custodian shall not have any
duty to question his investment directives.
9.05 Prohibited Transactions. Notwithstanding anything contained herein to the
contrary, the Custodian shall not lend any part of the corpus or income of the
account to; pay any compensation for personal services rendered to the account
to; make any part of its services available on a preferential basis to; acquire
for the account any property, other than cash, from; or sell any property to,
any Depositor, any member of a Depositor's family, or a corporation controlled
by any Depositor through the ownership, directly or indirectly, of 50 percent or
more of the total combined voting power of all classes of stock entitled to
vote, or of 50 percent or more of the total value of shares of all classes of
stock of such corporation.
9.06 Unrelated Business Income Tax. If the Depositor directs investment of the
account in any investment which results in unrelated business taxable income, it
shall be the responsibility of the Depositor to so advise the Custodian and to
provide the Custodian with all information necessary to prepare and file any
required returns or reports for the account. As the Custodian may deem
necessary, and at the Depositor's expense, the Custodian may request a taxpayer
identification number for the account, file any returns, reports, and
applications for extension, and pay any taxes or estimated taxes owed with
respect to the account. The Custodian may retain suitable accountants,
attorneys, or other agents to assist it in performing such responsibilities.
9.07 Disclosures and Voting. The Custodian shall deliver, or cause to be
executed and delivered, to Depositor all notices, prospectuses, financial
statements, proxies and proxy soliciting materials relating to assets credited
to the account. The Custodian shall not vote any shares of stock or take any
other action, pursuant to such documents, with respect to such assets except
upon receipt by the Custodian of adequate written instructions from Depositor.
9.08 Miscellaneous Expenses. In addition to those expenses set out in section
8.05 of this plan, the Depositor agrees to pay any and all expenses incurred by
the Custodian in connection with the investment of the account, including
expenses of preparation and filing any returns and reports with regard to
unrelated business income, including taxes and estimated taxes, as well as any
transfer taxes incurred in connection with the investment or reinvestment of the
assets of the account.
9.09 Nonbank Trustee Provision. If the Custodian is a nonbank trustee, the
Depositor shall substitute another trustee or custodian in place of the
Custodian upon receipt of notice from the Commissioner of the Internal Revenue
Service or his delegate that such substitution is required because the Custodian
has failed to comply with the requirements of Income Tax Regulations Section
1.408-2(e), or is not keeping such records, making such returns, or rendering
such statements as are required by applicable law, regulations, or other
rulings. The successor trustee or custodian shall be a bank, insured credit
union, or other person satisfactory to the Secretary of the Treasury pursuant to
Section 408(a)(2) of the Code. Upon receipt by the Custodian of written
acceptance by its successor of such successor's appointment, Custodian shall
transfer and pay over to such successor the assets of the account (less amounts
retained pursuant to section 8.04 of the Custodial Agreement) and all records
(or copies thereof) of the Custodian pertaining thereto, provided that the
successor trustee or custodian agrees not to dispose of any such records without
the Custodian's consent.
Instructions
(Section references are to the Internal Revenue Code unless otherwise noted.)
Purpose of Form
Form 5305-A is a model custodial account agreement that meets the requirements
of section 408(a) and has been automatically approved by the IRS. An individual
retirement account (IRA) is established after the form is fully executed by both
the individual (Depositor) and the Custodian and must be completed no later than
the due date of the individual's income tax return for the tax year (without
regard to extensions). This account must be created in the United States for the
exclusive benefit of the Depositor or his or her beneficiaries. Individuals may
rely on regulations for the Tax Reform Act of 1986 to the extent specified in
those regulations. Do not file Form 5305-A with the IRS. Instead, keep it for
your records. For more information on IRAs, including the required disclosure
you can get from your trustee, get Pub. 590, Individual Retirement Arrangements
(IRAs).
Definitions
Custodian. The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as Custodian.
Depositor. The Depositor is the person who establishes the Custodial account.
Broker. The Broker is the introducing brokerage firm with which the Depositor
opened this IRA account.
Identifying Number
The Depositor's social security number will serve as the identifying number of
his or her IRA. An employer identification number is required only for an IRA
account for which a return is filed to report unrelated business taxable income.
An employer identification number is required for a common fund created for
IRAs.
IRA for Nonworking Spouse
Form 5305-A may be used to establish the IRA custodial account for a nonworking
spouse. Contributions to an IRA custodial account for a nonworking spouse must
be made to a separate IRA custodial account established by the nonworking
spouse.
Specific Instructions
Article IV. Distributions made under this article may be made in a single sum,
periodic payment, or a combination of both. The distribution option should be
reviewed in the year the Depositor reaches age 70 1/2 to ensure that the
requirements of section 408(a)(6) have been met.
Article VIII. Article VIII and any that follow it may incorporate additional
provisions that are agreed to by the depositor and custodian to complete the
agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
custodian, custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the depositor, etc. Use additional pages if
necessary and attach them to this form.
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DISCLOSURE STATEMENT
This Disclosure Statement, which is provided to you in compliance with Treasury
Regulation section 1.408-6(d)(4), explains what you should know about your
individual retirement account (IRA), and is a general review of the federal
income tax law applicable to it.
A. Right To Revoke Your IRA Account.
You may revoke your IRA within 7 days after you sign the IRA Adoption Agreement
by hand-delivering or mailing a written notice to Waterhouse National Bank, c/o
Waterhouse Securities, Inc., Attn: Retirement Plans Customer Service Dept., 100
Wall St., 23rd floor, New York, NY 10005. If you revoke your account by mailing
a written notice, such notice must be postmarked by the 7th day after you sign
the Adoption Agreement. If you revoke your IRA within the 7 day period you will
receive a refund of the entire amount of your contributions to the IRA without
any adjustment for earnings or any administrative expenses. If you exercise this
revocation, we are still required to report the contribution on Form 5498
(except transfers) and the revoked distribution on Form 1099-R. If you have any
questions regarding this procedure, please call 1-800-934-2995.
If you mail the written notification, it will be deemed mailed on the date of
the postmark. If mailed, the written notice of revocation must be mailed in the
United States in an envelope, or other appropriate wrapper, first class mail
with the postage prepaid. If you send the notification by certified or
registered mail, it will be deemed to be mailed as of the date of certification
or registration.
B. General Requirements of An IRA.
1. Your contributions must be made in cash, unless you are making a rollover
contribution and the Custodian accepts non-cash rollover contributions.
2. The annual contributions you make on your behalf may not exceed the lesser of
100% of your compensation or $2,000, unless you are making a rollover, transfer,
or SEP contribution. If contributions are being made under an employer's SIMPLE
Retirement Plan, you must establish a separate SIMPLE-IRA document to which only
SIMPLE contributions may be made. This type of IRA is called a "SIMPLE-IRA".
"SIMPLE-IRA" contributions may not be made into this account.
3. Your regular annual contributions for any taxable year may be deposited at
any time during that taxable year and up to the due date for the filing of your
federal income tax return for that taxable year, no extensions. This generally
means April 15th of the following year.
4. The Custodian of your IRA must be a bank, savings and loan association,
credit union or a person who is approved to act in such a capacity by the
Secretary of the Treasury.
5. No portion of your IRA funds may be invested in life insurance contracts.
6. Your interest in your IRA is nonforfeitable at all times.
7. The assets in your IRA may not be commingled with other property except in a
common trust fund or common investment fund.
8. You may not invest the assets of your IRA in collectibles (as described in
Section 408(m) of the Internal Revenue Code.) A collectible is defined as any
work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or
any other tangible personal property specified by the IRS. However, if the
Custodian permits, specially minted US Gold, Silver and platinum coins and
certain state-issued coins are permissible IRA investments. Beginning on 1/1/98
you may also invest in certain gold, silver, platinum or palladium bullion. Such
bullion must be permitted by the custodian and held in the physical possession
of the IRA trustee or custodian.
9. Your interest in your IRA must begin to be distributed to you by the April
1st following the calendar year you attain the age of 70 1/2. The methods of
distribution, election deadlines, and other limitations are described in detail
below.
C. Who Is Eligible To Establish An IRA?
You are permitted to make a regular contribution to your IRA for any taxable
year prior to the taxable year you attain age 70 1/2, and if you receive
compensation for such taxable year. Compensation includes salaries, wages, tips,
commissions, bonuses, alimony, royalties from creative efforts and "earned
income" in the case of self-employed. The amount which is deductible, depends
upon whether or not you are an active participant in a retirement plan
maintained by your employer; your adjusted gross income (Modified AGI); your
marital status; and your tax filing status.
D. Active Participant.
You are considered an active participant if you participate in your employer's
qualified pension, profit-sharing, or stock bonus plan qualified under Section
401(a) of the Internal Revenue Code ("the Code"); qualified annuity under
Section 403(a) of the Code; a simplified employee pension plan (SEP) under
Section 408(k) of the Code; a retirement plan established by a government for
its employees (this does not include a Section 457 plan); Tax-sheltered
annuities (TSA) or custodial accounts under Section 403(b) of the Code; pre-1959
pension trusts under Section 501(c)(18) of the Code; and SIMPLE retirement plans
under Section 408(p) of the Code.
If you are not sure whether you are covered by an employer-sponsored retirement
plan, check with your employer or check your Form W-2 for the year in question.
The W-2 form will have a check in the "pension plan" box if you are covered by a
retirement plan. You can also obtain IRS Publication 923 for more information on
active participation in retirement plans for IRA deduction purposes.
E. Regular Contributions.
The maximum amount you may contribute for any one year is the lesser of 100% of
your compensation or $2,000. This is your contribution limit. The deductibility
of regular IRA contributions depends upon your marital status, tax filing
status, whether or not you are an "active participant" and your Modified AGI.
Deductibility of Regular Contributions for tax years before 1/1/98.
Nonactive Participants. If you (and your spouse) are not an active participant,
then the $2,000 contribution limit is also your deduction limit for federal
income tax purposes.
Unmarried Active Participant (or Married Persons filing separate returns who did
not live with their spouses at any time during the year). If you are unmarried
and your Modified AGI is $25,000 or less you may deduct the total amount
contributed. If your Modified AGI is $35,000 or more, no deduction is permitted.
If your Modified AGI is over $25,000 but less than $35,000, then a calculation
must be made to determine your deductible limit for the year. The calculation
reduces your otherwise deductible limit of $2,000 by .20 for every $1 of
Modified AGI between $25,000 and $35,000. The IRS has provided worksheets for
this calculation in the Form 1040 and 1040A instruction booklets.
Married Persons Filing Joint Tax Returns (if either spouse is an active
participant). If you file a joint tax return with your spouse and your combined
Modified AGI is $40,000 or less you may deduct
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Traditional IRA
the total amount contributed. If your combined Modified AGI is $50,000 or more,
no deduction is permitted. If your Modified AGI is over $40,000 but less than
$50,000, then a calculation similar to the one described above must be made. The
calculation reduces each spouse's otherwise deductible limit of $2,000 by .20
for every $1 of Modified AGI between $40,000 and $50,000.
