Ensign Investors, Inc.
9921 S. Treasure Circle
South Jordan, Utah 84095
H. R. Hallock, Jr.
Senior Counsel
Securities and Exchange Commission
Washington D. C. 20549
Re: Ensign Investors, Inc.
File Nos. 333-40337 and 8118307
Dear Mr. Hallock:
We submit this letter in response to your letter concerning the initial
Registration Statement of Ensign Investors, Inc. on Form N-1A. We also submit a
pre-effective amendment to the Registration with changes based on your comments.
I. Facing Page of Form
1. The name of the registrant has been replaced by the name of the securities
being registered.
2. As this is a pre-effective amendment, we request that the registration of
shares be changed to an indefinite number of shares of common stock under
the Securities Act of 1933, pursuant to Section 24(f) of the Investment
Company Act of 1940 and rule 24f-2 thereunder.
Furthermore, as the registrant has already submitted a fee of $1,515.15 to
register 5,000,000 shares, we request that this payment be applied to
future registration fee payments that will be required under a 24f
registration.
3. With the change to registration of an indefinite number of shares the fee
will be based on the requirements of Section 24f and rule 24f-2.
4. The name of the registrant, Ensign Investors, Inc. has been added to the
cover page of the prospectus.
5. A footnote has been added to the fee table alerting investors of potential
charges by securities dealers, if an investor elects to purchase shares
through a securities dealer.
6. Management made initial offers to 20 individuals to invest in the fund. To
date 11 of those individuals have invested in the fund and the total
amount of capital contributed by these individuals is $266,000. All money
was sent directly to the funds Custodian, Central Bank in Provo, Utah. A
portion of these funds has now been invested in equity securities; the
remaining funds are in money market accounts at the Custodian and at
Waterhouse Securities, Inc.
7. With respect to INVESTMENT OF THE Fund's assets, the prospectus and the
SAI have been amended so they are consistent.
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8. The comments regarding diversification have been amended in both the
prospectus and the SAI.
9. The agreements have been amended to comport with the current prospectus
disclosure and services performed for or on behalf of the Fund have been
described.
10. The prospectus has been amended to indicate that State law may differ on
the 30- day ratification of account statements.
11. Disclosures concerning distributions for tax purposes have been included.
12. Further research revealed that the limited share ownership does not
disqualify the Fund under Subchapter M; however, the fact that the Fund
was not registered with the SEC "at all times during the taxable year"
does disqualify the Fund at this time. For years subsequent to the
registration the fund will qualify.
For tax purposes the Fund is currently considered a personal holding
company because of its limited share ownership. Additional disclosure
concerning these points has been made in the prospectus and SAI.
13. Management does not intend to purchase shares of other open-end investment
companies except for money market funds where it will hold funds until
such time as they are invested according to the Fund's investment
objectives. Management does not intend to purchase closed-end funds and
that comment has been removed.
14. The tables required by Item 14 of Form N-1A have been inserted.
15. The compensation table required for Item 14 explains the current
compensation arrangement.
16. All financial statements and schedules required by Regulation S-X have
been included. Supplemental statements as of December 31, 1997 are also
included.
17. The wording of the undertaking has been changed as directed.
18. The additional undertaking has been added.
19. The prospectus and SAI have been reviewed and changes have been made to
make the use of Ensign Investors, Inc. and Ensign Investors Value Fund
consistent.
20. Appropriate qualifying terminology has been used regarding potential
investors' consideration of the impact market fluctuations may have on an
investment in the fund.
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21. We do not believe that Year 2000 software issues pose any problem to the
Registrant. At this point the company is very small, no proprietary
software developed specifically for accounting or tracking of investors is
used. Management uses Microsoft Windows 95 and Microsoft Office 97 and
developed all accounting and tracking systems used by the company.
Ensign Investors, Inc.
Registrant
By: /s/ Stanley M. Wells
Stanley M. Wells
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UNITES STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 X
Amendment No.
(Check appropriate box or boxes)
Ensign Investors, Inc.
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(Exact Name of Registrant as Specified in Charter)
9921 S. Treasure Circle, South Jordan, Utah 84095
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (801) 253-9647
----------------------------------
Stanley M. Wells, 9921 S. Treasure Circle, South Jordan, Utah 84095
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(Name and Address of Agent for Service)
-----------------------------------
Approximate Date of Proposed Public Offering As soon as is practical
after the Effective Date of
this offering.
-----------------------------------
It is proposed that this filing will become effective (check appropriate box)
_ Immediately upon filing pursuant to paragraph (b)
_ on (date) pursuant to paragraph (b)
_ 60 Days after filing pursuant to paragraph (a)
_ on (date) pursuant to paragraph (a) of rule 485
Registrant has elected to maintain registration, for its single series -
Ensign Investors Value Fund, of an indefinite number of shares of common stock,
$0.10 par value, under the Securities Act of 1933, pursuant to Section 24f of
the Investment Company Act of 1940 and rule 24f-2 thereunder.
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ENSIGN INVESTORS VALUE FUND
Form N-1A
Table of Contents
PART A PROSPECTUS 3
PART B STATEMENT OF ADDITIONAL INFORMATION 21
PART C OTHER INFORMATION 30
ITEM 24 FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements 29
(b)(1) Articles of Incorporation 33
(b)(2) By-Laws 43
(b)(4) Rights of Holders of Securities 31
(b)(5) Investment Advisory Contract 56
(b)(8) Custodian Agreement 61
(b)(9) Other Material Contracts 77
(b)(10) Opinion and Consent of Counsel 85
(b)(13) Subscription Agreements 86
(b)(14) Establishment of Retirement Plan 32
ITEM 25 PERSONS CONTROLLED BY OR UNDER COMMOM CONTROL WITH NA
REGISTRANT - NOT APPLICABLE
ITEM 26 NUMBER OF SECURITIES HOLDERS 31
ITEM 27 INDEMNIFICATION 31
ITEM 28 BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER 32
ITEM 29 PRINCIPAL UNTERWRITER - NOT APPLICABLE NA
ITEM 30 LOCATION OF ACCOUNTS AND RECORDS 32
ITEM 31 MANAGEMENT SERVICES 32
ITEM 32 UNDERTAKINGS 32
2
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PART A
INFORMATION REQUIRED IN PROSPECTUS
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ENSIGN INVESTORS, INC.
ENSIGN INVESTORS VALUE FUND
Equity Fund Prospectus
This prospectus contains information that you should know about Ensign
Investors before you decide to invest. You should read this prospectus carefully
and retain it for future reference. A Statement of Additional Information (SAI)
about the company, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference (legally forms a part of the
prospectus). For a free copy of the SAI call Wells Investment Services Inc. at
(801) 253-9647.
Mutual fund shares are not deposits or obligations of, or guaranteed by any
depository institution. Shares are not insured by the FDIC, the Federal Reserve
Board, or any other agency, and are subject to investment risk, including the
possible loss of principal.
No-Load Mutual Fund
Ensign Investors Value fund (the Fund) is a "no-load" mutual fund, which
means there are no sales charges or commissions. In addition, the Fund has no
12b-1 plan or other deferred sales charges.
The investment objective of the Fund is to seek long-term capital
appreciation through investments in a diversified portfolio of common stocks,
preferred stocks, and securities convertible into common stocks believed by the
Fund manager to possess superior prospects for appreciation over the long-term.
The Fund invests mainly in common stocks of well-known and established
companies. Income is a secondary objective which will be considered in
conjunction with the primary objective. As such, the Fund's policy is to invest
at least 80 percent of the Fund's assets in securities of companies that have a
record of paying dividends, have committed to the payment of regular dividends,
or otherwise produce income.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
ABOUT THE FUND: Summary 6
Annual Fund Expenses 6
Performance 7
Investment Objectives, Policies, and 8
Risks
HOW TO INVEST IN ENSIGN
INVESTORS VALUE FUND
Types of Accounts 10
Purchase of Shares 11
Retirement Plan Accounts 12
Further Information 12
Redemption of shares 13
Changing Your Address of Record 15
Tax-Qualified Retirement Plans 15
Transferring a Retirement Account 15
Shareholder Reports 16
Determination of Net Asset Value 16
Dividends, Capital Gains, and Taxes 17
MANAGEMENT OF THE COMPANY Charter 18
Investment Management 18
Additional Information About the Fund 19
Shareholder Inquiries 19
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ABOUT THE FUND
Summary The following Summary is qualified in its entirety by reference to the
more detailed information included elsewhere in this Prospectus and in the
Statement of Additional Information.
The Company: ENSIGN INVESTORS, INC. (Ensign Investors) is an open-end
diversified no-load management investment company which means its fund, Ensign
Investors Value Fund (Fund), pools shareholders' money and invests it toward a
specified objective.
The Objective: The Fund seeks long-term capital appreciation through investment
in common stocks, preferred stocks, and securities convertible into common
stocks. The Fund invests mainly in common stocks of well-known and established
companies. As with any mutual fund, there is no guarantee the fund will achieve
its objective. Any income which the fund earns is secondary to its objective of
capital appreciation. See "Investment Objectives, Policies, and Risks."
Management and Investment Advisor: Wells Investment Services, Inc. (Advisor
or Manager) acts as the Investment Advisor and manager to the Fund and was estab
lished in May 1996. See "Management of the Company." In addition, a description
of Ensign Investors' management and board of directors is included in the SAI.
Potential Investors: The Fund invests primarily in stock of well
established companies with the potential for high long-term returns. As a
result, the Fund's value is subject to fluctuations based on market conditions,
interest rates, and other economic, business, and political news. In the
short-term these factors can make stock prices fluctuate dramatically. When you
sell shares of the Fund they may be worth more or less than what you originally
paid for them. Potential investors should consider these matters when deciding
to invest in the Fund and should be willing to take a long-term perspective to
achieve their investment objectives. The fund is appropriate for both regular
and tax-deferred accounts, such as IRAs. However, there is no assurance that the
Fund's objective will be met, or that there will not be a substantial loss in
any given investment.
Purchase and Redemption of Shares: If we receive your request in correct
form to purchase or redeem shares by 4 p.m. Eastern Time, your transaction will
be priced at that day's net asset value (NAV). If we receive it after 4 p.m. it
will be priced at the next business day's NAV. See "Purchase of Shares" and
"Redemption of Shares."
The NAV for the fund is calculated at 4 p.m. Eastern Time each day the New York
Stock Exchange is open for business. To calculate the NAV, the fund's assets are
valued and totaled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. See "Determination of
Net Asset Value."