Married Persons Filing Separate Returns (who lived together at any time during
the year). If you have a separate Modified AGI of more than $10,000 no deduction
is permitted if either you or your spouse was an active participant for the
year. If you or your Spouse's separate Modified AGI is more than $0 but less
than $10,000, then each spouse's deductible limit of $2,000 is reduced by .20
for every $1 of Modified AGI between $0 and $10,000.
Deductibility of Regular Contributions for tax years beginning after 12/31/97:
The dollar thresholds for pre-1998 years for certain active participants in
employer-sponsored plans will be replaced with the following thresholds:
Married Participants Single Participants
1998 $50,000 - $ 60,000 $30,000 - $40,000
1999 $51,000 - $ 61,000 $31,000 - $41,000
2000 $52,000 - $ 62,000 $32,000 - $42,000
2001 $53,000 - $ 63,000 $33,000 - $43,000
2002 $54,000 - $ 64,000 $34,000 - $44,000
2003 $60,000 - $ 70,000 $40,000 - $50,000
2004 $65,000 - $ 75,000 $45,000 - $55,000
2005 $70,000 - $ 80,000 $50,000 - $60,000
2006 $75,000 - $ 85,000 $50,000 - $60,000
2007 $80,000 - $100,000 $50,000 - $60,000
Married participants filing separately still have a beginning threshold of zero.
Therefore the phase out range remains $0 - $10,000. This rule also applies to a
nonactive participant spouse who files separately, where their spouse is an
active participant.
Limitation for Spouse Who is not an Active Participant. In the case where an IRA
participant is not an active participant in an employer plan at any time during
a taxable year but whose spouse is an active participant, a special dollar
threshold shall apply. In these cases the phase-out dollar threshold for
deductible IRA contributions shall be $150,000 - $160,000, beginning for taxable
years after 12/31/97, and such spouse must file a joint income tax return with
their spouse who is the active participant.
Spousal IRAs. If during any year you receive compensation and your spouse
receives no compensation (or receives compensation), you may make contributions
to both your IRA and your spouse's IRA. If you are eligible then you may
contribute the lesser of 100% of your combined compensation or $4,000 divided
any way you wish so long as no more than $2,000 is contributed into either
account. You and your spouse must file a joint tax return and have unequal
compensations to take advantage of this spousal contribution limit.
If you are over the age of 70-1/2 and your spouse is under age 70-1/2, then a
contribution may still be made for the year into the IRA established by your
spouse. Such contribution, however, is limited to the lesser of 100% of your
combined compensation or $2,000.
If you or your spouse are an active participant in an employer-sponsored plan,
then the IRA deduction for your IRA and your spouse's IRA is based upon the
"phase-out" amounts in exactly the same manner as the phase-out under the
Married Persons Filing Joint Tax Returns.
$200 Minimum Deduction. If you fall into any of the categories listed above,
your minimum allowable deduction will be $200 until phased out under the
appropriate marital status. In other words, if your deductible amount calculated
under the appropriate dollar amounts above results in a deduction between $0 and
$200, your permitted deduction is $200 instead of the calculated deduction.
Nondeductible IRA Contributions. You may make a nondeductible IRA contribution
in one of two ways. First, you are permitted to treat any IRA contributions
which are not deductible due to your active participation status as explained
above as nondeductible contributions. Secondly, you are permitted to treat an
otherwise deductible IRA contribution as a nondeductible contribution. Your
total contribution for the year however, is still limited to the lesser of 100%
of your compensation or $2,000.
Nondeductible IRA contributions represent money in your IRA which has already
been taxed. Therefore, when you receive a distribution from any of your IRAs, a
portion of each distribution will be treated as a tax-free return of your
nondeductible contributions. You are responsible for indicating the amount of
nondeductible IRA contributions you made for the year on IRS Form 8606 which is
attached to your federal income tax return. You should also be aware that there
is a penalty of $100 if you should overstate the nondeductible amount unless you
can show it was due to a reasonable cause. There is also a $50 penalty if you do
not file the IRS Form 8606 for years that you are required to do so.
If you make a nondeductible IRA contribution for a year and you decide not to
treat it as a nondeductible contribution, you must withdraw the contribution
plus earnings attributable to the nondeductible contributions on or before that
year's tax filing deadline, including extensions, and you may not take a
deduction for such amounts. Such earnings will be taxable to you in the year in
which the contribution was made.
Simplified Employee Pension Plan (SEP) Contributions. Your employer may make a
SEP contribution on your behalf into this IRA up to 15% of your compensation.
This limit is a per employer limit. Therefore if you work for more than one
employer who maintains a SEP plan, you may receive up to 15% of your
compensation from each employer. Your employer may contribute to this IRA or any
other IRA on your behalf under a SEP plan even if you are age 70 1/2 or over,
and even if you are covered under a qualified plan for the year.
For Plan Years beginning before January 1, 1994, not more than $200,000 (as
adjusted annually by the Secretary of the Treasury) will be considered as your
compensation in any year. For Plan Years beginning after December 31, 1993, not
more than $150,000 (as adjusted annually by the Secretary of the Treasury
beginning in 1995) will be considered as your compensation in any year.
Therefore for years beginning before January 1, 1994 the maximum contribution
made by your employer may not exceed the smaller of $30,000 or 15% of your
compensation. For years beginning after December 31, 1993 and subsequent years
until the $150,000 compensation limit equals or exceeds $200,000, the maximum
contribution will be less than $30,000.
F. Excess Contributions.
Generally an excess IRA contribution is any contribution which exceeds the
contribution limits, and such excess contribution is subject to a 6% excise tax
penalty on the principal amount of the excess each year until the excess is
corrected.
Method of Withdrawing Excess in a Timely Manner. This 6% penalty may be avoided,
if the excess amount plus the earnings attributable to the excess are
distributed by your tax filing deadline including extensions for the year the
excess contribution was made, and you do not take a deduction for such excess
amount. If you decide to correct your excess in this manner, the principal
amount of the excess returned is not taxable, however, the earnings attributable
to the excess are taxable to you in the year in which the contribution was made.
In addition, if you
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are under age 59 1/2 the earnings attributable are subject to a 10% premature
distribution penalty. THIS IS THE ONLY METHOD OF CORRECTING AN EXCESS
CONTRIBUTION THAT WILL AVOID THE 6% PENALTY!
Method of Withdrawing Excess After Tax Filing Due Date. If you do not correct
your excess contribution in the manner prescribed above by the due date for
filing your tax return, then you may withdraw the principal amount of the excess
(no earnings need be distributed). The 6% penalty will, however, apply first to
the year in which the excess was made and each subsequent year until it is
withdrawn.
$2,000 Rule. If the principal amount of your excess contribution is withdrawn
after your tax filing deadline for the year during which the contribution was
made, it is not taxable unless the total amount of contributions you made during
the year the excess was made exceeded $2,000. In this case, the principal amount
of the excess withdrawn is taxable and would be subject to the 10% premature
distribution penalty if you are not yet age 59 1/2.
Undercontribution Method. Another method of correcting an excess contribution is
to treat a prior year excess as a regular contribution in a subsequent year.
Basically all you do is undercontribute in the first subsequent year where you
have an unused contribution limit until your excess amount is used up.
However,once again you will be subject to the 6% penalty in the first year and
each subsequent year that an excess remains.
G. Rollover IRAs.
Rollover Contribution from Another IRA - A rollover from another IRA is any
amount you receive from one IRA and roll some or all of it over into another
IRA. You are not required to roll over the entire amount received from the first
IRA. However, any amount you do not roll over will be taxed at ordinary income
tax rates for federal income tax purposes.
The following special rules also apply to rollovers between IRAs.
1. The rollover must be completed no later than the 60th day after the day the
distribution was received by you.
2. You may have only one IRA to IRA rollover during a 12 consecutive month
period measured from the date you received a distribution of an IRA which was
rolled over to another IRA. (See IRS Publication 590 for more information.)
3. The same property you receive in a distribution must be the same property you
roll over into the second IRA. For example, if you receive a distribution from
an IRA of property, such as stocks, that same stock must be rolled over into the
second IRA.
4. You are required to make an irrevocable election indicating that this
transaction will be treated as a rollover contribution.
3. You are not required to receive a complete distribution from your IRA in
order to make a rollover contribution into another IRA, nor are you required to
roll over the entire amount you received from the first IRA.
5. If you inherit an IRA due to the death of the participant, you may not roll
this IRA into your own IRA unless you are the spouse of the decedent.
6. If you are age 70 1/2 or older and wish to roll over to another IRA, you must
first satisfy the minimum distribution requirement for that year and then the
rollover of the remaining amount may be made.
7. Rollovers from a SEP or an Employer-IRA follow the IRA to IRA rollover rules
since your contributions under these types of plans are funded directly into
your own IRA.
Rollovers From SIMPLE-IRA Plans. A SIMPLE-IRA is a separate IRA that may only
receive contributions under an Employer-sponsored SIMPLE Retirement Plan. These
contributions must remain segregated in a SIMPLE-IRA account for a two-year
period from your initial participation in the Employer's SIMPLE plan. A rollover
or transfer from a SIMPLE-IRA to any other IRA may not occur until this initial
two-year period has been met. Rollovers or transfers between SIMPLE-IRA plans
are permitted. All of the IRA to IRA rollover rules generally apply to rollovers
from a SIMPLE-IRA.
Rollovers From Employer-Sponsored Plans. Employer-Sponsored Plans Eligible for
Rollovers to IRAs - Rollovers to IRAs are permitted if you have received an
eligible rollover distribution from one of the following:
1. A qualified plan under Section 401(a);
2. A qualified annuity under Section 403(a); or
3. A Tax-Sheltered Annuity (TSA) or Custodial Account under Section 403(b).
Eligible Rollover Distributions before 1/1/93. Eligible rollover distributions
from a qualified plan, annuity or TSA include a qualified total distribution, a
partial distribution or a total distribution to you as an eligible alternate
payee under a qualified domestic relations order (QDRO). (The following
citations are from the Internal Revenue Code prior to its amendment under the
Unemployment Compensation Amendments Act of 1992.)
A Qualified Total Distribution includes either a lump sum distribution (as
defined under ss.402(e)(4)(A)), a plan termination distribution (as defined
under ss.402(a)(5)(E)(i)(I)), or a distribution of accumulated deductible
employee contributions (as defined under ss.402(a)(5)(E)(i)(III)). A Partial
Distribution is also permitted to be rolled over if it meets the requirements
under ss.402(a)(5)(D). A spouse or former spouse may make a rollover pursuant to
a QDRO (as defined under ss.414(p)) if it meets the requirements under
ss.402(a)(6)(F).
Conduit IRAs Before 1/1/93 - A conduit IRA is an IRA which contains only
qualified total distributions from qualified plans, annuities and TSAs. The IRA
is then used as a "holding account" until you subsequently roll that IRA back
into another qualified plan, annuity or TSA. In order to take advantage of this
conduit treatment, you must establish a separate IRA plan into which the
qualified total distribution will be rolled over. When you decide to roll the
conduit IRA back into a qualified plan or TSA, the entire balance in the IRA
plan must be distributed. However, you are not required to roll over the entire
amount into a qualified plan or TSA. Any amounts not rolled back into a
qualified plan or TSA will be taxed to you at ordinary income tax rates. A
surviving spouse who rolls a qualified total distribution to the spouse's own
IRA may not use that IRA as a Conduit IRA.
Eligible Rollover Distributions after 12/31/92: Eligible rollover distributions
from a qualified plan, annuity, or TSA generally include any distribution which
is not:
1. part of a series of substantially equal payments that are made at least once
a year and that will last for:
(a) your lifetime (or your life expectancy), or
(b) your lifetime and your beneficiary's lifetime (or joint life
expectancies), or
(c) a period of ten years or more.
2. attributable to your required minimum distribution for the year; and
3. attributable to your "after-tax" employee contributions to the plan, since
these amounts will be non-taxable when they are paid to you.
4. Caution: A pending technical correction would not allow amounts attributable
to a "hardship" distribution from a 401(k) plan to be rolled to an IRA for
years beginning after 12/31/97.
Rollovers to Roth IRAs. You are not permitted to make a qualified rollover
contribution to a Roth IRA from any IRA plan (other than another Roth IRA) if
your AGI for the year during which the rollover is made exceeds $100,000 or you
are a married individual filing a separate return.
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Traditional IRA
Adjusted gross income means the AGI determined for the year during which the
rollover is made, but reduced by the taxable amount of an IRA distribution
includible in income but only with respect to such amount that was rolled over
to a Roth IRA. Taxable IRA distributions that are not rolled over to a Roth IRA
are included in the AGI amount. Qualified rollovers between Roth IRAs are
permitted regardless of your AGI.
Taxation in Rolling Over from Traditional IRA to Roth IRA. The amount that would
have been included in your income if you had taken a distribution is included in
gross income "ratably" over a four-tax-year period beginning with the tax year
in which the distribution is made. In order for the taxable amount of an IRA
distribution to be included in income ratably over 4 years, such rollover must
be made before 1/1/99. Any rollovers from an IRA to a Roth IRA after 12/31/98
will be fully includible in income the year in which rolled over. The 10%
premature distribution tax shall not apply to the taxable amount of an IRA
rolled to a Roth IRA. Income tax withholding will apply to the distribution.
CAUTION: Pending technical corrections would apply the 10% premature additional
tax to a distribution from a Roth IRA of an amount that was rolled over from a
traditional IRA if the distribution is made before the first day of the taxable
year immediately following the 5-year period beginning with the year of the
rollover unless an exception applies. Also, if the distribution is attributable
to a rollover conversion made in 1998, an additional 10 % tax will apply to the
portion includible in income regardless of age.
Contribution Conversion of Traditional IRA to a Roth IRA. Generally, the
conversion of a traditional IRA to a Roth IRA is treated as a distribution and
subsequent rollover conversion contribution. However, if an individual decides
by their tax filing deadline (not including extensions) to transfer a current
year contribution plus earnings thereon from an IRA to a Roth IRA, no amount
shall be includible in gross income as long as no deduction was taken for the
contribution. In addition, pending technical corrections would also permit you
to "convert" a contribution plus earnings from a Roth IRA to a traditional IRA
by your tax filing deadline, including extensions.
Qualified Rollover Contribution. This term includes: (a) Rollovers between Roth
IRA accounts; and (b) Traditional IRA to a Roth IRA. Qualified Rollovers must
meet the general IRA rollover rules outlined in your Disclosure Statement,
except that the 12 month rollover restriction shall not apply to rollovers
between a traditional IRA and a Roth IRA. However, the 12 month rule shall apply
to rollovers between Roth IRAs. Rollovers from employer-sponsored plans, such as
qualified plans and 403(b)s, to a Roth IRA are not permitted. However, you could
roll over from the employer plan to a traditional IRA, and then roll over to a
Roth IRA.
CAUTION: Pending technical corrections would not allow rollover conversions from
a SEP IRA or SIMPLE IRA to a Roth IRA.
Direct Rollovers to Another Plan. You can elect a direct rollover of all or any
portion of your payment that is an "eligible rollover distribution", as
described above. In a direct rollover, the eligible rollover distribution is
paid directly from the Plan to an IRA or another employer plan that accepts
rollovers. If you elect a direct rollover, you are not taxed on the payment
until you later take it out of the IRA or the employer plan, and you will not be
subject to the 20% mandatory income tax withholding otherwise applicable to
Eligible Rollover Distributions which are paid directly to you. Your employer is
required to provide you with a Notice regarding the effects of electing or not
electing a direct rollover to an IRA or another employer plan. Although a direct
rollover is accomplished similar to a transfer, the Custodian must report the
direct rollover on Form 5498 as a rollover contribution.
Eligible Rollover Distribution Paid to You. If you choose to have your eligible
rollover distribution paid to you (instead of electing a direct rollover), you
will receive only 80% of the payment, because the plan administrator is required
to withhold 20% of the payment and send it to the IRS as income tax withholding
to be credited against your taxes. However, you may still roll over the payment
to an IRA within 60 days of receiving the distribution. The amount rolled over
will not be taxed until you take it out of the IRA. If you want to roll over
100% of the payment to an IRA, you must replace the 20% that was withheld from
other sources. If you roll over only the 80% that you received, you will be
taxed on the 20% that was withheld and that is not rolled over. In either event,
the 20% that was withheld can be claimed on your income tax return as a credit
toward that year's tax liability.
Conduit IRAs after 12/31/92. A direct rollover (or rollover within 60 days of
receipt) of any eligible rollover distribution may be treated as a "Conduit
IRA", provided that a separate IRA is established for purposes of retaining the
ability to later roll these funds back into a qualified plan or 403(b) plan. The
conduit IRA need not be completely distributed in order for a rollover back to a
qualified plan or 403(b) plan, however, the amount distributed must be rolled
over to the qualified plan or 403(b) plan. In addition, a surviving spouse may
also treat such conduit IRA for purposes of rolling over into the surviving
spouse's qualified plan or 403(b) plan.
Special Rules for surviving spouses, alternate payees, and other beneficiaries.
If you are a surviving spouse, you may choose to have an eligible rollover
distribution paid in a direct rollover to an IRA or paid to you. If you have the
payment paid to you, you can keep it or roll it over yourself to an IRA, but you
cannot roll it over to an employer plan. If you are the spouse or former spouse
alternate payee with respect to a Qualified Domestic Relations Order, you may
have the payment paid as a direct rollover or paid to you which you may roll
over to an IRA or another employer plan. If you are a beneficiary other than the
surviving spouse, you cannot choose a direct rollover and you cannot roll over
the payment yourself.
The following additional rules apply to a rollover from an employer-sponsored
plan to an IRA:
1. The rollover must be completed no later than the 60th day after the day the
distribution was received by you.
2. You are required to make an irrevocable election indicating that this
transaction will be treated as a rollover contribution.
3. You are not required to contribute the entire amount you received from the
qualified plan, qualified annuity or TSA distribution.
4. If you are age 70-1/2 or older and wish to roll over your qualified plan,
qualified annuity or TSA distribution to an IRA, you must first satisfy the
minimum distribution requirement for that year and then the rollover of the
remaining amount may be made.
5. If your distribution consists of money which was nondeductible employee
contributions, these amounts may not be rolled over to an IRA.
6. If your distribution consists of property (i.e., stocks) you may either roll
over the same property (the same stock) or you may sell the distributed property
and roll over the proceeds from the sale. This is true whether the proceeds from
the sale are more or less than the fair market value of the property on the date
of distribution. You may not keep the property received in the distribution and
roll over cash which represents the fair market value of the property.
H. Distributions.
Taxation of Distributions. When you start withdrawing from your IRA, you may
take the distributions in regular payments, random withdrawals or in a single
sum payment. Generally all amounts distributed to you from your IRA are included
in your gross income in the taxable year in which they are received. However, if
you have made nondeductible contributions to your IRA, the nontaxable portion of
the distribution, if any, will be a percentage based upon the ratio of your
unrecovered nondeductible contributions to the aggregate of all IRA balances,
including SEP, SIMPLE and rollover contributions, as of the end of the year in
which you take the distribution, plus distributions from the account during the
year. All taxable distributions from your IRA are
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Traditional IRA
taxed at ordinary income tax rates for federal income tax purposes and are not
eligible for either capital gains treatment or 5/10 year averaging.
Premature Distributions. If you are under age 59 1/2 and receive a distribution
from your IRA account, a 10% additional income tax will apply to the taxable
portion of the distribution unless the distribution is received due to death;
disability; a series of substantially equal periodic payments at least annually
over your life expectancy or the joint life expectancy of you and your
designated beneficiary; medical expenses that exceed 7.5% of your adjusted gross
income; health insurance premiums paid by certain unemployed individuals; a
qualifying rollover distribution; or the timely withdrawal of the principal
amount of an excess or nondeductible contribution.
If you request a distribution in the form of a series of substantially equal
payments, and you modify the payments before 5 years have elapsed and before
attaining age 59 1/2, the 10% additional income tax will apply retroactively to
the year payments began through the year of such modification.
Premature Distributions After 12/31/97. If you are under age 59 1/2 and receive
a distribution from your IRA account, a 10% additional income tax will apply to
the taxable portion of the distribution unless the distribution is received due
to death; disability; a series of substantially equal periodic payments at least
annually over your life expectancy or the joint life expectancy of you and your
designated beneficiary; medical expenses in excess of 7.5% of your adjusted
gross income; health insurance premiums paid by certain unemployed individuals;
qualified acquisition costs of a first time homebuyer; qualified higher
education expenses; a qualifying rollover distribution; or the timely withdrawal
of the principal amount of an excess or nondeductible contribution.
Age 70 1/2 Required Minimum Distributions. You are required to begin receiving
minimum distributions from your IRA by your required beginning date (the April 1
of the year following the year you attain age 70 1/2). The year you attain age
70 1/2 is referred to as your "first distribution calendar year". Your minimum
distribution is based upon the value of your account at the end of the prior
year (less any required distributions you received between January 1 and April
1st of the year following your first distribution calendar year) by the joint
life expectancy of you and your designated beneficiary. If you do not have a
designated beneficiary then the minimum distribution will be based upon your
single life expectancy.
As you can see, who you designate as beneficiary under your IRA will affect the
period over which distributions may be made. If you have more than one primary
beneficiary, generally the beneficiary with the shortest life expectancy will be
the measuring life expectancy used for determining the period over which
distributions will be made. If no beneficiary is named or you name a beneficiary
which is not an individual (i.e., your estate), distributions will be based upon
your single life expectancy.
By the April 1 following your first distribution calendar year, you must make
certain elections on a form provided by the Custodian. If no election is made,
you will be deemed to have elected to take your distributions over a period not
to exceed your single life expectancy.
The required distributions for the second distribution calendar year and for
each subsequent distribution calendar year must be made by December 31 of such
year.
Unless otherwise elected by the Custodian (or by you, if the Custodian permits)
in determining the amount to be distributed for the second distribution calendar
year and subsequent distribution calendar years, your life expectancy (and your
designated beneficiary's life expectancy) shall be recalculated.