Dividends and Distributions: It is the Fund's intention to distribute
substantially all of its net investment income. Dividends from such net
investment income are paid at least annually. All net realized long-term and
short-term capital gains, if any, will be distributed to the Fund's shareholders
at least annually. See "Dividends, Capital Gains, and Taxes."
Annual Fund Expenses
Shareholder Transaction Expenses (5)
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Sales Load Imposed on Purchase None
Sales Load Imposed on
Reinvestment of Dividends None
Deferred Sales Load None
Redemption Fee(1) None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fee(2) 1.00%
12b-1 Fees None
Other Expenses, (After Expense
Reimbursement)(3) 0.50%
Total Fund Operating Expenses(4)1.50%
(1) Each wire redemption is subject to a $10.00 fee by the Custodian.
(2) The Fund pays a management fee based on the average net assets under
management (see Expenses on page 6 and Investment Management on page 12).
(3) Other Expense is based on estimated amounts for the current fiscal year,
after expense reimbursements. Prior to reimbursements, Other Expenses are
estimated to be 0.75 percent.
(4) The Ad visor has voluntarily agreed to limit total expenses to 1.5% of the
Fund's average net assets computed on a daily basis. Expenses are factored
into the Fund's share price and are not charged directly to shareholder
accounts. Prior to reimbursement by Wells Investment Services, the ratio of
total expenses to average net assets was 1.53% for 1997.
(5) If your transaction is processed through your Securities Dealer, you may be
charged a fee by your Securities Dealer for this service.
Example
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
1 Year $ 16
3 Years 49
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE RETURNS OR EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER
THAN THOSE SHOWN.
The purpose of the table is to help you understand the various costs and
expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in the Fund. The example assumes reinvestment of
all dividends and distributions and uses a 5% annual rate of return as re quired
by Securities and Exchange Commission regulations. For more complete
descriptions of the various costs and expenses, see "Expenses" under the heading
Investment Objectives, Policies, and Risks.
Performance
Ensign Investors is an open-end, no-load diversified management investment
company, organized as a
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corporation under the laws of Utah on August 28, 1996, and commenced operation
on January 17, 1997. The Fund's financial statements and the report of the
auditor, Tanner & Company, are included in the Fund's Annual Report, and are
incorporated by reference into and are legally a part of the Fund's SAI. You may
contact Ensign Investors for a free copy of the Annual Report or the SAI.
Highlights of these statements are shown below. The value of the Fund's shares,
at any time in the future, may be more or less than the price paid by the
investor.
Table # 1
Year ended December 31 1997a
Net asset value, beginning of period 1.00
Income from investment operations
Net investment income d 0.03
Net realized and unrealized gain (loss) -
Total from investment operations 0.03
Less Distributions
Dividends from net investment income 0.02
Distributions from net realized capital gain -
Total distributions 0.02
Net asset value, end of period 1.01
Total Return b,c 3.44%
Ratios and Supplemental Data
Net assets, end of period (in thousands) $274
Ratio of expenses to average net assets 1.53%e
Ratio of expenses to average net assets after expense reductions 1.50%e,f
Ratio of net income to average net assets 2.77%e
Portfolio turnover rate 0
Average commission rate paid g $0.1397
a For the period January 17, 1997 (commencement of operations) to December
31, 1997.
b Total returns for periods of less than one year are not annualized.
c The total return would have been lower had certain expenses not been
reduced during the period.
d Net investment income per share was calculated using average shares
outstanding during the period.
e Annualized
f Wells Investment Services, Inc. agreed to reimburse a portion of the fund's
expenses during the period. The fund's expense ratio would have been higher
without this reimbursement.
g For fiscal years beginning on or after September 1, 1995, the fund is
required to disclose its average commission rater per share for security
trades on which commissions are charged.
Average Annual Total Return
For periods ended December 31, 1997
Life of
Fund*
Ensign Investors Value Fund 3.44%
S & P 500 26.75%
*The Fund commenced operation on January 17, 1997. S & P 550 performance is for
the comparable period.
Example:
The Fund's total return from its inception, January 17, 1997 to December 31,
1997 was 3.44%. If you had invested $10,000 in the fund at inception it would
have grown to $10,344 (the total of your investment plus the 3.44%).
Explanation of Terms
The following terms will be used by Ensign Investors Value Fund going
forward to report the performance of the Fund.
Total Return - the change in value of an investment in the fund over a given
period of time. Total return assumes the reinvestment of any dividends and
capital gains distributed to investors.
Average annual total return - represents the change in value of an investment in
the Fund over a designated measuring period and reflects the average annual
percentage change. The average annual total return evens out the annual
performance figures of the fund during the designated period to reflect what
would have been the cumulative results of the investment had a constant return
been realized during the period. The average annual total return is not the same
as the actual year-by-year results, which may fluctuate over the designated
investment period.
Cumulative Total Return - reflects the total percentage change in the Fund's
value over the designated measuring period.
These measurements of return are based on past results and are not meant to
indicate future performance.
Investment Objectives, Policies, and Risks
Investment Objectives identified below may not be changed without prior
shareholder approval. The Fund's investment policies and practices used to
pursue the Fund's objectives may be changed without shareholder approval.
The investment objective of the Fund is to seek long-term capital appreciation
through investments in a diversified portfolio of common stocks, preferred
stocks, and securities convertible into common stocks believed by the Fund
manager to possess superior prospects for appreciation over the long-term. The
Fund invests mainly in common stocks of well-known and established companies.
The Ad viser will normally invest in companies with a market capitalization of
at least $250 million if the company's stock is included in the Dow Jones
Industrial Average or the S&P 500 Index. If the company is not included in
either index it must have a market capitalization of at least $500 million.
Income is a secondary objective and will be considered in conjunction with the
primary objective. As such, the Fund's policy is to invest at least 80 percent
of the Fund's assets in securities of companies that have a record of paying
dividends, have committed to the payment of regular dividends, or otherwise
produce income. The Fund's remaining assets (20 percent) may be invested in any
other permissible securities that the Adviser believes will contribute to the
fund's stated objective. The Fund pursues growth by investing in companies that,
in the opinion of the Adviser, exhibit better- than-average potential for
long-term appreciation. Consistent earnings are a critical factor used by
management in determining a company's long-term prospects. In the search for
capital appreciation, the Investment Advisor looks for stocks that are
attractively priced relative to their anticipated long-term value.
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Management intends to remain fully invested in equity and equity equivalent
securities, regardless of movements in the general market or fluctuations in
specific securities. As a practical matter, the fund's cash and cash equivalents
will represent between 0 percent and 10 percent of its assets to facilitate the
redemption of shares. However, management has broad powers with respect to
investing funds or holding them uninvested. Also, management may invest the
Fund's assets in other instruments such as money market instruments, other
short-term investments, preferred stocks, and convertible issues, when such a
course is deemed appropriate.
The Fund may not:
With respect to 75 percent of its total assets, invest more than 5 percent of
total assets (at the time of purchase) in the securities of any one issuer
(other than obligations of, or guaranteed by the United States government, its
agencies, or instrumentalities).
Invest more than 25 percent of its total assets in any one industry. This
policy is subject to change only by shareholder approval.
Purchase more than 10 percent of the outstanding voting securities of any
issuer. This policy is subject to change only by shareholder approval.
Invest in securities of companies that have a record of less than three years
continuous operation.
Borrow money except as a temporary measure for extraordinary or emergency
purposes in order to meet redemption requests and then only in an amount up to 5
percent of the value of its total assets.
Invest in securities of foreign issuers. Securities of foreign issuers, which
are publicly traded in the United States either directly or through American
Depository Receipts (ADRs), are not subject to this limitation. ADRs are
securities listed on American exchanges, but represent the shares of issuers
domiciled in foreign countries.
Invest in securities that are commonly referred to as derivative securities.
Engage in short sales of securities.
The Fund may:
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Invest in investment grade debt securities, money market instruments (including
but not limited to, repurchase agreements and commercial paper), sweep accounts
with a bank, or other short-term investments for the purpose of receiving a
return on cash that has not been committed to the purchase of securities
pursuant to the investment policies of the Fund. Debt obligations will be
investment grade at the time of purchase, which consists of the four highest
rating categories by Moody's Investors Ser vices, Inc., Standard & Poor's
Corporation, or other nationally recognized rating agencies. Unrated debt
obligations may be purchased only if the security is deemed by the Adviser to be
of comparable quality to instruments that are rated.
Invest in U.S. companies with substantial foreign operations. (Investments in
companies with substantial foreign operations involve additional risks including
local political and economic conditions, fluctuations in foreign currencies,
operational risks, and withholding and other taxes.)
Risk Factors
Common stocks offer a way to invest for long-term appreciation of capital.
However, economic growth
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in the U.S. and other developed countries is not constant and has been
punctuated by periods of decline. During these periods share prices of even the
best managed corporations are subject to mar ket risk and may decline in value.
In addition, changes in investor psychology or trading by large institutional
investors can result in significant fluctuations in the price of a corporation's
stock. The Investment Advisor seeks to purchase the stock of well managed
companies. A stock is purchased when it's price represents good value based on
available information; however, subsequent unanticipated events at the company
or changes in the general economic outlook may still result in a price decline.
Portfolio Turnover
Turnover is calculated by dividing the lesser of purchases or sales of
investment securities for a particular year by the monthly average value of
investment securities owned by the fund during that same year. For purposes of
this calculation, debt securities with maturities of less than 12 months from
the date of investment are not included.
Investment decisions are based on the anticipated contribution a specific
security may make to the Fund's objective rather than the rate of turnover in
the Fund. Portfolio turnover may be higher or lower than funds with similar
objectives. A high rate of turnover will result in higher expenses for the Fund
related to brokerage commissions. It may also affect the level of capital gains
realized by shareholders and the amount of taxes associated with those gains.
Under normal circumstances, it is anticipated that the annual turnover rate of
the Fund will be less than 50 percent.
Expenses
Wells Investment Services, Inc. pays all the expenses of Ensign Investors except
brokerage, taxes, interest, fees and expenses of the noninterested person
directors (including counsel fees) and extraordinary expenses. These expenses
are paid out of the Fund's assets and are reflected in its share price. Expenses
are not billed directly to shareholders or deducted from shareholder accounts.
All expenses paid by Wells Investment Services, Inc. include, but are not
limited to, independent audit expenses, legal expenses, transfer agent and
dividend disbursing agent expenses, costs of reports and notices to
shareholders; fees payable to federal, state or other govenrnmental agencies on
account of the registration of securities issued by the Fund or for filing other
corporate documents, and all other expenses except those noted above. Wells
Investment Services, Inc. paid taxes that the Fund incurred in 1997 as a result
of the Fund not qualifying as a Regulated Investment Company. It also paid taxes
relating to the Fund's status as a personal holding company (see Dividends,
Capital Gains, and Taxes). Wells will pay these taxes as long as they are
required to be paid.
The Fund pays a management fee to its adviser, Wells Investment Services,
Inc., for managing its investments and business affairs. The advisory and
service contract provides that, from time to time, the manager agrees to
reimburse the fund for management fees and other expenses above a specified
limit. The contract also stipulates that the manager will be repaid by the fund
if expenses fall below the specified limit prior to the end of the fiscal year.
Any decreases in the funds expenses improve the Fund's overall performance. (See
Investment Management) The management fee paid by the Fund may be higher than
that paid by many other investment companies; however, many of these companies
pay most of their own expenses, while most of the Fund's expenses, except as
specified above, are paid by Wells Investment Services, Inc.
HOW TO INVEST IN ENSIGN INVESTORS VALUE FUND
Types of Accounts
General Accounts
IndividualThe account is owned by one person.
Joint: The account has two or more owners.
Retirement Accounts
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Individual Retirement Account (IRA):
IRAs allow anyone of legal age and under 70 1/2 with earned income to invest up
to $2,000 per tax year. Individuals can also invest in a spouse's IRA if the
spouse has earned income of less than $250.
Rollover IRAs
Retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
Simplified Employee Pension Plans (SEP-IRAs)
Provide small business owners or those with self-employed income (and their
eligible employees) with many of the same advantages as a Keogh plan, but with
fewer administrative requirements.
Gifts or Transfers to a Minor (UGMA, UTMA)
A custodial account that provides a way to give money to a child and obtain tax
benefits. An individual can give up to $10,000 a year per child without paying
federal gift tax. Which type of account you set up, UGMA OR UTMA, depends on the
laws of the state where you reside.
Purchase of Shares
Shares of the Fund are sold on a continuous basis at the net asset value (NAV)
next determined after receipt of a new account application. Purchase requests
received by 4 p.m. Eastern Time will be priced at that day's NAV; requests
received after 4 p.m. will be priced at the next business day's NAV.
The NAV for the fund is calculated at 4 p.m. Eastern Time each day the New
York Stock Exchange is open for business. To calculate the NAV, the fund's
assets are valued and totaled, liabilities are subtracted, and the balance,
called net assets, is divided by the number of shares outstanding. The Fund's
assets are valued on the basis of market quotations. Securities are valued at
the last sale price on the exchange where they are traded. If no sale is
reported, the latest bid price is used. Short-term debt securities are valued at
either original cost or amortized cost, both of which approximate current market
value.
Minimum Investments
General Accounts:
To open an account $1,000
To add to an account 50
Minimum Balance 1,000
Retirement Accounts:
To open an account $500
For a spousal account 500
To add to an account 50
Minimum Balance 500
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For a spousal account 500
Investing by Mail
Send your application and check or money order, made payable to Ensign
Investors, Inc., to Ensign Investors, Inc. c/o Central Bank, Trust Department,
P.O. Box 1488, Provo, Utah 84603. For additional investments by mail, please
enclose your check with the return remittance portion of the confirmation of
your previous investment. If the remittance slip is not available, indicate on
your check or a separate piece of paper your name, address, and account number.
Wells Investment Services, Inc. cannot accept funds for direct investment. Any
applications or subsequent funds for investment that are sent directly to the
Adviser will be returned to the investor.
Orders to purchase shares are effective on the day the Fund receives your
check or money order. All purchases must be made in U.S. dollars and checks must
be drawn on U.S. banks. Cash will not be accepted.
Investing by Wire
After opening your account by mail you may make subsequent investments in the
Ensign Investors Value Fund by wiring funds. To do so:
(1) Instruct your bank to wire funds to Central Bank, Trust Dept., Provo, Utah;
ABA 124300327; BNF Ensign Investors, Inc.; Account #51-70267-8.
(2) Please specify on the wire: a) your Fund account number, b) your name, c)
your address.
Wired funds are considered received the day they are deposited in the Fund's
account, if they are deposited before the close of business of the New York
Stock Exchange, usually 4 p.m. Eastern time.
Retirement Plan Accounts Individuals who receive compensation or earned
income may establish their own tax-sheltered Individual Retirement Account
(IRA), even if they participate in a qualified retirement plan. A prototype IRA
is available through the Fund.
Certain limitations on contributions and withdrawals apply to IRA accounts. A
description of these limitations and an application are available upon request.
The IRA packet contains a Disclosure Statement which the Internal Revenue
Service requires to be furnished to individuals who are considering adopting the
IRA.
Further Information
The Fund cannot accept investments specifying a certain
price, date, or number of shares and will return these investments.
Once you have mailed or otherwise transmitted your investment instructions to
the Fund it may not be modified or cancelled.
All applications to purchase Fund shares are subject to acceptance by the Fund
and are not binding until so accepted. Purchases may be refused if, in the
opinion of the manager, they are of a size that would disrupt the management of
the Fund.
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The Fund does not accept telephone orders for purchase of shares.
Transactions in shares of the Fund may be executed by brokers or investment
advisers who charge a fee for their services. These transactions may be made
directly with Ensign Investors, Inc. without incurring such fees.
Ensign Investors reserves the right to suspend the offering of shares in the
Fund.
Stock Certificates
In order to relieve the investor of responsibility for safekeeping and
delivery of stock certificates, the Fund will not issue certificates. Instead,
shares purchased are automatically credited to an account maintained for the
investor on the books of the Fund. The investor will receive a statement showing
the details of each transaction. These statements are important and should be
retained as confirmation of shares owned and to help in determining your cost
basis for tax purposes when you sell your shares.
Automatic Investment Plan
An easy way to work toward your financial goals is to invest money regularly.
The Fund offers an Automatic Investment Plan that lets you transfer money into
your fund account on a regular convenient basis. Under the plan an investor's
designated bank or other financial institution debits a preauthorized amount on
the investor's account monthly or quarterly and applies the amount to the
purchase of Fund shares. A $15 fee will be imposed by the Fund if the investor's
account has insufficient funds at the time of the automatic transaction.
While a regular investment plan provides an excellent way to invest for
retirement or other long-term financial goals, it does not protect you against
loss in a declining market. Certain restrictions apply for retirement accounts.
See the retirement account application for further information.
Redemption of Shares
You may request redemption of some or all of your shares at any time. Shares
requested for redemption will be sold at the next share price calculated after
your order is received and accepted. Share price is normally calculated each
business day at 4 p.m. Eastern time.
If you are selling some, but not all of your shares, you must leave at least
$1,000 worth of shares in the account to keep it open ($500 for a retirement
account).
When A Signature Guarantee is Required
Under certain circumstances your request for redemption must include a signature
guarantee. This is to protect you and the Fund from fraud. A request for
redemption should be in writing and accompanied by a signature guarantee in the
following situations:
o You wish to redeem more than $10,000 worth of shares,
o Your account registration has been changed within the last 30 days,
o The check is being mailed to a different address than the one on your
account, or
o The check is being made payable to someone other than the account owner.
13
<PAGE>
When a signature guarantee is required, each signature must be guaranteed by a
domestic bank, trust company, credit union, broker, dealer, national securities
exchange, registered securities association, clearing agency, or savings
association as defined by federal law. A notary public cannot provide a
signature guarantee. The institution providing the signature guarantee must use
a signature guarantee ink stamp or medallion which states "Signature(s)
Guaranteed" and be signed in the name of the guarantor by an authorized person
with that person's title and the date. The Fund may reject a signature guarantee
if the guarantor is not a member of or participant in a signature guarantee
program.
Request for Redemption by Mail
Written instructions to redeem shares may be in one of the following forms:
o A redemption form printed on the Fund's individual account statement.
o A letter to Ensign Investors, Inc. giving:
o the name of the account,
o the account number,
o the dollar amount or number of shares to be redeemed, and
o the signature of each account holder (including signature
guarantees, if necessary).
Unless otherwise instructed, the Fund will send a check to the record
address. Mail your request to:
Ensign Investors, Inc.
c/o Central Bank, Trust Dept.
P.O. Box 1488
Provo, Utah 84603
If you are requesting that your funds be wired to another financial institution,
the appropriate information to complete the transfer must be included in your
redemption request.
Once mailed to the Fund, the redemption request is irrevocable and may
not be modified or cancelled.
Redemptions from Retirement Accounts
Retirement account owners should complete a retirement distribution form, which
is available from the company.
Additional Information About Redemptions
Telephone requests for redemption of shares will not be accepted. During
periods of drastic economic or market changes, your redemption request may be
made by regular or express mail. Your request will be implemented at the net
asset value next determined after your request, in good order, has been received
by the Fund.
Redemptions specifying a certain date or price cannot be accepted and will be
returned.
14
<PAGE>
The Fund will mail payment for redemption within seven days after it receives
proper instructions for redemption. However, the Fund will delay payment for up
to 15 calendar days on redemptions of recent purchases made by check. This
allows the Fund to verify that the check will not be returned due to
insufficient funds and is intended to protect the remaining investors from loss.
To relieve the Fund of the cost of maintaining uneconomical accounts, the Fund
reserves the right to redeem the shares held in any account if, at the time of
any redemption of shares in the account, the net asset value of the remaining
shares in the account would fall below $1,000 ($500 for retirement accounts).
Before such involuntary redemption would occur, the investor would be given at
least 60 days written notice and, during that period, the investor could make an
additional investment to restore the account to at least the minimum amount, in
which case there would be no such redemption. Involuntary redemptions will not
be made because the value of shares in an account falls below the minimum amount
solely because of a decline in the Fund's net asset value. Any such involuntary
redemption would be at net asset value.
The right to redeem Fund shares will be suspended for any period during which
the Exchange is closed because of financial conditions or any other
extraordinary reason and may be suspended for any period during which (a)
trading on the Exchange is restricted pursuant to rules and regulations of the
Securities and Exchange Commission, (b) the Securities and Exchange Commission
has by order per mitted such suspension, or (c) an emergency, as defined by
rules and regulations of the Securities and Exchange Commission, exists as a
result of which it is not reasonably practicable for the Fund to dispose of
portfolio securities or fairly to determine the net asset value.