If the Custodian elects (or you elect, if the Custodian permits) to recalculate
your life expectancy or your spouse's life expectancy, you will generally have a
longer period of time over which payments will be made and therefore the minimum
distribution will be less.
CAUTION: If you or your spouse should die, the decedent's life expectancy is
reduced to zero which will reduce the period of distribution to the survivor's
single life expectancy. If recalculation is not elected, the death of either
spouse will not have an effect on the payment period.
In any distribution calendar year you may take more than the required minimum.
However, if you take less than the required minimum with respect to any
distribution calendar year, you are subject to a federal excise tax penalty of
50% of the difference between the amount required to be distributed and the
amount actually distributed.
Minimum Distribution Incidental Benefit (MDIB) Rule. Basically, this rule
specifies that benefits provided under a retirement plan must be for the primary
benefit of a participant rather than for his/her beneficiaries. If your spouse
is your sole beneficiary, these special MDIB rules do not apply. The amount
required to be distributed under the MDIB rule may in some cases be more than
the amount required under the normal age 70 1/2 required minimum distribution
rules.
If someone other than or in addition to your spouse is a named beneficiary, the
minimum distribution required is the greater of the amount determined under the
regular 70 1/2 rules and the amount determined under the MDIB rules.
The minimum amount to be distributed under the MDIB rules is the amount
determined by taking the balance in your IRA account and dividing it by a factor
taken from an IRS table specified in IRS regulations. The table provides life
expectancies for you and a beneficiary who is assumed to be 10 years younger.
Death Distributions. If you die after your required beginning date, the balance
in your IRA will be distributed in a manner which is at least as rapid as the
method of distribution being used on the date of your death.
If you die before your required beginning date, the balance in your IRA must
generally be distributed within 5 years from the date of your death. However
your beneficiary(ies) may elect to receive the balance in your account over the
single life expectancy of your designated beneficiary if distributions begin no
later than the end of the year containing the one year anniversary of your
death. In addition, if your only beneficiary is your surviving spouse,
distributions need not commence until December 31st of the year you would have
attained age 70 1/2.
I. Prohibited Transactions.
If you or your beneficiary engage in a prohibited transaction (as defined under
Section 4975 of the Internal Revenue Code) with your IRA, it will lose its tax
exemption and you must include the value of your account in your gross income
for that taxable year. If you pledge any portion of your IRA as collateral for a
loan, the amount so pledged will be treated as a distribution and will be
included in your gross income for that year.
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Traditional IRA
J. Penalties.
If you are under age 59 1/2 and receive a premature distribution from your IRA,
an additional 10% income tax will apply on the taxable amount of the
distribution. If you make an excess contribution to your IRA and it is not
corrected on a timely basis, an excise tax of 6% is imposed on the excess
amount. This tax will apply each year to any part or all of the excess which
remains in your account. If you are age 70 1/2 or over or if you should die, and
the appropriate required minimum distributions are not made from your IRA, an
additional tax of 50% is imposed upon the difference between what should have
been distributed and what was actually distributed.
For tax years ending before 1/1/97, you will be taxed an additional 15% on any
amount you receive and include in income during a calendar year from qualified
plans, TSAs and IRAs which exceeds the greater of $150,000 (unindexed) or
$112,500 (indexed for cost of living). This 15% excess distribution tax is
repealed for distributions occurring after 12/31/96. In the event of an IRA
participant's death before 1/1/97, the participant's estate may be subject to a
15% tax on the "excess accumulation" in all of the individual's qualified plans,
TSAs and IRAs. The 15% excess accumulation tax is repealed for decedents dying
after 12/31/96.
You must file IRS Form 5329 with the Internal Revenue Service for any year an
additional tax is due. You must file IRS Form 8606 for any year you make a
nondeductible IRA contribution. The penalty for not filing Form 8606, when
required, is $50.
K. Income Tax Withholding.
All withdrawals from your IRA (except a direct transfer) are subject to federal
income tax withholding. You may, however, elect not to have withholding apply to
your IRA distribution in most cases. If withholding does apply to your
distribution, it is at the rate of 10% of the amount of the distribution.
L. Transfers.
A direct transfer of all or a portion of your funds is permitted from this
Traditional IRA to another Traditional IRA or visa versa. Such transfers do not
constitute a distribution since you are never in receipt of the funds. The
monies are transferred directly to the new trustee or custodian.
If you should transfer all or a portion of your IRA to your former spouse's IRA
under a divorce decree (or under a written instrument incident to divorce) or
separation instrument, you will not be deemed to have made a taxable
distribution, but merely a transfer. The portion so transferred will be treated
at the time of the transfer as the IRA of your spouse or former spouse.
If your spouse is the beneficiary of your IRA, in the event of your death, your
spouse may "assume" your IRA. The assumed IRA is then treated as your surviving
spouse's IRA.
M. Federal Estate And Gift Taxes.
Generally there is no specific exclusion for IRAs under the estate tax rules.
Therefore, in the event of your death, your IRA balance will be includible in
your gross estate for federal estate tax purposes. However, if your surviving
spouse is the beneficiary of your IRA, the amount in your IRA may qualify for
the marital deduction available under Section 2056 of the Internal Revenue Code.
A transfer of property for federal gift tax purposes does not include an amount
which a beneficiary receives from a IRA plan.
N. IRS Approval As To Form.
This IRA Custodial Agreement has been approved by the Internal Revenue Service
as to form. This is not an endorsement of the plan in operation or of the
investments offered.
O. Additional Information.
You may obtain further information on IRAs from your District Office of the
Internal Revenue Service. In particular you may wish to obtain IRS Publication
590 (Individual Retirement Arrangements).
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Roth IRA
WATERHOUSE NATIONAL BANK
ROTH INDIVIDUAL RETIREMENT ACCOUNT
CUSTODIAL ACCOUNT AGREEMENT
(Under Section 408A of the Internal Revenue Code)
Please save this agreement for future reference.
Article I
1.01 If this Roth IRA is not designated as a Roth Conversion IRA, then, except
in the case of a rollover contribution described in section 408A(e), the
Custodian will accept only cash contributions and only up to a maximum amount of
$2,000 for any tax year of the Depositor.
1.02 If this Roth IRA is designated as a Roth Conversion IRA, no contributions
other than IRA Conversion Contributions made during the same tax year will be
accepted.
Article II
2.01 The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single Depositor, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married Depositor who files jointly, between AGI of $150,000 and $160,000;
and for a married Depositor who files separately, between $0 and $10,000. In the
case of a conversion, the Custodian will not accept IRA Conversion Contributions
in a tax year if the Depositor's AGI for that tax year exceeds $100,000 or if
the Depositor is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
Article III
3.01 The Depositor's interest in the balance in the custodial account is
nonforfeitable.
Article IV
4.01 No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
4.02 No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3),
which provides an exception for certain gold, silver, and platinum coins, coins
issued under the laws of any state, and certain bullion.
Article V
5.01 If the Depositor dies before his or her entire interest is distributed to
him or her and the Depositor's surviving spouse is not the sole beneficiary, the
entire remaining interest will, at the election of the Depositor or, if the
Depositor has not so elected, at the election of the beneficiary or
beneficiaries, either:
(a) Be distributed by December 31 of the year containing the fifth anniversary
of the Depositor's death, or
(b) Be distributed over the life expectancy of the designated beneficiary
starting no later than December 31 of the year following the year of the
Depositor's death.
If distributions do not begin by the date described in 5.01(b), distribution
method 5.01(a) will apply.
5.02 In the case of distribution method 5.01(b) above, to determine the minimum
annual payment for each year, divide the Depositor's entire interest in the
trust as of the close of business on December 31 of the preceding year by the
life expectancy of the designated beneficiary using the attained age of the
designated beneficiary as of the beneficiary's birthday in the year
distributions are required to commence and subtract 1 for each subsequent year.
5.03 If the Depositor's spouse is the sole beneficiary on the Depositor's date
of death, such spouse will then be treated as the Depositor.
Article VI
6.01 The Depositor agrees to provide the Custodian with information necessary
for the Custodian to prepare any reports required under sections 408(i) and
408A(d)(3)(E), and Regulations section 1.408-5 and 1.408-6, and under guidance
published by the Internal Revenue Service.
6.02 The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
Article VII
7.01 Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
Article VIII
8.01 This agreement will be amended from time to time to comply with the
provisions of the Code, related regulations, and other published guidance. Other
amendments may be made with the consent of the persons whose signatures appear
on the Roth IRA Adoption Agreement.
Article IX
9.01 Representations and Responsibilities. The Depositor represents and warrants
that any information provided with respect to this Agreement shall be complete
and accurate. Further, the Depositor agrees that any directions given or actions
taken will be proper under this Agreement and that the Custodian shall be
entitled to rely on such information or directions. The Custodian shall not be
responsible for losses of any kind that may result from the Depositor's
directions,
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Roth IRA
actions or failures to act and the Depositor agrees to reimburse the Custodian
for any loss it may incur as a result of such directions, actions or failures to
act. The Custodian shall not be responsible for any taxes, penalties, judgments
or expenses incurred by the Depositor in connection with this IRA. The Custodian
shall have no duty to determine whether contributions or distributions comply
with the Code, regulations, rulings or this Agreement. The Depositor shall be
responsible for all tax consequences originating from contributions to and
distributions from this IRA and acknowledges that no tax advice has been
provided by the Custodian.
9.02 Annual Accounting. The Custodian shall, at least annually, provide the
Depositor or Beneficiary (in the case of death) with an accounting of such
Depositor's account which accounting may consist of regularly issued brokerage
statements. Such accounting shall be deemed to be accepted by the Depositor, if
the Depositor or Beneficiary does not object in writing within 60 days after the
mailing of such accounting statement.
9.03 Amendment. The Depositor irrevocably delegates to the Custodian the right
and power to amend this Custodial Agreement. Except as hereafter provided, the
Custodian will give the Depositor 30 days prior written notice of any amendment.
In case of a retroactive amendment required by law, the Custodian will provide
written notice to the Depositor of the amendment within 30 days after the
amendment is made, or if later, by the time that notice of the amendment is
required to be given under regulations or other guidance provided by the IRS.
The Depositor shall be deemed to have consented to any such amendment unless the
Depositor notifies the Custodian to the contrary within 30 days after notice to
the Depositor and requests a distribution or transfer of the balance in the
account.
9.04 Resignation and Removal of Custodian.
(a) The Custodian may resign at any time by giving at least 30 days notice to
the Depositor. The Custodian may resign and appoint a successor trustee or
custodian to serve under this agreement or under another governing instrument
selected by the successor trustee or custodian by giving the Depositor written
notice at least 30 days prior to the effective date of such resignation and
appointment, which notice shall also include a copy of such other governing
instrument, if applicable, and the related disclosure statement.
The Depositor shall then have 30 days from the date of such notice to either
request a complete distribution of the account balance or designate a different
successor trustee or custodian. If the Depositor does not request distribution
of the account or designate a different successor within such 30 days, the
Depositor shall be deemed to have consented to the appointment of the successor
trustee or custodian and the terms of any new governing instrument, and neither
the Depositor nor the successor shall be required to execute any written
document to complete the transfer of the account to the successor trustee or
custodian. The successor trustee or custodian may rely on any information,
including beneficiary designations, previously provided by the Depositor.