Changing Your Address of Record
Changes in your address of record may be submitted to the Fund
either in writing or by telephone. Because your address of record impacts all of
our correspondence with you, it is critical that you notify the Fund promptly of
any change of address. To protect you and the Fund, all transactions
that meet the following criteria must be in writing, signed by each person in
whose name the shares are owned, and all signatures must be guaranteed, requests
to redeem shares:
1. with a value of $10,000 or more,
2. made within 30 days of our receipt of an address change (including
requests that accompany an address change),
3. where the proceeds will be mailed to a different address than the one
on your account, and
4. where the check is being made payable to someone other than the account
owner.
Tax-Qualified Retirement Plans
The Fund is available for tax-deferred retirement plans. Call or write Ensign
Investors to receive the appropriate forms for an Individual Retirement Account
(IRA), or Simplified Employee Pension Plan (SEP-IRA).
Transferring a Retirement Account to the Fund
15
<PAGE>
To transfer your existing tax-deferred plan to the Fund from another
company or custodian call or write for a Request to Transfer form.
Shareholder Reports
The Fund will send you a statement with complete year-to-date information
on activity in your account at the end of each quarter. In addition, you may
request a statement on your account activity at any time. You will also receive
a confirmation of transaction each time you invest or redeem shares. Please
notify the Fund in writing if there is an error. If you do not provide
notification of an error within 30 days of the date of your statement we will
deem you to have ratified the transactions as recorded on the statement. State
law governing the period of time that must elapse before you are considered to
ratify your account statement may differ from the time frame adopted by the
Fund.
In March of each year, Ensign Investors will send you an annual report that
includes audited financial statements for the fiscal year ending December 31 and
a list of securities in the Fund's portfolio on that date. In September of each
year Ensign Investors will send you a semiannual report that includes unaudited
financial statements for the six months ending the preceding June 30, and a list
of securities in the portfolio on that date.
No later than January 31 of each year, the Fund will send you important
information relating to your U.S. income tax return:
Form 1099-DIV Reports taxable distributions during the preceding year.
Form 1099-B Reports proceeds paid on redemptions during the preceding year.
Form 1099-R Reports distributions from IRA plans during the preceding year.
At such time as prescribed by law, Ensign Investors will send you a Form 5498,
which reports contributions to your IRA for the previous year.
Ensign Investors prepares and mails to shareholders a new prospectus dated April
30 of each year.
Each year you will receive a notice of the annual meeting of shareholders and a
proxy statement. Because your vote is important and is needed to conduct the
annual meeting of shareholders, you are urged to return the proxy statement
promptly. It is important that you notify Ensign Investors promptly of any
change of address.
Determination of Net Asset Value (NAV)
NAV is the value of a single share of the Fund's stock. NAV is calculated as of
the close of business (normally 4 p.m. Eastern time) each day the New York Stock
Exchange (NYSE) is open.
NAV is determined by adding the value of the Fund's investments, cash, and other
assets, subtracting its liabilities, and then dividing the result by the number
of shares outstanding. Investment orders and redemption requests will receive
the share price next determined after receipt of the request by the Fund.
Investment and transaction instructions received by the Fund prior to the close
of business on the NYSE (normally 4 p.m. Eastern time) will receive that day's
price. Investments and instructions received after that time will receive the
price determined on the next business day.
16
<PAGE>
Valuation of Investments
The Fund's assets are valued on the basis of market quotations. Securities are
valued at the last sale price on the exchange where they are traded. If no sale
is reported, the latest bid price is used. Short- term debt securities are
valued at either original cost or amortized cost, both of which approximate
current market value.
Information About NAV
NAV may be obtained by calling Wells Investment Services, Inc. at (801)
253-9647. NAV will also be recorded on any confirmation of transaction report
you receive each time you invest or redeem shares.
Dividends, Capital Gains Distributions, and Taxes
In addition to any increase in the value of shares, which the Fund may achieve,
shareholders may receive two kinds of return from the Fund: dividends and
capital gains. Distributions from investment income and from net profits
realized on the sale of securities, if any, will be declared annually on or
before December 31.
The objective of the Fund is capital appreciation and not the production of
income for distribution. You may measure the success of your investment by the
value of your investment at any given time and not by the distributions you
receive.
Distributions will be reinvested in the Fund unless you elect to receive
them in cash. Distributions on shares held in IRA accounts must be reinvested
unless you are 59 1/2 years old or are permanently and totally disabled.
Distribution checks are normally mailed within seven days after the record date.
The Fund's Custodian, Central Bank, acts as the disbursing agent for dividends
and capital gains.
As with any investment, you should consider what affect taxes will have on your
gains or losses in the Fund. If your account is not a tax-deferred retirement
account, you should be aware of these tax implications.
Distributions are subject to federal income tax, and may also be subject to
state or local taxes. Your distributions are taxable when they are paid, whether
you take them in cash or reinvest them in the Fund, even if the value of your
shares in the Fund is below your cost.
The Fund intends to be taxed under Subchapter M of the Internal Revenue
code, which means that to the extent its income is distributed to shareholders
it pays no income tax. However, the Fund does not qualify under Subchapter M,
for the years 1997 or 1998, because it has not completed the registration
process with the Securities and Exchange Commission. Furthermore, at this time,
the Fund is considered to be a personal holding compamny (PHC) because five or
fewer persons own more that 50 percent of its outstanding stock. As a PHC, the
Fund is subject to a special tax in addition to the regular corporate income
tax. The additional tax is 50 percent of the "undistributed personal holding
company income." The Fund intends to distribute over 90 percent of personal
holding company income and therefore expects the additional tax to have minimal
impact on the Fund's overall performance.
<PAGE>
Income and short-term capital gains of the Fund are distributed as
dividends and taxed as ordinary income for federal tax purposes. Capital gain
distributions are taxed as long-term capital gains. In January of each year, the
Fund must send you and the IRS a statement displaying the type of tax
distributions paid to you in the previous year.
Taxes may be imposed on the Fund and its investments by foreign
governments, which will reduce the Fund's distributions. However, an offsetting
tax credit may be available to you if you meet certain holding period
requirements. If you do not meet these holding period requirements, a deduction
for certain foreign taxes may still be available to you. The tax statement you
receive from the Fund will show more taxable income or capital gains than the
Fund actually distributed and will also indicate any available offsetting credit
or deduction.
By January 31 of the year following the distribution, the Fund will send
you a Form 1099-DIV notifying you of the status of your distributions for
federal income tax purposes.
Whenever you sell shares of the Fund, you will receive a confirmation
statement showing how many shares you sold and at what price. You will also
receive a complete transaction history every February for the previous year. It
is up to you or your tax preparer to determine whether
17
<PAGE>
any sale resulted in a capital gain or loss and what affect this will have
on your taxes to be paid. Please keep your regular account statements; the
information they contain will be essential in cal culating the amount of your
capital gain or loss.
If you have not complied with certain provisions of the Internal Revenue Code
and Regulations, the Fund is required by federal law to withhold and remit to
the IRS 31 percent of reportable payments (which may include dividends, capital
gains distributions, and redemptions). Those regulations require you to certify
that the social security number or tax identification number you provide is
correct and that you are not subject to 31 percent withholding for previously
under-reporting to the IRS. You will be asked to make the appropriate
certification on your application. Payments reported by the Fund that
omit your social security number or tax identification number will subject
the Fund to a penalty of $50, which will be charged against your account
if you fail to provide the certification by the time the report is filed, and is
not refundable.
MANAGEMENT OF THE COMPANY
Charter
Ensign Investors Value Fund is a mutual fund, issued by Ensign Investors, Inc. a
company that pools shareholders' money and invests it toward a specific goal. In
more technical terms, the company is an open-end diversified no-load management
investment company organized under the laws of the State of Utah on August 28,
1996.
Ensign Investors is governed by a Board of Directors which is responsible
for protecting shareholder interests.
The Board consists of three directors who are elected each year and serve for
one-year terms or until their successors are elected and qualified. The
directors are experienced professionals who meet throughout the year to oversee
the Fund's activities, review contractual arrangements with service providers to
the Fund, and review the Fund's performance.
Investment Management
Acting pursuant to an investment advisory agreement entered into with Ensign
Investors, Wells Investment Services, Inc. acts as investment manager for the
Fund. The Manager's principal place of business is 9921 S. Treasure Circle,
South Jordan, Utah 84095.
Wells Investment Services supervises and manages the Fund's investment portfolio
and directs the purchase and sale of investment securities within the investment
parameters established by the Board of Directors, as outlined in this Prospectus
and the SAI. Stanley Wells is the president of the Manager and manages the Fund.
Prior to forming the Manager, Mr. Wells worked for eleven years as a Safety and
Soundness Examiner for the Federal Reserve Bank of San Francisco, conducting
financial and regulatory reviews of bank holding companies and banks, and credit
quality reviews of banks' loan portfolios. Although Mr. Wells has extensive
experience as a financial analyst, he has no previous experience advising a
mutual fund.
Mr. Wells and his spouse, Rebecca Wells jointly own 85 percent of Wells
Investment Services and thus are deemed to control the Manager.
Under the Advisory and Service Contract, the Fund pays the Manager a monthly fee
computed on the average daily net assets of the Fund at the annual rate of 1.0%
of the average daily net assets of the Fund up to $50 million, plus 0.75% of the
next $450 million, and 0.5% of the excess over $500 million.
18
<PAGE>
The fee will be calculated daily and paid at the end of each month after
services have been rendered. The Advisor has voluntarily agreed to limit total
expenses to 1.5 percent of the Fund's average net assets computed on a daily
basis.
Ensign Investors acts as transfer agent for the Fund's shares.
Additional Information About the Fund
Ensign Investors issues one series of shares, known as the Ensign Investors
Value Fund, at a par value of $0.10 per share. Each share is entitled to one
vote and fractional shares are entitled to a proportionate vote. Shares have
non-cumulative voting rights, which means that the holders of more than 50
percent of the shares voting for the election of directors can elect all of the
directors if they choose to do so, and in such event the holders of the
remaining less-than-fifty percent of the shares will not be able to elect any
person or persons to the board of directors. As of April 30, 1997, Stanley M.
Wells owns either beneficially or of record 114,649.5 shares or 51.1 percent of
the outstanding shares of the Fund; his wife, Rebecca S. Wells owns beneficially
and of record 57,023.4 shares or 25.4 percent of the Fund.
The Fund reserves the right to change any of its policies, practices,
and procedures described in this prospectus, including the statement of
additional information, without shareholder approval except in those instances
where shareholders approval is expressly required.
Shareholder Inquires
All shareholder inquiries should be addressed to:
Ensign Investors, Inc.
9921 S. Treasure Circle
South Jordan, Utah 84095
(801) 253-9647
Officers and Directors
Stanley M. Wells, President and Director, Ensign Investors, Inc.
Jerry J. Ohrn, CPA, Controller, Sierra Forest Products, Inc., Director,
Ensign Investors, Inc.
Jim M. Bagley, President and Owner Gracewood, Inc., Director, Ensign
Investors, Inc.
Rebecca S. Wells, Secretary, Ensign Investors, Inc.
Custodian and Disbursing Agent
All requests for purchase or redemption of shares should be addressed to the
Custodian:
Central Bank
Trust Dept.
19
<PAGE>
P.O. Box 1488
Provo, Utah 84603
Independent Accountant
Tanner+Co.
Salt Lake City, Utah
20
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
21
<PAGE>
PART B
ENSIGN INVESTORS, INC.
ENSIGN INVESTORS VALUE FUND
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (SAI) contains information that
may be of interest to investors, but is not included in the Prospectus of Ensign
Investors Value Fund (the "Fund"), or which is merely summarized in the
Prospectus. This Statement is not a prospectus. It relates to and should be read
in conjunction with the Prospectus for the Fund. Investors may obtain a free
copy of the Prospectus by request to Ensign Investors, Inc. 9921 S. Treasure
Circle, South Jordan, Utah 84095, telephone (801) 253-9647.
TABLE OF CONTENTS AND CROSS-REFERENCE SHEET TO THE PROSPECTUS
Page Page in
Herein Prospectus
General Information and History 22 6
Investment Objectives and
Policies 22 8
Fixed Income Securities ratings 24
Portfolio Turnover 24 10
Officers and Directors 25 19
Management 25 18
Custodian 26 19
Independent Accountant 26 20
Control Persons and Principal
Holders of Securities 26
Investment Adviser 27 18
Brokerage Allocation 27
Purchase, Redemption, and
Pricing of Securities 28 11
Tax Status 28 17
Performance Advertising 28
Performance Comparisons 28
Permissible Advertising
information 28
Holidays 28
Financial Statements 29
General Information and History
Ensign Investors, Inc. (Ensign Investors) was incorporated on August 28,
1996, under the laws of the State of Utah and has no prior operating history.
The company was initially capitalized during the first quarter of 1997.
Investment Objectives and Policies
In achieving its objectives, the Fund must conform to certain fundamental
policies that may not be changed without shareholder approval.
22
<PAGE>
Within the restrictions outlined herein, the Fund has broad powers with
respect to investing funds or holding them uninvested. Management intends for
the Fund to generally consist of common stocks. However, the investment manager
may invest the Fund's assets in varying amounts in other instruments and in
senior securities such as money market instruments, or other short-term in
vestments, preferred stocks, and convertible issues, when such a course is
deemed appropriate in order to attempt to attain its investment objectives.
The Fund will not:
1. Purchase, with respect to 75 percent of its total assets, securities of an
issuer (other than obligations of, or guaranteed by, the United States
government, its agencies or instrumentalities) if, as a result, more than 5
percent of the value of the Fund's assets would be invested in the
securities of that issuer.
2. Purchase more than 10 percent of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.
3. Invest any of the Fund's assets in securities of issuers which with their
predecessors have a record of less than three years continuous operation,
and securities of issuers which are not readily marketable.
4. Make loans to others (except through the purchase of debt obligations in
accordance with its investment objectives and policies.
5. Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only in an amount up to 5 percent of the value of its
total assets, in order to meet redemption requests.
6. Make short sales of securities, purchase any security on margin, or write
put or call options.
7. Invest more than 25 percent of the value of its assets in any one
industry.
8. Purchase or retain the securities of any issuer if any of the officers or
directors of the Fund or its Investment Adviser own beneficially more than
1/2 of one percent of the securities of such issuer and together own more
than 5 percent of the securities of such issuer.
9. Invest for the purpose of exercising control or management of another
issuer.
10. Invest in commodities or commodity futures contracts or in real estate
mortgage loans, although it may invest up to 5 percent in securities which
are secured by real estate and securities of issuers which invest or deal
in real estate.
11. Invest in interests in oil, gas, or other mineral exploration or
development programs, although it may invest in the securities of issuers
which invest in or sponsor such programs.
12. Purchase securities of other open-end investment companies, except by
purchases in the open market involving only customary brokers' commissions and
no sales charges subject to Section 12 of the Investment Company Act of 1940.
23
<PAGE>
13. Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
14. Issue senior securities as defined in the Investment Company Act of 1940.
15. Invest any of the Fund's assets in securities restricted as to disposition
under federal securities laws.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of net assets will not be considered a violation except the
investment restriction on borrowing money.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the Fund of securities issued by insurance companies, brokers,
dealers, underwriters, or investment advisers, and upon transactions with
affiliated persons as therein defined. It also defines and forbids the creation
of cross and circular ownership. Neither the Securities and Exchange Commission
nor any other agency of the federal government participates in or supervises the
corporation's management or its investment practices or policies.
Fixed Income Securities Ratings
As described in the prospectus the Fund may, at any given time, have investments
in short-term fixed income securities. However, those investments are subject to
certain credit quality restrictions. The following is a description of the
rating categories referenced in the prospectus.
Commercial paper rated A-1 by S&P indicated that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory, but the relative degree of safety is
not as high as for issues designated A-1.
The rating Prime-1 or P-1 is the highest commercial paper rating assigned by
Moody's Investor Services, Inc. Issuers rated Prime-1 are considered to have a
superior capacity for repayment of short-term promissory obligations. Issuers
rated Prime-2 or P-2 are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-1, but to a lesser degree.
Portfolio Turnover
It is management's intention to seek for securities that have the potential
to meet the Fund's objectives over long periods of time. However, management
will sell a security without regard to the length of time the security has been
held if management believes that it is not fulfilling its purpose, either
because, among other things, it did not live up to management's expectations, or
because it may be replaced with another security holding greater promise, or
because it has reached its optimum potential, or because of a change in the
circumstances of a particular company, industry, or general economic conditions,
or because of some combination of such reasons.
24
<PAGE>
Officers and Directors
Ensign Investors, Inc. was incorporated on August 28, 1996, under the laws
of the State of Utah and has no prior operating history.
The principal officers and directors of the corporation, their principal
business experience during the past five years, and their affiliations with
Wells Investment Services, Inc. are listed below. The busi ness address of each
director and officer is 9921 S. Treasure Circle., South Jordan, Utah 84095.
Those persons who are "interested persons" as defined in the Investment Company
Act are indicated by an asterisk (*).
Stanley M. Wells, * director, and president Ensign Investors, Inc.; director,
president, and controlling shareholder of Wells Investment Services, Inc.;
formerly Safety and Soundness Examiner, Federal Reserve Bank of San Francisco
(11 years).
Jerry J. Ohrn, CPA, director Ensign Investors, Inc.; controller Sierra Forest
Products, Inc.; prior corporate controller Snowbird Ski Resort; and senior
supervising accountant KPMG Peat Marwick.
Jim M. Bagley, director Ensign Investors, Inc., President and Owner,
Grace, Inc. (wooden frames), prior appraiser for Bagley Appraisal Company.
Rebecca S. Wells, * Secretary Ensign Investors, Inc.; director, secretary, and
controlling shareholder Wells Investment Services, Inc.; educator (15 years).
Mr. and Mrs. Wells are husband and wife and jointly own 85 percent of the
voting stock of Wells Investment Services, Inc. The Fund is in compliance with
Section 10(d) of the Investment Company Act of 1940.
Each director who is an "interested person" as defined in the Investment Company
Act serves as a member of the board without remuneration.
<TABLE>
<CAPTION>
Position(s) Held with
Name and Age Registrant Principal Occupation(s) During Past 5 years
_______________________________________________________________________________________________________
<S> <C> <C>
*Stanley M. Wells (46) Director, President Safety and Soundness Examiner for the Federal
Reserve Bank of San Francisco
Jerry J. Ohrn (39) Director Controller Sierra Forest Products, Inc., prior
corporate controller Snowbird Ski Resort
Jim M. Bagley (41) Director President and Owner Grace Company (quilting
frames), prior appraiser for Bagley Appraisal Company
*Rebecca S. Wells (42) Secretary Eductator, Jordan School District
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE ***
_______________________________________________________________________________________________________
Name of Person, Aggregate Pension or Estimated Annual Total
Position Compensation Retirement Benefits Upon Compensation
From Registrant Benefits Accrued Retirement From Registrant
As Part of Fund and Fund Complex
Expenses Paid to Directors
________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Stanley M. Wells * 0 0 0 0
President
Jerry J. Ohrn** 0 0 0 0
Director
Jim M. Bagley ** 0 0 0 0
Director
Rebecca S. Wells * 0 0 0 0
Secretary
</TABLE>
* Interested persons are compensated by Wells Investment Services, Inc.
** The noninterested person Directors elected to take no compensation until
the Fund has reached net assets of at least $1 million. At that time, Directors'
compensation will be reconsidered.
*** Compensation figures are for the period from inception to December 31, 1997.
Management
A description of the responsibilities and method of compensation of the
Funds' investment manager, Wells Investment Services, Inc., appears in the
prospectus under the caption, "Investment Management."
The management agreement shall continue in effect until the earlier of the
expiration of two years from the date of its execution, or until the first
meeting of shareholders following such execution, and for as long thereafter as
its continuance is specifically approved at least annually by the board of
directors of Ensign Investors, Inc., or by the vote of a majority of the
outstanding votes (as defined in the Invest ment Company Act) of the Fund.
The management agreement provides that it may be terminated at any time
without payment of any penalty by the board of directors of Ensign Investors, or
by a vote of a majority of the Fund's shareholders, on 60 days written notice to
Wells Investment Services, Inc., and that it shall be automatically terminated
if it is assigned.
The management agreement also provides that Wells Investment Services, Inc.
shall not be liable to Ensign Investors or the Fund's shareholders for anything
other than willful misfeasance, bad faith, gross
26
<PAGE>
negligence or reckless disregard of its obligations or duties.
The management agreement also provides that Wells Investment Services and its
officers, directors, and employees may engage in other business, devote time and
attention to any other business whether of similar or dissimilar nature, and
render services to others.