(b) The Depositor may at any time remove the Custodian and replace the Custodian
with a successor trustee or custodian of the Depositor's choice by giving 30
days written notice to the Custodian. In such event, the Custodian shall then
deliver the assets of the account as directed by the Depositor. However, the
Custodian may retain a portion of the assets of the Roth IRA as a reserve for
payment of any anticipated remaining fees and expenses, and shall pay over any
remainder of this reserve to the successor trustee or custodian upon
satisfaction of such fees and expenses.
9.05 Custodian's Fees and Expenses.
(a) The Depositor agrees to pay the Custodian any and all fees specified in the
Custodian's current published fee schedule for establishing and maintaining this
Roth IRA, including but not limited to any fees for distributions from,
transfers from, and terminations of this Roth IRA. The Custodian may change its
fee schedule at any time by giving the Depositor 30 days prior written notice.
In addition, the Depositor agrees to pay any brokerage commissions attributable
to the purchase or sale of assets.
(b) The Depositor agrees to pay any expenses incurred by the Custodian in the
performance of its duties in connection with the account. Such expenses include,
but are not limited to, administrative expenses, such as legal and accounting
fees, and any taxes of any kind whatsoever that may be levied or assessed with
respect to such account.
(c) All such fees, taxes, and other administrative expenses charged to the
account shall be collected either from the assets in the account or from any
contributions to or distributions from such account if not paid by the
Depositor, but the Depositor shall be responsible for any deficiency.
(d) In the event that for any reason the Custodian is not certain as to who is
entitled to receive all or part of the Custodial Funds, the Custodian reserves
the right to withhold any payment from the Custodial Account, to request a court
ruling to determine the disposition of the custodial assets, and to charge the
Custodial Account for any expenses incurred in obtaining such legal
determination.
9.06 Withdrawal Requests. All requests for withdrawal shall be in writing on the
form provided by the Custodian. Such written notice must also contain the reason
for the withdrawal and the method of distribution being requested. Any
withdrawals shall be subject to applicable tax and other laws and regulations
including possible early withdrawal penalties and withholding requirements.
9.07 Designation of Beneficiary. Except as may be otherwise required by State
law, in the event of the Depositor's death, the balance in the account shall be
paid to the beneficiary or beneficiaries designated by the Depositor on a
beneficiary designation acceptable to and filed with the Custodian. The
Depositor may change the Depositor's beneficiary or beneficiaries at any time by
filing a new beneficiary designation with the Custodian. If no beneficiary
designation is in effect, if none of the named beneficiaries survive the
Depositor, or if the Custodian cannot locate any of the named beneficiaries
after reasonable search, any balance in the account will be payable to the
Depositor's estate.
9.08 Governing Law. This Agreement shall be construed, regulated and
administered under the laws of the State of New York, and any court accounting
shall be in the courts of New York.
9.09 Arbitration. The Depositor agrees that all controversies which arise under
this Agreement or in connection with the Depositor's account shall be governed
by the Depositor's Customer Agreement with the Broker. Notwithstanding any other
provision in the document, any arbitration provision shall be subject to the
interpretation of the Code and regulations thereunder.
9.10 Inquiries. The Depositor authorizes the Custodian to furnish upon request
(i) to the Broker all information relating to the Depositor's IRA and (ii) to
the issuer of securities the Depositor's name, address and securities positions
relating to the securities of such issuer.
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Roth IRA
Article X
Self-Directed IRA Provisions
10.01 Investment of Contributions. At the direction of the Depositor (or the
direction of the beneficiary upon the Depositor's death) the Custodian shall
invest all contributions to the account and earnings thereon in investments
acceptable to the Custodian, which may include marketable securities traded on a
recognized exchange or "over the counter" (excluding any securities issued by
the Custodian), covered call options, certificates of deposit, and other
investments to which the Custodian consents, in such amounts as are specifically
selected and specified by Depositor in orders to the Custodian in such form as
may be acceptable to the Custodian, without any duty to diversify and without
regard to whether such property is authorized by the laws of any jurisdiction as
a custodial investment. The Custodian shall be responsible for the execution of
such orders and for maintaining adequate records thereof. However, if any such
orders are not received as required, or, if received, are unclear in the opinion
of the Custodian, all or a portion of the contribution may be held uninvested
without liability for loss of income or appreciation, and without liability for
interest pending receipt of such orders or clarification, or the contribution
may be returned. The Custodian may, but need not, establish programs under which
cash deposits in excess of a minimum set by it will be periodically and
automatically invested in interest-bearing investment funds. The Custodian shall
have no duty other than to follow the written investment directions of the
Depositor, and shall be under no duty to question said instructions and shall
not be liable for any investment losses sustained by the Depositor. All
transactions shall be subject to any and all applicable, Federal, State and self
regulatory organization laws and regulations, the rules, regulations, customs
and usages of any Exchange, Market or clearing house where the transaction is
executed, and to the Custodian's prevailing policies and practices.
10.02 Registration. All assets of the account shall be registered in the name of
the Custodian or of a suitable nominee. The same nominee may be used with
respect to assets of other investors whether or not held under agreements
similar to this one or in any capacity whatsoever. However, each Depositor's
account shall be separate and distinct; a separate account therefor shall be
maintained by the Custodian, and the assets thereof shall be held by the
Custodian in individual or bulk segregation either in the Custodian's vaults or
in depositories approved by the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
10.03 Investment Advisor. The Depositor may appoint an Investment Advisor,
qualified under Section 3(38) of the Employee Retirement Income Security Act of
1974, to direct the investment of his Roth IRA. The Depositor shall notify the
Custodian in writing of any such appointment by providing the Custodian a copy
of the instruments appointing the Investment Advisor and evidencing the
Investment Advisor's acceptance of such appointment, an acknowledgement by the
Investment Advisor that it is a fiduciary of the account, and a certificate
evidencing the Investment Advisor's current registration under the Investment
Advisor's Act of 1940. The Custodian shall comply with any investment directions
furnished to it by the Investment Advisor, unless and until it receives written
notification from the Depositor that the Investment Advisor's appointment has
been terminated. The Custodian shall have no duty other than to follow the
written investment directions of such Investment Advisor and shall be under no
duty to question said instructions, and the Custodian shall not be liable for
any investment losses sustained by the Depositor.
10.04 No Investment Advice. The Custodian does not assume any responsibility for
rendering advice with respect to the investment and reinvestment of Depositor's
account and shall not be liable for any loss which results from Depositor's
exercise of control over his account. The Custodian and Depositor may
specifically agree in writing that the Depositor shall have and exercise
exclusive responsibility for control over the investment of the assets of his
account, and the Custodian shall not have any duty to question his investment
directives.
10.05 Prohibited Transactions. Notwithstanding anything contained herein to the
contrary, the Custodian shall not lend any part of the corpus or income of the
account to; pay any compensation for personal services rendered to the account
to; make any part of its services available on a preferential basis to; acquire
for the account any property, other than cash, from; or sell any property to,
any Depositor, any member of a Depositor's family, or a corporation controlled
by any Depositor through the ownership, directly or indirectly, of 50 percent or
more of the total combined voting power of all classes of stock entitled to
vote, or of 50 percent or more of the total value of shares of all classes of
stock of such corporation.
10.06 Unrelated Business Income Tax. If the Depositor directs investment of the
account in any investment which results in unrelated business taxable income, it
shall be the responsibility of the Depositor to so advise the Custodian and to
provide the Custodian with all information necessary to prepare and file any
required returns or reports for the account. As the Custodian may deem
necessary, and at the Depositor's expense, the Custodian may request a taxpayer
identification number for the account, file any returns, reports, and
applications for extension, and pay any taxes or estimated taxes owed with
respect to the account. The Custodian may retain suitable accountants,
attorneys, or other agents to assist it in performing such responsibilities.
10.07 Disclosures and Voting. The Custodian shall deliver, or cause to be
executed and delivered, to Depositor all notices, prospectuses, financial
statements, proxies and proxy soliciting materials relating to assets credited
to the account. The Custodian shall not vote any shares of stock or take any
other action, pursuant to such documents, with respect to such assets except
upon receipt by the Custodian of adequate written instructions from Depositor.
10.08 Miscellaneous Expenses: In addition to those expenses set out in Section
9.05 of this plan, the Depositor agrees to pay any and all expenses incurred by
the Custodian in connection with the investment of the account, including
expenses of preparation and filing any returns and reports with regard to
unrelated business income, including taxes and estimated taxes, as well as any
transfer taxes incurred in connection with the investment or reinvestment of the
assets of the account.
10.09 Nonbank Custodian Provision. If the Custodian is a nonbank custodian, the
Depositor shall substitute another trustee or custodian in place of the
Custodian upon receipt of notice from the Commissioner of the Internal Revenue
Service or his delegate that such substitution is required because the Custodian
has failed to comply with the requirements of Income Tax Regulations Section
1.408-2(e), or is not keeping such records, making such returns, or rendering
such statements as are required by applicable law, regulations, or other
rulings. The successor trustee or custodian shall be a bank, insured credit
union, or other person satisfactory to the Secretary of the Treasury pursuant to
Section 408(a)(2) of the Code. Upon receipt by the Custodian of written
acceptance by its successor of such successor's appointment, Custodian shall
transfer and pay over to such successor the assets of the account (less amounts
retained pursuant to Section 9.04 of the Custodial Agreement) and all records
(or copies thereof) of the Custodian pertaining thereto, provided that the
successor trustee or custodian agrees not to dispose of any such records without
the Custodian's consent.
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Roth IRA
General Instructions
(Section references are to the Internal Revenue Code unless otherwise noted.)
Purpose of Form
Form 5305-RA is a model custodial account agreement that meets the requirements
of section 408A and has been automatically approved by the IRS. A Roth
Individual Retirement Account (Roth IRA) is established after the form is fully
executed by both the individual (Depositor) and the Custodian. This account must
be created in the United States for the exclusive benefit of the Depositor or
his or her beneficiaries. Do not file Form 5305-RA with the IRS. Instead, keep
it for your records.
Unlike contributions to traditional individual retirement arrangements,
contributions to a Roth IRA are not deductible from the Depositor's gross
income; and distributions after 5 years that are made when the Depositor is
59 1/2 years of age or older or on account of death, disability, or the purchase
of a home by a first-time homebuyer (limited to $10,000), are not includible in
gross income. For more information on Roth IRAs, including the required
disclosure the Depositor can get from the Custodian, get Pub. 590, Individual
Retirement Arrangements (IRAs).
This Roth IRA can be used by a Depositor to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth IRA, and
annual cash contributions of up to $2,000 from the Depositor; or (2) if
designated as a Roth Conversion IRA, only IRA Conversion Contributions for the
same tax year. To simplify the identification of funds distributed from Roth
IRAs, Depositors are encouraged to maintain IRA Conversion Contributions for
each tax year in a separate Roth IRA.