Custodian
Central Bank, Trust Dept., P.O. Box 1488, Provo, Utah 84603, serves as custodian
of the Fund's assets. The custodian takes no part in determining the investment
policies of the Fund or in deciding which securities are purchased or sold by
the Fund. In addition to the custodian, securities are held in the name of the
custodian on behalf of the Fund with selected brokerage firms. The custodian
also acts as dividend disbursing agent for the Fund.
Independent Accountant
Tanner & Co., 675 E. 500 S., Salt Lake City, Utah 84102, serves as independent
accountant to Ensign Investors, providing services including (1) audit of annual
financial statements, (2) review of the Fund's annual federal income tax return,
and (3) assistance and consultation in connection with SEC filings.
Capital Stock
The Fund's capital stock is described in the prospectus under the caption
"Additional Information About the Fund."
All shares have equal redemption rights. Each share, when issued, is fully-paid
and nonassessable. Each share is entitled to one vote on all questions presented
to shareholders.
Ensign Investors may in the future issue additional series of shares without a
vote of shareholders.
In the event of complete liquidation or dissolution of Ensign Investors,
shareholders shall be entitled to receive, pro rata, all of the assets less the
liabilities of the Fund.
Control Persons and Principal Holders of Securities
The following persons own of record and beneficially, in amounts stated
after their names, 25 percent or more of the Fund's out-standing securities. As
of the same date, the following persons owned of record and beneficially, in
amounts stated after their names, 5 percent or more of the Fund's out-standing
securities:
Name and Address Number of Shares Percentage
Stanley M. Wells 114,649.5 1/ 51.1
South Jordan, Utah
Rebecca S. Wells 57,023.4 25.4
South Jordan, Utah
26
<PAGE>
Allyn Grosjean 50,000.0 22.3
Sandy, Utah
1/ Mr. Wells holds 10,236.5 shares in Uniform Gift to Minors accounts for
his dependent children.
The officers and directors of the Fund own, as a group, own 171,672.9 percent of
the outstanding voting securities of the Fund.
Investment Adviser
The Fund's investment adviser, Wells Investment Services, Inc., is
controlled by Stanley M. Wells and Rebecca S. Wells who as of this filing
jointly owned 85 percent of its voting securities. Mr. and Mrs. Wells are
affiliated persons of the Adviser and the Fund. Mr. Wells is president and
director and Mrs. Wells is secretary of both entities.
Under an Advisory and Service Contract dated September 7, 1996, the Adviser
provides the Fund with investment advisory services, office space, and
personnel. Under the contract, the Adviser pays the salaries and fees of the
Fund's officers and directors who are interested persons of the Adviser and all
clerical expenses relating to the Fund's investments.
On March 6, 1997, the Fund's Board of Directors approved an Agency Agreement
with the Adviser, under which the Adviser would act as stock registrar, and
transfer agent.
Brokerage Allocation
Placement of the Fund's orders to buy and sell portfolio securities is the
responsibility of the Adviser. Such decisions are made for the Adviser by its
president, Stanley M. Wells. Policies underlying the allocation of brokerage are
subject to review by the Fund's Board of Directors. In the allocation of such
orders and the resulting commissions, the following factors are considered:
The services furnished by the broker in providing price quotations or
publications which are not available for cash;
The allocation to the Fund of desired underwritten securities;
The part, if any, played by the broker or dealer in bringing the security
involved to the Adviser's attention and providing information, research,
(e.g., published reports) and analysis with respect thereto;
Rates of commission.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
commissions paid to brokers or dealers for effecting securities transactions may
exceed the amount of commission which another broker or dealer would have
charged for effecting such transactions, if the Adviser has determined in good
faith that such charges are reasonable in view of quotation or research services
provided by such broker or dealer. The Adviser's authority to incur such fees is
subject to policy review by the Fund's Board of Directors.
27
<PAGE>
Purchase, Redemption, and Pricing of Securities
The pricing of the Fund's shares for purchase and redemption is described in the
Fund's Prospectus. (See "Determination of Net Asset Value.") Shares are offered
to the public at the Net Asset Value as set forth in the Prospectus, pursuant to
written application as specified in the Prospectus. (See "Purchase of shares.")
Tax Status
The Fund intends to qualify under Subchapter M of the Internal Revenue Code (26
U.S.C. 851-856). However, the Fund does not qualify under Subchapter M,
for the years 1997 or 1998, because it has not completed the registration
process with the Securities and Exchange Commission. Furthermore, at this time,
the Fund is considered to be a personal holding company (PHC) because five or
fewer persons own more that 50 percent of its outstanding stock. As a PHC, the
Fund is subject to a special tax in addition to the regular corporate income
tax. The additional tax is 50 percent of the "undistributed personal holding
company income." The Fund intends to distribute over 90 percent of personal
holding company income and therefore edxpects the additional tax to have minimal
impact on the Fund's overall performance.
Performance Advertising
Fund performance may be compared to various indices including the Standard &
Poor's 500 index and the Dow Jones Industrial Average. The Fund's performance
will be measured over one-, five-, and 10- year periods, and since inception.
Average annual total return will be calculated by determining the Fund's
cumulative total return for the stated period and then computing the annual
compound return that would produce the cumulative total return if the fund's
performance had been constant over that period. Cumulative total return includes
all elements of return, including reinvestment of dividends and capital gains
distributions.
The Fund may also advertise average annual return over periods of time other
than one, five, and 10 years, and cumulative total return over various time
periods.
Performance Comparisons
Investors may judge the performance of the Fund by comparing its performance to
the performance of other mutual funds with comparable investment objectives.
Permissible Advertising Information
From time to time, the Fund may, in addition to any other permissible
information, include the following types of information in advertisements,
supplemental sales literature and reports to shareholders: (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost averaging); (2) discussions of general economic
trends; (3) presentation of statistical data to supplement such discussions; (4)
description of the Fund's investment strategy; (5) comparisons of investment
products with relevant market or industry indices or other appropriate
benchmarks, and (6) discussions of fund rankings or ratings by recognized rating
organizations.
28
<PAGE>
Holidays
The Fund does not determine the net asset value of its shares on days when
the New York Stock Exchange is closed. Currently, the Exchange is closed on
Saturdays and Sundays, and on specific holidays, namely New Year's Day,
Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving, and Christmas.
Financial Statements
Financial Statements for the Fund as of April 30, 1997 and December 31,
1997 are as follows:
Ensign Investors, Inc.
Calculation of Net Asset Value
As of
April 30, 1997
Securities at Market Value 0.00
Cash and other assets
(including accrued income) 226,692.96
----------
Total Assets 226,692.96
Liabilities
(including accrued expenses) 191.98
------
Net Assets 226,500.98
----------
Number of Shares Outstanding 224,596.8093
Net Asset Value (offering and redemption
Price per share) 1.0085
29
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Ensign Investors, Inc.
We have audited the accompanying statement of assets and liabilities of Ensign
Investors, Inc., including the schedule of investments in securities as of April
30, 1997, and the related statement of operations for the four months then
ended, the statement of changes in net assets for the period January 1, 1997
(date operations commenced) through April 30, 1997, and the supplementary
schedule of selected per share data and ratios for the period January 1, 1997
(date operations commenced) through April 30, 1997. These financial statements
and per share data and ratios are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and per share data and ratios based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. Our procedures included confirmation of
securities owned at April 30, 1997 by corresponding with the custodian. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary schedule referred to
above present fairly, in all material respects, the financial position of Ensign
Investors Inc. at April 30, 1997, the results of its operations for the period
January 1,1997 (date operations commenced) through April 30, 1997, the changes
in its net assets and the selected per share data and ratios for the period
January 1, 1997 (date operations commenced) through April 30, 1997, in
conformity with generally accepted accounting principles.
TANNER + CO.
Salt Lake City, Utah
May 2, 1997
29-A
<PAGE>
ENSIGN INVESTORS, INC.
Statement of Assets and Liabilities
April 30, 1997
- ------------------------------------------------------------------------------
Assets
Investment in securities, at value (costs $226,693) $ 226,693
------------
- ------------------------------------------------------------------------
Liabilities and Stockholder's Equity
------------------------------------
Current liabilities-
related party -accounts payable $ 192
------------
Net assets applicable to outstanding capital shares -
authorized 500,000,000 shares of $.10 par value; $ 226,693
------------
Net asset value per share $ 1.01
------------
See accompanying notes to financial statements.
29-B
<PAGE>
ENSIGN INVESTORS, INC.
Schedule of Investments in Securities
April 30, 1997
- ------------------------------------------------------------------------------
Short-term investments, 100%
Money market funds 4.8% $ 226,693
------------
Total short-term investments (cost $226,693) 226,693
------------
Total investments in securities - 100% (cost $226,693) 226,693
------------
See accompanying notes to financial statements.
29-C
<PAGE>
ENSIGN INVESTORS, INC.
Statement of Operations
Period January 1, 1997 (Date Operations Commenced)
Through April 30, 1997
- ------------------------------------------------------------------------------
Investment income - interest $ 1,692
------------
Expenses:
Investment advisory fee 192
Custodian fee 56
Taxes 100
------------
348
------------
Net investment income 1,344
------------
Net increase in net assets resulting from operation $ 1,344
------------
See accompanying notes to financial statements.
29-D
<PAGE>
ENSIGN INVESTORS, INC.
Statement of Changes in Net Assets
Period January 1, 1997 (Date Operations Commenced)
Through April 30, 1997
- ------------------------------------------------------------------------------
Increase in net assets from operations:
Net investment income $ 1,344
------------
Distributions to shareholders -
------------
From capital share transactions:
Net asset value of shares issued to shareholders 225,157
------------
Increase in net assets from
capital share transactions 225,157
------------
Increase in net assets 226,501
Net assets, beginning of period -
------------
Net assets, end of period (including undistributed net
investment income of $1,344 $ 226,501
------------
29-E
<PAGE>
ENSIGN INVESTORS, INC.
Notes to Financial Statements
April 30, 1997
- ------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies.
Organization.
The Company was incorporated on August 29, 1996 under the laws of the sate of
Utah and is currently in the process of registering under the Investment Company
Act of 1940, as amended, as a diversified, open-end management company. The
following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
Securities Valuation.
The value of securities traded on any national exchange has been determined at
their last sales price on the year end date. Investments are stated at value
based on latest quoted market prices or at fair value as determined by the Board
of Directors.
Federal Income Taxes.
The Company's intention is to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders it pays no income tax. However, currently the fund does not qualify
under Subchapter M because more than 50 percent of its stock is owned by five or
fewer persons.
Cash and Cash Equivalents.
The Company considers all nongovernment debt instruments of nine months or less
to be cash or cash equivalents.