Definitions
Roth Conversion IRA. A Roth Conversion IRA is a Roth IRA that accepts only IRA
Conversion Contributions made during the same tax year.
IRA Conversion Contributions. IRA Conversion Contributions are amounts rolled
over, transferred, or considered transferred from a nonRoth IRA to a Roth IRA. A
nonRoth IRA is an individual retirement account or annuity described in section
408(a) or 408(b), other than a Roth IRA.
Custodian. The Custodian must be a bank or savings and loan association, as
defined in section 408(n), or any person who has the approval of the IRS to act
as custodian.
Depositor. The Depositor is the person who establishes the custodial account.
Broker. The Broker is the introducing brokerage firm with which the Depositor
opened this account.
Specific Instructions
Article I. The Depositor may be subject to a 6 percent tax on excess
contributions if (1) contributions to other individual retirement arrangements
of the Depositor have been made for the same tax year, (2) the Depositor's
adjusted gross income exceeds the applicable limits in Article II for the tax
year, or (3) the Depositor's and spouse's compensation does not exceed the
amount contributed for them for the tax year. The Depositor should see the
disclosure statement or Pub. 590 for more information.
Article IX. Article IX and any that follow it may incorporate additional
provisions that are agreed to by the Depositor and Custodian to complete the
agreement. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
Custodian, Custodian's fees, state law requirements, beginning date of
distributions, accepting only cash, treatment of excess contributions,
prohibited transactions with the Depositor, etc. Use additional pages if
necessary and attach them to this form.
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Roth IRA
ROTH IRA DISCLOSURE STATEMENT
This Disclosure Statement, which is provided to you in compliance with Treasury
Regulation section 1.408-6(d)(4), explains what you should know about your
individual retirement account (IRA), and is a general review of the federal
income tax law applicable to it.
A. Right To Revoke Your Roth IRA.
You may revoke your Roth IRA within 7 days after you sign the Roth IRA Adoption
Agreement by hand-delivering or mailing a written notice to Waterhouse National
Bank, c/o Waterhouse Securities, Inc., Attn: Retirement Plans Customer Service
Dept., 100 Wall St., 23rd floor, New York, NY 10005. If you revoke your account
by mailing a written notice, such notice must be postmarked by the 7th day after
you sign the Adoption Agreement. If you revoke your Roth IRA within the 7 day
period you will receive a refund of the entire amount of your contributions to
the Roth IRA without any adjustment for earnings or any administrative expenses.
If you exercise this revocation, we are still required to report the
contribution on Form 5498 (except transfers) and the revoked distribution on
Form 1099-R. If you have any questions regarding this procedure, please call
1-800-934-2995.
If you mail the written notification, it will be deemed mailed on the date of
the postmark. If mailed, the written notice of revocation must be mailed in the
United States in an envelope, or other appropriate wrapper, first class mail
with the postage prepaid. If you send the notification by certified or
registered mail, it will be deemed to be mailed as of the date of certification
or registration.
B. General Requirements of a Roth IRA.
1. Your contributions must be made in cash, unless you are making a qualified
rollover contribution and the Custodian accepts non-cash rollover contributions.
2. The annual contributions you make on your behalf to all of your Roth IRAs and
traditional IRAs may not exceed the lesser of 100% of your compensation or
$2,000, unless you are making a rollover or transfer contribution from a
traditional IRA or another Roth IRA.
3. Your regular annual Roth IRA contributions for any taxable year may be
deposited at any time during that taxable year and up to the due date for the
filing of your federal income tax return for that taxable year, no extensions.
This generally means April 15th of the following year.
4. The Custodian of your Roth IRA must be a bank, savings and loan association,
credit union or a person who is approved to act in such a capacity by the
Secretary of the Treasury.
5. No portion of your Roth IRA funds may be invested in life insurance
contracts.
6. Your interest in your Roth IRA is nonforfeitable at all times.
7. The assets in your Roth IRA may not be commingled with other property except
in a common trust fund or common investment fund.
8. You may not invest the assets of your Roth IRA in collectibles (as described
in Section 408(m) of the Internal Revenue Code.) A collectible is defined as any
work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage, or
any other tangible personal property specified by the IRS. However, if the
Custodian permits, specially-minted US gold, silver, and platinum coins and
certain state-issued coins are permissible Roth IRA investments. Beginning on
1/1/98, you may also invest in certain gold, silver, platinum or palladium
bullion, if the trustee or custodian permits. Such bullion must be in the
physical possession of the Roth IRA trustee or custodian.
C. Who Is Eligible To Establish a Roth IRA?
You are permitted to make regular contributions to your Roth IRA for any taxable
year if you receive compensation for such taxable year. Compensation includes
salaries, wages, tips, commissions, bonuses, alimony, royalties from creative
efforts and "earned income" in the case of self-employed. The amount which is
permitted to be contributed depends upon your modified adjusted gross income
(Modified AGI); your marital status; and your tax filing status discussed below.
D. Contributions to A Roth IRA.
Regular Roth Contributions. The maximum amount you may contribute for any year
is the lesser of 100% of your compensation or $2,000. Your actual contribution
limit depends upon your marital status, tax filing status, and your Modified
AGI.
All regular contributions to a Roth IRA are nondeductible. The maximum amount
you may contribute to a Roth IRA is reduced by any contributions you make to all
of your traditional IRAs for the same tax year. In other words, the total
maximum combined annual contribution to a traditional IRA and a Roth IRA is
$2,000.
Unmarried Taxpayer (or a Married Person filing a separate return who did not
live with their spouse at any time during the year). If you are unmarried and
your Modified AGI is $95,000 or less, you may contribute up to the maximum
amount of $2,000 to your Roth IRA. If your Modified AGI is $110,000 or more, no
contribution is permitted. If your Modified AGI is over $95,000 but less than
$110,000, then a calculation must be made to determine your Roth IRA
contribution limit for the year. The calculation reduces your otherwise
allowable contribution limit of $2,000 by .13 for every $1 of Modified AGI
between $95,000 and $110,000.
Married Person Filing Joint Tax Return. If you file a joint tax return with your
spouse and your combined Modified AGI is $150,000 or less, you may contribute up
to the maximum amount of $2,000 to your Roth IRA. If your combined Modified AGI
is $160,000 or more, no contribution is permitted. If your Modified AGI is over
$150,000 but less than $160,000, then a calculation similar to the one described
above must be made. The calculation reduces each spouse's otherwise allowable
Roth IRA contribution limit of $2,000 by .20 for every $1 of Modified AGI
between $150,000 and $160,000.
Married Persons Filing Separate Returns (who lived together at any time during
the year). If you have a separate Modified AGI of more than $10,000, no
contribution is permitted to your Roth IRA. If your or your Spouse's separate
Modified AGI is more than $0 but less than $10,000, then the Roth IRA
contribution limit of $2,000 is reduced by .20 for every $1 of Modified AGI
between $0 and $10,000.
Spousal Roth IRAs. If you and your spouse file a joint tax return and have
unequal compensation (including no compensation for one spouse) you may
establish separate Roth IRAs for each spouse. The total annual contribution
limit for both Roth IRAs may not exceed the lesser of 100% of the combined
compensation for both spouses or $4,000, but neither Roth IRA may accept more
than $2,000 per spouse.
The maximum Roth IRA contribution of $2,000 for the spouse is then reduced by:
(1) regular traditional IRA contributions made on behalf of such spouse; and
(2) Roth IRA contributions made on behalf of such spouse.
This $2,000 limit may be further reduced if the modified AGI exceeds
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Roth IRA
the levels discussed above.
$200 Minimum Roth IRA Contribution. If you fall into any of the categories
listed above, your minimum allowable Roth IRA contribution will be $200 until
phased out under the appropriate marital status.
In other words, if your Roth IRA contribution amount calculated under the
appropriate dollar amounts discussed above results in a contribution between $0
and $200, your permitted contribution is $200 instead of the calculated amount.
If the result is not a multiple of $10, round up to the nearest $10.
Modified AGI. Modified AGI does not include any distributions from a traditional
IRA that are rolled over to a Roth IRA and included in income. Modified AGI is
determined after deductible traditional IRA contributions. Caution: Pending
technical corrections would provide that modified AGI is determined before a
deductible traditional IRA contribution.
Other Contributions. Your Roth IRA may not accept rollovers from an
employer-sponsored plan, employer contributions made under a SEP or SIMPLE plan
and traditional IRA contributions. However, certain rollovers and transfers as
described below may be made.
Miscellaneous Contribution Rules
1. Contributions are permitted after you attain age 70 1/2, so long as you have
compensation discussed earlier.
2. Contributions are permitted regardless of whether you are an active
participant in an employer-sponsored plan.
E. Excess Contribution To A Roth IRA.
Generally, an excess Roth IRA contribution is any contribution which exceeds the
contribution limits. Such excess amount is subject to a 6% excise tax on the
principal remaining amount of the excess each year until the excess is
corrected.
Method of Withdrawing Excess in a Timely Manner. This 6% excise tax may be
avoided, if the excess amount plus the earnings attributable to the excess are
distributed to you by your tax filing deadline including extensions for the year
during which the excess contribution was made. If you decide to correct your
excess in this manner, the principal amount of the excess returned to you is not
taxable, however, the earnings attributable to the excess are taxable to you in
the year in which the contribution was made. In addition, if you are under age
59 1/2, the earnings attributable to the excess amount are subject to a 10%
additional income tax. This is the only method of correcting an excess
contribution that will avoid the 6% excise tax!
Method of Withdrawing Excess After Tax Filing Due Date. If you do not withdraw
your excess contribution in the manner prescribed above by the due date for
filing your tax return, then you may withdraw the principal amount of the excess
(no earnings need be distributed). The 6% excise tax will, however, apply first
to the year in which the excess was made and each subsequent year until it is
withdrawn.
Undercontribution Method. Another method of correcting an excess contribution is
to treat a prior year excess as a regular Roth IRA contribution in a subsequent
year. Basically all you do is undercontribute in the first subsequent year where
you have an unused contribution limit until your excess amount is used up.
However,once again, you will be subject to the 6% excise tax in the first year
and each subsequent year that an excess remains.
F. Contribution Conversions of Traditional IRA To A Roth IRA.
If you decide by your tax filing deadline (not including extensions) to transfer
a current year contribution plus earnings from a Traditional IRA to a Roth IRA,
no amount will be included in your gross income as long as you did not take a
deduction for the amount of the converted contribution. Caution: Pending
technical corrections would also allow you to make a contribution conversion
plus earnings from a Roth IRA to a Traditional IRA by your tax filing deadline
and would permit such contribution conversions plus earnings to be made by your
tax filing deadline including extensions.
G. Rollover Roth IRAs.
Rollover Contribution from Another Roth IRA - A rollover contribution from
another Roth IRA is any amount you receive from one Roth IRA and within 60 days
roll some or all of it over into another Roth IRA. You are not required to roll
over the entire amount received from the first Roth IRA. However, any taxable
amount (generally earnings) you do not roll over will be taxed at ordinary
income tax rates for federal income tax purposes and may be subject to
additional income taxes.
The following special rules also apply to rollovers between Roth IRAs:
1. The rollover must be completed no later than the 60th day after the day the
distribution was received by you from the first Roth IRA.
2. You may have only one Roth IRA to Roth IRA rollover during a 12 consecutive
month period measured from the date you received a distribution from a Roth IRA
which was rolled over to another Roth IRA.
3. The same property you receive in a distribution from the first Roth IRA must
be the same property you roll over into the second Roth IRA. For example, if you
receive a distribution from a Roth IRA of property, such as stocks, that same
stock must be the property rolled over into the second Roth IRA.
4. You are required to make an irrevocable election indicating that this
transaction will be treated as a rollover contribution.
5. You are not required to receive a complete distribution from your Roth IRA in
order to make a rollover contribution into another Roth IRA, nor are you
required to roll over the entire amount you received from the first Roth IRA
into the second Roth IRA.
6. If you inherit a Roth IRA due to the death of the participant, you may not
roll this Roth IRA into your own Roth IRA unless you are the spouse of the
deceased Roth IRA participant.
Rollovers From Employer-Sponsored Plans. You may not roll over from an
employer-sponsored plan to a Roth IRA. However, you may roll over from an
employer-sponsored plan to a traditional IRA and then "convert" the traditional
IRA to a Roth IRA in a Rollover Conversion explained below.
Employer-Sponsored Plans Eligible for Rollovers to Traditional IRAs. Rollovers
to Traditional IRAs are permitted if you have received an eligible rollover
distribution from one of the following:
1. A qualified plan under Section 401(a);
2. A qualified annuity under Section 403(a);
3. A Tax-Sheltered Annuity (TSA) or Custodial Account under Section 403(b); or
4. A Federal Employee's Thrift Savings Plan.
For more information concerning rollovers from an employer-sponsored retirement
plan to a traditional IRA, please refer to the traditional IRA's disclosure
statement.
Rollover Conversion from a Traditional IRA to a Roth IRA. You are permitted to
make a qualified rollover contribution from a Traditional IRA to a Roth IRA if
your Modified AGI (not including the taxable amount rolled over) for the year
during which the rollover is made does not exceed $100,000 and you are not a
married person filing a separate tax return. This is called a "rollover
conversion" and may be done at any time without waiting the usual 12 months.
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Roth IRA
Taxation in Completing a Rollover Conversion from a Traditional IRA to a Roth
IRA. If you complete a rollover conversion from a Traditional IRA to a Roth IRA,
the rollover amount (to the extent taxable) is generally included in your income
for the year during which the rollover is made. However, the 10% additional
income tax for premature distributions does not apply.
For rollover conversions made during 1998, you will include the taxable amount
of the traditional IRA distribution in income "ratably" over a four-tax-year
period beginning in 1998.
Any rollover conversions from a Traditional IRA to a Roth IRA after 12/31/98
will be fully includible in income the year in which you receive the
distribution.
CAUTION: Pending technical corrections would provide that, with respect to 1998
rollover conversions, if the taxpayer dies before including the taxable amounts
in income over a 4-year period, all remaining amounts will be included in gross
income for the taxable year of death. However, if the surviving spouse of such
deceased Roth IRA participant is the beneficiary of the Roth IRA, the surviving
spouse may elect to continue including the remaining amount in income over the
4-year period as if the surviving spouse were the distributee.
The trustee or custodian of your Roth IRA may require you to establish a
separate Roth IRA for a 1998 rollover conversion and a separate Roth IRA for
rollover conversions after 1998.
H. Distributions From a Roth IRA.
Taxation of Distributions. "Qualified" distributions are neither subject to
income tax nor the 10% additional income tax for premature distributions.
Nonqualified distributions are taxable to the extent such distribution is
attributable to the income earned in the account.
When you start withdrawing from your Roth IRA, you may take the distributions in
regular payments, random withdrawals or in a single sum payment.
Qualified Distributions. A Qualified distribution is one made:
1. on or after you attain age 59 1/2;
2. to a beneficiary after your death;
3. on account of you becoming disabled (defined under Section 72(m)(7) IRC);
4. for qualified first time homebuyer expenses.
AND
after the end of the 5 year period beginning with the first taxable year for
which you made a regular contribution to a Roth IRA.
For rollover conversion contributions from a traditional IRA to a Roth IRA, the
5 year period begins with the year in which the rollover was made. The Custodian
of your Roth IRA may require that you establish separate Roth IRA plans for
regular Roth IRA contributions, rollovers and transfers between Roth IRAs and
rollover conversions from a traditional IRA.
Nonqualified Distributions. Distributions from a Roth IRA which are made as a
nonqualified distribution are treated as made from contributions to the Roth IRA
to the extent that such distribution, when added to all previous distributions
from the Roth IRA, does not exceed the aggregate amount of contributions to the
Roth IRA.
In other words, nonqualified distributions are treated as taken from the
nontaxable portion first (the contributions) until the aggregate distributions
exceed the aggregate contributions. When the aggregate distributions exceed the
aggregate contributions, then the earnings will be treated as part of the
distribution for taxation purposes. The portion of the nonqualified distribution
that represents earnings will be taxable and subject to the 10% additional
income tax for premature distributions, unless an exception applies. It is
anticipated that the IRS will develop a tax form for you to use to keep records
on the contributions you make to your Roth IRA and to figure any taxable,
nonqualified distributions from your Roth IRA.
Distributions Made Before the End of the 5 Year Period. Distributions taken
before the end of the 5 year period are taxable (to the extent you receive the
earnings attributable) and are subject to the 10% additional income tax if the
participant is not age 59 1/2. However, the 10% additional income tax is avoided
if the distribution meets one of the exceptions under Section 72(t).
CAUTION: Pending technical corrections would provide that the 10% additional tax
on early distributions will apply to rollover conversions if the taxpayer
withdraws any portion of the taxable conversion amount before the end of the 5
year period unless an exception under Section 72(t) applies. Also, if the
taxpayer withdraws any portion of the taxable conversion amount before the end
of the 5 year period, an additional 10% tax will apply to the taxable portion of
the rollover conversion if such conversion occurs in 1998 and the 4-year income
inclusion rule applies.
Basis Recovery Rules for Distributions from Different IRA Plans. The taxation of
distributions from a Roth IRA shall be treated separately from the taxation of a
distribution from other IRA plans. In other words, nondeductible contributions
made to your traditional IRA will continue to be recovered tax-free on a ratable
basis.
Caution. Pending technical corrections would also provide that a Rollover
Conversion Roth IRA will be treated separately from regular Roth IRAs and that
Rollover Conversion Roth IRAs that are subject to a different 5-year aging
period would be treated separately. In addition, pending technical corrections
would provide that Roth IRA distributions would be subject to the following
ordering rules: first, from rollover conversion contributions to a Roth IRA
during 1998 from a traditional IRA eligible for the 4-year income inclusion;
second, from rollover conversion contributions to a Roth IRA after 1998 from a
traditional IRA not eligible for the 4 year income inclusion; and third, from
contributions to a Roth IRA that are not rollover contributions.
Premature Distributions. If you are under age 59 1/2 and receive a
"nonqualified" distribution from your Roth IRA, a 10% additional income tax will
apply to the taxable portion (generally the earnings portion) of the
distribution unless the distribution is received due to death; disability; a
qualifying rollover distribution; the timely withdrawal of the principal amount
of an excess; substantially equal periodic payments; certain medical expenses;
health insurance premiums paid by certain unemployed individuals; qualified
higher education expenses; or qualified first time homebuyer expenses.
Required Distributions. Unlike a traditional IRA, you are not required to begin
distributions when you attain age 70 1/2. Also, the incidental death benefit
requirements (referred to as MDIB) do not apply to the Roth IRA.
Death Distributions. If you die, the balance in your Roth IRA must generally be
distributed no later than December 31st of the year containing the 5th
anniversary of your death. However your beneficiary(ies) may elect to receive
the balance in your account over the non-recalculated single life expectancy of
your designated beneficiary if distributions begin no later than the end of the
year containing the one year anniversary of your death. If your spouse is your
sole beneficiary, your spouse is automatically deemed to assume your Roth IRA as
their own Roth IRA.
I. Prohibited Transactions With A Roth IRA.
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<PAGE>
If you or your beneficiary engage in a prohibited transaction ( as defined under
Section 4975 of the Internal Revenue Code) with your
Roth IRA
Roth IRA, it will lose its tax exemption and you must include the taxable
portion of your account in your gross income for that taxable year. If you
pledge any portion of your Roth IRA as collateral for a loan, the amount so
pledged will be treated as a distribution and the taxable portion will be
included in your gross income for that year.
J. Additional Taxes And Penalties.
If you are under age 59 1/2 and receive a nonqualified premature distribution
from your Roth IRA, an additional 10% income tax will apply on the taxable
amount of the distribution (generally the earnings portion only), unless an
exception under Section 72(t) applies.
CAUTION: As mentioned earlier, pending technical corrections would assess a 10%
additional tax if you are under age 59 1/2 plus another 10% additional tax
regardless of your age if you withdraw any portion of a 1998 Rollover Conversion
that you made from your traditional IRA to your Roth IRA before the 5-year
period ends.
If you make an excess contribution to your Roth IRA and it is not corrected on a
timely basis, an excise tax of 6% is imposed on the excess amount. This tax will
apply each year to any part or all of the excess which remains in your account.
If you should die, and the appropriate required death distributions are not made
from your Roth IRA, an excise tax of 50% is assessed to your beneficiary based
upon the difference between the amount that should have been distributed and the
amount that was actually distributed.
You must file IRS Form 5329 with the Internal Revenue Service for any year an
additional tax is due.
K. Income Tax Withholding.
All withdrawals from your Roth IRA (except a direct transfer) are subject to
federal income tax withholding. You may, however, elect not to have withholding
apply to your Roth IRA distribution in most cases. If withholding does apply to
your distribution, it is at the rate of 10% of the amount of the distribution.
L. Transfers.
A direct transfer of all or a portion of your funds is permitted from this Roth
IRA to another Roth IRA or visa versa. Such transfers do not constitute a
distribution since you are never in receipt of the funds. The monies are
transferred directly to the new trustee or custodian. Transfers are neither
subject to the 12-month restriction nor the 60 day rollover period usually
associated with rollovers.
If you should transfer all or a portion of your Roth IRA to your former spouse's
Roth IRA under a divorce decree (or under a written instrument incident to
divorce) or separation instrument, you will not be deemed to have made a taxable
distribution, but merely a transfer. The portion so transferred will be treated
at the time of the transfer as the Roth IRA of your spouse or former spouse.
If your spouse is the beneficiary of your Roth IRA, in the event of your death,
your spouse may "assume" your Roth IRA. The assumed Roth IRA is then treated as
your surviving spouse's Roth IRA.
M. Federal Estate And Gift Taxes.
Generally there is no specific exclusion for Roth IRAs under the estate tax
rules. Therefore, in the event of your death, the value of your Roth IRA will be
includible in your gross estate for federal estate tax purposes. However, if
your surviving spouse is the beneficiary of your Roth IRA, the value of your
Roth IRA may qualify for the marital deduction available under Section 2056 of
the Internal Revenue Code. A transfer of property for federal gift tax purposes
does not include an amount which a beneficiary receives from a Roth IRA plan.