Other.
As is common in the industry, security transactions are accounted for on the
date the securities are purchased or sold. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Discounts and premiums on
securities purchased are amortized over the life of the respective security.
Concentration of Credit.
The Company is a diversified open-end management company (Mutual Fund) investing
in common stocks, preferred stock, and securities convertible into common
stocks. The fund's value is subject to fluctuations based on market conditions,
interest rates, and other economic, business, and political news.
29-F
<PAGE>
ENSIGN INVESTORS, INC.
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies (Continued).
Estimates.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
2. Management and Advisory Fees with Related Parties.
The Company has contracts with Wells Investment Services, Inc.
wherein Wells Investment Services, Inc. acts as an investment advisor
to the Company.
Under the Advisory and Service Contract, the Fund pays the advisor a monthly fee
computed on the average daily net assets of the Fund at the annual rate of 1.0%
of the average daily net assets of the Fund up to $50 million, plus 0.75% of the
next $450 million, and 0.5% of the excess over $500 million. The fee will be
calculated daily and paid at the end of each month after services have been
rendered. The Advisor has voluntarily agreed to limit total expenses to 1.5
percent of the Fund's average net assets computed on a daily basis.
The president of Wells Investment Services, Inc. is also president of the
Company. Eighty-five percent of the outstanding capital stock of Wells
Investment Services, Inc. is owned by such officer.
3. Accumulated Undistributed Investment Income.
It is the Company's intention to distribute substantially all of its net
investment income. Dividends from such net investment income are paid at least
annually. All net realized long-term and short-term capital gains, if any, will
be distributed to the Fund's shareholders at least annually.
As of April 30, 1997, all net investment income of $1,344 had not been
distributed to the Company's shareholders.
29-G
<PAGE>
ENSIGN INVESTORS, INC.
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
4. Financial Instruments.
None of the Company's financial instruments are held for trading purposes. The
Company estimates that the fair value of all financial instruments at April 30,
1997, does not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgement is
necessarily required in interpreting market data to develop the estimates of
fair value, and, accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
29-H
<PAGE>
ENSIGN INVESTORS, INC.
Supplementary Schedule Selected Per Share Data and Ratios
Period January 1, 1997 (Date Operations Commenced)
Through April 30, 1997
- ------------------------------------------------------------------------------
Per Share Data
Investment income $0.01
Expenses 0.00
------------
Net investment income 0.01
Dividends from net investment income -
Net realized and unrealized gain on securities -
Capital share transactions 1.00
Distributions from net realized gain on securities -
------------
Net increase in net asset value 1.01
Net asset value at beginning of period -
------------
Net asset value at end of period $ 1.01
------------
Ratios
Expenses to average net assets % 0.30
Net investment income to average net assets % 1.50
Portfolio turnover ratio -
Number of shares outstanding at end of period 224,597
------------
29-I
<PAGE>
Ensign Investors Value Fund
Annual Report
December 31, 1997
The first year of operation for Ensign Investors Value Fund presented
great opportunities and challenges. The Fund's primary objective is to find well
managed companies that have the potential to produce solid revenue and earnings
growth over a period of many years, and to buy those companies when their stock
prices represent reasonable values. Although management focuses on the
performance of individual companies when looking for investments, conditions in
the stock market can have an impact on the trading value of any given stock.
The stock market, as measured by the Standard and Poors 500 Index, has
risen significantly over the past three years and by most traditional measures
was considered overvalued during 1997. As a result, although there are many
excellent companies in operation, their stock prices have been carried by the
momentum of the market to values that are significantly above what management
feels are reasonable values. The challenge has been to find companies that meet
the Fund's investment criteria.
Even in this overvalued market there were companies whose stock prices
entered into management's buy range during the year. Management used these
opportunities to purchase shares of these companies.
The 1997 year-end financial audit of Ensign Investors Value Fund is
enclosed. The audit includes a listing of the investments made by the Fund.
Although the Fund showed positive results for the year, its performance
did not come close to matching the performance of the Standard and Poors 500
Index. Ensign Investors Value Fund is, as its name implies, a value fund seeking
to purchase well-managed companies at reasonable values and hold them for
long-term capital appreciation. Management does not try to play off the momentum
of the overall stock market, and only buys a company's stock when it believes
the price represents good value in relation to the company's continued prospects
for sales, earnings, and dividends. Management believes that over time the value
of these well-run companies will be reflected in their stock prices.
The Fund's total return was 3.0 percent for the year and a dividend of
$0.02 per share was paid on December 10, 1997.
The fund's charter establishes an investment strategy of long-term
capital appreciation through investments in mid- to large-capitalization stocks.
Dividend income is a secondary objective of the fund. Dividend payments are an
indication that a company has reached a certain level of maturity in its growth
and are also a reflection of management's confidence in its ability to continue
to generate sales and earnings.
Sincerely,
Stanley M. Wells
President
29-J
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors of
Ensign Investors, Inc.
We have audited the accompanying statement of assets and liabilities of Ensign
Investors, Inc., including the schedule of investments in securities as of
December 31, 1997, and the related statements of income, changes in net assets,
and the supplementary schedule of selected per share data and ratios for the
year then ended. These financial statements and per share data and ratios are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and supplementary schedule based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and per share data and ratios
are free of material misstatement. Our procedures included confirmation of
securities owned at December 31, 1997 by corresponding with the custodian. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and supplementary schedule referred to
above present fairly, in all material respects, the financial position of Ensign
Investors Inc. at December 31, 1997, the results of its operations for the year
then ended, the changes in its net assets and the selected per share data and
ratios for the year then ended, in conformity with generally accepted accounting
principles.
TANNER + CO.
Salt Lake City, Utah
February 13, 1998
29-K
<PAGE>
ENSIGN INVESTORS, INC.
Statement of Assets and Liabilities
December 31, 1997
- ------------------------------------------------------------------------------
Assets
Investment in securities, at value (cost $273,675) $ 275,537
Interest and dividends receivable 781
------------
Total assets 276,318
------------
Liabilities
Current liabilities-
related party -accounts payable 2,201
------------
Net assets applicable to outstanding capital shares -
authorized 500,000,000 shares of $.10 par value;
outstanding 271,024 shares $ 274,117
============
Net asset value per share $ 1.01
============
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
29-L
<PAGE>
ENSIGN INVESTORS, INC.
Schedule of Investments in Securities
December 31, 1997
- ------------------------------------------------------------------------------
Principal
Amount or Market
Shares Value
------------------------
Common stock, 35%:
Retail - Supermarket, 10%:
Albertsons, Inc. 200 $ 9,450
Building and Construction, 11%:
Clayton Homes, Inc. 600 10,800
Medical/Dental Supplies, 13%:
Ballard Medical Products 500 12,125
Medical Instruments, 8%:
Stryker Corp 200 7,450
Consumer Products, 8%:
Newell Company 200 8,500
Business Information Services, 14%:
Reuters Group 200 13,250
Diversified Operations, 24%:
Federal Signal 600 12,975
Johnson Controls 200 9,550
Telecommunication, 12%:
Andrew Corporation 500 12,000
------------
Total common stock (cost $94,338) 96,100
------------
Real estate trust 1%:
Real Estate Operations, 1%:
Washington Real Estate Trust (cost $3,250) 200 3,350
------------
Temporary investments, 64%:
Money Market Funds, 64%:
Temporary Reserve Central Bank 69,904
Waterhouse Securities Money Market 106,183
------------
Total temporary investments
(cost $176,087) 176,087
------------
Total investments, 100% (cost $273,675) $ 275,537
============
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
29-M
<PAGE>
ENSIGN INVESTORS, INC.
Statement of Income
Year Ended December 31, 1997
- ------------------------------------------------------------------------------
Investment income:
Income:
Interest $ 9,301
Dividends 373
------------
9,674
------------
Expenses:
Investment advisory fee 2,107
Custodian fee 661
Brokerage fee 475
Taxes 200
------------
3,443
------------
Net investment income 6,231
------------
Realized and unrealized gain on investments:
Realized gain from securities transaction:
Proceeds from sale -
Cost of securities sold -
------------
Net realized gain on investments -
------------
Change in net unrealized appreciation of investments:
Beginning of year -
End of year 1,862
------------
Increase in net unrealized appreciation of investments 1,862
------------
Net gain on investments 1,862
------------
Net increase in net assets resulting from operation $ 8,093
============
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
20-N
<PAGE>
ENSIGN INVESTORS, INC.
Statement of Changes in Net Assets
Year Ended December 31, 1997
- ------------------------------------------------------------------------------
Increase in net assets from operations:
Net investment income $ 6,231
Change in net unrealized appreciation of investments 1,862
------------
Net increase in net assets resulting from operations 8,093
------------
Distributions to shareholders - net investment income (6,000)
------------
From capital share transactions:
Payments for redemption of 176 shares (180)
Sale of 271,200 shares to investors 272,204
------------
Increase in net assets from capital share transactions 272,024
------------
Increase in net assets 274,117
Net assets, beginning of year -
------------
Net assets, end of year (including undistributed net
investment income of $2,093) $ 274,117
============
- ------------------------------------------------------------------------------
See accompanying notes to financial statements.
29-O
<PAGE>
ENSIGN INVESTORS, INC.
Notes to Financial Statements
December 31, 1997
- ------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Organization
The Company was incorporated on August 29, 1996 under the laws of the sate of
Utah and is currently in the process of registering under the Investment Company
Act of 1940, as amended, as a diversified, open-end management company. The
following is a summary of significant accounting policies followed by the
Company in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
Securities Valuation
The value of securities traded on any national exchange has been determined at
their last sales price on the year end date. Investments are stated at value
based on latest quoted market prices or at fair value as determined by the Board
of Directors.
Federal Income Taxes
The Company's intention is to be taxed under Subchapter M of the Internal
Revenue Code, which means that to the extent its income is distributed to
shareholders it pays no income tax. However, currently the fund does not qualify
under Subchapter M because more than 50 percent of its stock is owned by five or
fewer persons.
Cash and Cash Equivalents
The Company considers all nongovernment debt instruments of nine months or less
to be cash or cash equivalents.
Other
As is common in the industry, security transactions are accounted for on the
date the securities are purchased or sold. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Discounts and premiums on
securities purchased are amortized over the life of the respective security.
Concentration of Credit
The Company is a diversified open-end management company (Mutual Fund) investing
in common stocks, preferred stock, and securities convertible into common
stocks. The fund's value is subject to fluctuations based on market conditions,
interest rates, and other economic, business, and political news.