N. IRS Approval As To Form.
This Roth IRA Custodial Agreement has been approved by the Internal Revenue
Service as to form. This is not an endorsement of the plan in operation or of
the investments offered.
O. Additional Information.
You may obtain further information on Roth and Traditional IRAs from your
District Office of the Internal Revenue Service. In particular, you may wish to
obtain IRS Publication 590 (Individual Retirement Arrangements).
20
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WATERHOUSE SECURITIES, INC.
Member New York Stock Exchange * SIPC
National Headquarters
100 Wall Street * New York, New York 10005
NEW YORK STOCK EXCHANGE RULE 382 DISCLOSURE
This disclosure letter is provided to inform you of the allocation of
responsibilities between Waterhouse Securities, Inc. ("Waterhouse") and its
clearing affiliate, National Investor Services Corp. ("NISC"). Waterhouse has
designated NISC as its clearing agent to handle the recordkeeping, clearance and
settlement functions for its customers' accounts pursuant to a written
agreement. Please note that you will have a direct relationship with Waterhouse;
the clearing services to be provided by NISC will not alter that relationship.
Waterhouse, as your broker, will be responsible for the following with respect
to your account:
* Opening, approving and monitoring your account, including obtaining and
verifying account information;
* Accepting and transmitting your orders, including responsibility for
accepting or rejecting orders, procedures for screening orders prior to
execution, transmission of your orders and the supervision of Account
Officers (registered representatives) in accordance with Waterhouse
policies and applicable federal, state and industry regulations;
* Prompt communication of instructions to NISC involving your account,
including instructions for the transfer or delivery of securities,
disbursement of funds from your account, and instructions regarding tender
or exchange offers involving securities in your account;
* Prompt transmission to NISC of cash and securities delivered to Waterhouse
for credit to your account;
* General supervision of your account, including compliance with New York
Stock Exchange Rules 342 and 405 and Rule 3010 of the National Association
of Securities Dealers;
* Responding to any inquiries or complaints that you may have concerning your
account and providing prompt notification to NISC of any complaints or
inquiries involving NISC.
NISC, as clearing broker, will be responsible for the following with respect to
your account:
* Maintaining books and records which detail transactions in your account,
and preparing and sending confirmations and statements reflecting purchases
and sales of securities and related activity in your account, including
receipt and delivery of monies or securities and the collection and
distribution of dividends;
* Providing extensions of credit to you in compliance with Regulation T of
the Federal Reserve Board, the regulations of the New York Stock Exchange
and other self-regulatory organizations, determining margin maintenance
requirements, paying and charging interest and rehypothecation or loan of
any of your margin securities;
* Distributing shareholder information, including proxy material, tender
offers, or any similar materials received by NISC, and providing various
records on your behalf as required by applicable laws and regulations;
* Safeguarding your funds and securities. NISC is a member of the New York
Stock Exchange and the Securities Investor Protection Corporation (SIPC)
and, together with a supplemental protection policy, securities in your
accounts held at NISC are protected up to $50,000,000 (with a $100,000
limitation on cash).
21
<PAGE>
CUSTOMER AGREEMENT
In consideration of Waterhouse Securities, Inc. (WSI) and National Investor
Services Corp. (NISC)(Collectively "you") accepting and carrying for me one or
more accounts, I hereby understand and agree that:
1. Legal Capacity to Enter Into Agreements - I am at least the age of 18 years
and am of full legal age in the state in which I reside. If I am an employee,
member or partner of any security exchange or member firm thereof, of any
corporation a majority of the stock of which is owned by any exchange or a
broker/dealer I have so indicated on the account application. I also agree to
notify you promptly if I should later become employed in any of the capacities
cited above.
2. Definitions - Applicable Rules and Regulations - The terms "securities",
"options", or "other property", as used herein, shall include money, securities
and commodities of every kind and nature and all contracts and options relating
thereto. All transactions shall be subject to the rules, customs and usages of
the exchange, market or clearing house where executed, and to all applicable
federal and state laws and regulations.
3. Orders, Executions and Statements - Reports of the execution of orders and
statements of my account shall be deemed accepted by me if you have not received
written objections from me within five days with respect to the former and ten
days with respect to the latter after transmitted by you to me. You may execute
any transaction authorized by me on any exchange or other market where such
business is then transacted. You may reject any order I place with you in your
sole discretion. I understand that you reserve the right to refuse, and assume
no responsibility for, orders sent through the mail for the purchase or sale of
securities or other investments. I also understand that if I request the
transfer or registration of foreign securities, I may be responsible for any
transfer fees charged to you.
I understand that you direct customer orders in equity securities to exchanges
and market makers based on an analysis of their ability to provide rapid and
quality executions. These market participants guarantee that all customer orders
are executed at a price equal to or better than the displayed national best
bid/best offer. Your policy also assures that these market participants provide
your customer orders with price improvement and limit order protection. I
further understand that you may receive remuneration for directing customer
orders to these market participants, the source and amount of which is available
upon written request.
4. Deposit of Equity - Consent to Recording - I understand that you reserve the
right to require full payment or an acceptable equity deposit prior to the
acceptance of any order. I understand that you may tape record telephone
conversations with customers in order to permit you to verify data concerning
securities transactions.
5. Payment of Indebtedness Upon Demand - I shall at all times be liable for the
payment upon demand of any debit balance or other obligations owing in any of my
accounts with you; and, I shall be liable to you for any deficiency remaining in
any such accounts in the event of the liquidation thereof, in whole or in part,
by you or by me, and, I shall make payments of such obligations and indebtedness
upon demand.
6. Security for Indebtedness - All securities and other property whatsoever
which you may hold, carry or maintain for any purpose, in or for any of my
accounts, whether individually or jointly held with others, are subject to a
lien in your favor for the discharge of all the indebtedness of me to you, and I
hereby grant to you a continuing lien, security interest and right of set-off in
all such property and securities whether now owned by me or hereafter acquired.
You may hold securities and other property as security for the payment of any
liability or indebtedness of me to you, and you shall have the right to transfer
such securities and other property in any of my accounts from or to any other of
my accounts, when in your judgement such transfer may be necessary for your
protection. In enforcing your lien you shall have the right to sell, assign, and
deliver all or any part of the securities or other property in any of my
accounts when you deem it necessary for your protection. You reserve the right
to close transactions in my account if you believe there is inadequate security
for my obligation or upon an event which in your opinion jeopardizes my account.
You shall have all rights of a secured party under the Uniform Commercial Code.
7. Costs of Collection - The reasonable costs of collection of the debit balance
and any unpaid deficiency in my accounts, including attorney's fees incurred by
you, shall be paid or reimbursed by me to you.
8. The Laws of New York Govern - This agreement and its enforcement shall be
governed BY THE LAWS OF THE STATE OF NEW YORK; shall cover individually and
collectively all accounts (Cash, Margin, Option or other) which I may open or
reopen with you; and shall inure to the benefit of your successors, whether by
merger, consolidation or otherwise, and assigns and you may transfer my accounts
and my agreements to your successors and assigns, and this Agreement shall be
binding upon my heirs, executors, administrators, successors and assigns.
9. Agreement To Arbitrate Controversies -
* Arbitration is final and binding on the parties.
* The parties are waiving their right to seek remedies in court, including
the right to jury trial.
* Pre-arbitration discovery is generally more limited than and different
from court proceedings.
* The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.
* The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
I agree that any controversy relating to any of my accounts or any agreement
that I have with you will be submitted to arbitration conducted only under the
provisions of the Constitution and Rules of the New York Stock Exchange, Inc. or
pursuant to the code of the Arbitration of the National Association of
Securities Dealers, Inc. Arbitration must be initiated by service upon the other
party of a written demand for arbitration or notice of intention to arbitrate.
Judgement, upon any award rendered by the arbitrator, may be entered in any
court having jurisdiction. No person shall bring a putative or certified class
action to arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who is
a member of a putative class who has not opted out of the class with respect to
any claims encompassed by the putative class action until: (i) the class
certification is denied; or (ii) the class is decertified; or (iii) the customer
is excluded from the class by the court. Such forbearance to enforce an
agreement to arbitrate shall not constitute a waiver of any rights under this
agreement except to the extent stated herein.
10. Losses Due to Extraordinary Events - You shall not be liable for loss caused
directly or indirectly by war, natural disasters, government restrictions,
exchange or market rulings or other conditions beyond your control.
11. Joint and Several Liability - If there is more than one owner of the
account, then obligations under this agreement shall be joint and several.
12. Separation of Provisions -If any provision or condition of this agreement
shall be held to be invalid or unenforceable by any court, or regulatory or
self-regulating agency or body, such invalidity or unenforceability shall attach
only to such provisions or condition. The validity of the remaining provisions
and conditions shall not be affected thereby, and this agreement shall be
carried out as if such invalid or unenforceable provision or condition were not
contained herein.
13. Presumption of Receipt of Communications - Communications may be sent to me
at my address given in the New Account Application as a mailing address, or at
such other address as I may hereafter give you in writing and all communication
so sent, whether by mail, telegraph, messenger, or otherwise, shall be
considered delivered to me personally, whether actually received or not.
14. SEC Rule 14b - 1(c) - Communication Between Companies and Shareholders - You
will release my name, address, and security positions to requesting companies in
which I own shares that are held in my account, unless I notify you in writing
that I object.
15. Credit Information - I authorize you to make inquiries for the purpose of
verifying my creditworthiness and to provide information regarding my
performance under this agreement to credit reporting agencies and to your
affiliates. I understand that, upon my request, you will tell me whether a
credit report was requested and provide the name and address of the agency that
furnished it.
I understand that any alteration to this Agreement will be ineffective to
relieve me of my obligations hereunder.
<PAGE>
WATERHOUSE SECURITIES, INC.
---------------------------------------------------
Where Investors Who Expect Value Feel Right At Home
Member New York Stock Exchange * SIPC
National Headquarters
100 Wall Street * New York, New York 10005
WSI #0573 Rev. 12/97
<PAGE>
POWER OF ATTORNEY
Each of the undersigned hereby constitutes and appoints Margery K. Neale,
Joel H. Goldberg and Richard H. Neiman, and each of them, with full power to
act, his/her true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him/her and his/her name, place and stead,
in any and all capacities (until revoked in writing) to sign any and all
amendments to the Registration Statement for National Investors Cash Management
Fund, Inc. (including post-effective amendments and amendments thereto), and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission and any state securities
commissions, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing, and ratifying and
confirming all that said attorneys-in-fact and agents, or substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
/s/ James F. Rittinger /s/ Anthony J. Pace
- ------------------------------ ------------------------------
James F. Rittinger, Director Anthony J. Pace, Director
/s/ Theodore Rosen /s/ Carolyn B. Lewis
- ------------------------------ ------------------------------
Theodore Rosen, Director Carolyn B. Lewis, Director
/s/ Richard W. Dalrymple
- ------------------------------
Richard W. Dalrymple, Director
Dated: April 27, 1998