- ------------------------------------------------------------------------------
29-P
<PAGE>
ENSIGN INVESTORS, INC.
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies (Continued)
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results may differ from those estimates.
2. Management and Advisory Fees with Related Parties
The Company has contracts with Wells Investment Services, Inc.
wherein Wells Investment Services, Inc. acts as an investment advisor
to the Company.
Under the Advisory and Service Contract, the Company pays the advisor a monthly
fee computed on the average daily net assets of the Fund at the annual rate of
1.0% of the average daily net assets of the Fund up to $50 million, plus 0.75%
of the next $450 million, and 0.5% of the excess over $500 million. The fee will
be calculated daily and paid at the end of each month after services have been
rendered. The Advisor has voluntarily agreed to limit total expenses to 1.5
percent of the Company's average net assets computed on a daily basis. The
Company paid $2,114 to Wells Investment Services, Inc.
The president of Wells Investment Services, Inc. is also president of the
Company. Eighty-five percent of the outstanding capital stock of Wells
Investment Services, Inc. is owned by such officer.
- ------------------------------------------------------------------------------
29-Q
<PAGE>
ENSIGN INVESTORS, INC.
Notes to Financial Statements
Continued
- ------------------------------------------------------------------------------
3. Accumulated Undistributed Investment Income
As of December 31, 1997, net investment income had been distributed as follows:
Accumulated net investment income distributed:
December 31, 1997 $ 6,000
Accumulated realized gains distributed:
December 31, 1997 -
-------------
Total net investment income and realized gain
distributed $ 6,000
=============
Net unrealized appreciation in value of
investments as of December 31, 1997 $ 1,862
=============
As of December 31, 1997, net investment income of $231 had not been
distributed to the Company's shareholders.
4 Distributions to Shareholders
On December 10, 1997, cash distributions of $.02 per share aggregating in $6,000
were declared and paid from net investment income.
5. Financial Instruments
None of the Company's financial instruments are held for trading purposes. The
Company estimates that the fair value of all financial instruments at December
31, 1997, does not differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet. The estimated
fair value amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable judgement is
necessarily required in interpreting market data to develop the estimates of
fair value, and, accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market exchange.
- ------------------------------------------------------------------------------
29-R
<PAGE>
ENSIGN INVESTORS, INC.
Supplementary Schedule Selected Per Share Data and Ratios
Year Ended December 31, 1997
- ------------------------------------------------------------------------------
Per Share Data
Investment income $ 0.04
Expenses (0.01)
-----------------
Net investment income 0.03
Dividends from net investment income (0.02)
Net realized and unrealized gain on securities -
Capital share transactions 1.00
Distributions from net realized gain on securities -
-----------------
Net increase in net asset value 1.01
Net asset value at beginning of year -
-----------------
Net asset value at end of year $ 1.01
=================
Ratios
Expenses to average net assets % 1.53
Net investment income to average net assets % 2.77
Portfolio turnover ratio -
Number of shares outstanding at end of year 271,024
=================
- ------------------------------------------------------------------------------
20-S
<PAGE>
PART C
OTHER INFORMATION
30
<PAGE>
Item 24. Financial Statements and Exhibits
(a) Financial Statements see Part B, Financial Statement
Item 24. (b)(1) Articles of Incorporation, see Attachment A.
Item 24. (b)(2) By-laws, see Attachment B.
Item 24. (b)(3) Not applicable.
Item 24. (b)(4)See Articles of Incorporation, Articles IV, XII; and By-laws,
Articles II, IV, and VI.
Item 24. (b)(5) Advisory and Service Contract, see Attachment C.
Item 24. (b)(6) Not applicable.
Item 24. (b)(7) Not applicable.
Item 24. (b)(8) Custodian Agreement, see Attachment D.
Item 24. (b)(9) Other Material Contracts, Agency Agreement between Ensign
Investors, Inc. and Wells Investment Services, Inc., see Attachment E.
Item 24. (b)(10) Opinion of Counsel, see Attachment F.
Item 24. (b)(11) Opinion of Certified Public Accountant, see Financial
Statements in Part B.
Item 24. (b)(12) Not applicable.
Item 24. (b)(13) Subscription Agreement, see Attachment G.
Item 24. (b)(14) Copy of the Model Plan Used in the Establishment of Any
Retirement Plan: IRS Form 5305A Individual Retirement Custodial
Account is used.
Item 24. (b)(15) Not applicable.
Item 24. (b)(16) Not applicable.
Item 24. (b)(17) Not applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant, not
applicable.
Item 26. Number of Holders of Securities
Title of Class Number of Record Holders
_____________________________________ _____________________________
Ensign Investors Value Fund 11
31
<PAGE>
Item 27. Indemnification
The Registrant has no formal indemnification contract or arrangement with any
director, officer, underwriter, or affiliated person, other than such
arrangement as is evidenced by Article XIV of the Registrant's By-Laws.
Item 28. Business and Other Connections of Investment Advisor
Officers and Directors of Wells Investment Services, Inc.
Stanley M. Wells, President and Director of adviser. Formerly employed as a
Safety and Soundness Examiner for the Federal Reserve Bank of San Francisco, 215
South State Street, Suite 350, Salt Lake City, Utah 84111-2319.
Rebecca S. Wells, Secretary and Director of adviser. Math teacher for the Jordan
School District, 315 East 9375 South, Sandy, Utah 84070.
Item 29. Principal Underwriters - Not Applicable
Item 30. Location of Accounts and Records
All accounts, books, and other documents required to be maintained by Section
31(a) of the 1940 Act will be maintained by Wells Investment Services, Inc. at
its principal office at 9921 S.
Treasure Cir., South Jordan, Utah 84095.
Item 31. Management Services
Not applicable. There are no management related service contracts that have not
been discussed in Part A or Part B of this Registration Statement.
Item 32. Undertakings
(a) Certified financial statements showing the initial capital received before
accepting subscriptions from any person in excess of 25 is included in this
registration in Part B.
(b) post-effective amendment, presenting financial statements within four to
six months from the effective date of this registration will be filed
within six months from the effective date of this registration statement.
(c) Registrant hereby undertakes to promptly call a meeting of shareholders for
the purpose of voting upon the question of removal of any director when
requested in writing to do so by the record holders of not less than 10
percent of the Fund's outstanding voting securities.
32
<PAGE>
ARTICLES OF INCORPORATION
OF
ENSIGN INVESTORS, INC.
ARTICLE I
The name of the Corporation is ENSIGN INVESTORS, INC. (hereinafter called
the "Corporation").
ARTICLE II
The period of duration of the Corporation is perpetual.
ARTICLE III
The nature of the business and the objects and purposes to be transacted,
promoted or carried on are to engage in the business of an incorporated
investment company of the management type, investing and reinvesting its assets
in accordance with the provisions of these articles of incorporation. The
general nature of its business shall be to buy, hold, sell, exchange, pledge,
and otherwise deal in notes, stock, bonds, options, or other securities of
whatsoever nature; to do any and all acts and things necessary or incidental
thereto to the extent permitted business corporations under the provisions of
the laws of the State of Utah as from time to time amended; to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging, or
otherwise subjecting as security the assets of the Corporation; and to sell,
hold, purchase, and reissue the shares of its own capital stock.
ARTICLE IV
a. The Corporation is authorized to issue a total of five hundred million
(500,000,000) shares of Common Stock, with par value of $0.10 per share. All
shares have equal voting right; each share is entitled to one vote per share
(with proportionate voting for fractional shares). There shall be no
restrictions imposed upon the transfer of shares.
b. All consideration received by the Corporation for the issue or sale of
<PAGE>
shares, together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof, including any
proceed derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceed in whatever form
the same may be, shall irrevocably belong to the fund for all purposes, subject
only to the rights of creditors and except as may otherwise be required by
applicable tax laws, and shall be so recorded upon the books of account of the
Corporation.
c. Each share of the Corporation has equal dividend, distribution,
liquidation, and voting rights with every other share of the Corporation. Each
issued and outstanding share is entitled to one vote and to participate equally
in dividends and distributions declared by the Corporation and in net assets
upon liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
d. The Board of Directors is authorized to establish new Series of stock
in addition to those already existing without the approval of the shareholders
of the Corporation by executing a resolution setting forth such establishment
and designation and the relative rights and preference of such Series. At any
time that there are no shares outstanding of any particular Series previously
established and designed, the Board of Directors may by a resolution executed by
a majority of their number abolish that Series and the establishment and
designation thereof.
e. The Board of directors may from time to time issue and sell or provide
for the issuance and sale of the authorized but unissued shares of the
Corporation. All shares of the Corporation sold shall be sold for cash, except
as otherwise provided in this Article, which shall in each case be paid prior to
the delivery of any certificate of the Corporation for such shares.
f. The Corporation may issue and sell fractions of shares having pro rata
all the rights of full shares, including, without limitation, the right to vote
and receive dividends; and wherever the words "share" or "shares" are used in
these articles or in the bylaws they shall be deemed to include fractions of
shares where the context does not clearly indicate that only full shares are
intended.
g. The shareholders have no preemptive right to acquire additional shares
of the Corporation. No shares need be offered to existing shareholders before
being offered to others. No shares shall be sold by the Corporation during any
period when the determination of net asset value is suspended.
h. In connection with the acquisition of all or substantially all the
assets of another entity, the Board of Directors may issue or cause to be issued
shares of the Corporation and accept in payment thereof in lieu of cash such
assets of such entity at market value, provided such assets are of the character
in which the Board of Directors are authorized to invest the funds of the
Corporation.
<PAGE>
Any shareholder of record in the Corporation desiring to dispose of his/her
shares may deposit his/her certificate or certificates for such shares with the
Corporation or its agent, duly endorsed or accompanied by a proper instrument of
transfer, with a request that the Corporation redeem the shares represented
thereby. Upon any such deposit being made, the Corporation shall be required to
redeem said shares but only at the net asset value of such shares next
determined following their deposit. Payment for such shares shall be made by the
Corporation within seven (7) days after the date upon which the shares are
deposited. Whenever the Board of directors, by declaration or resolution, has
suspended the
determination of net asset value pursuant to the provisions of these articles of
incorporation, the right of any shareholder to require the Corporation to redeem
his shares shall be likewise suspended. At any time such suspension is in effect
any shareholder may withdraw his certificate or certificates from deposit or may
leave the same on deposit, in which case the redemption price shall be the net
asset value next determined after the suspension is terminated. The Corporation
may by agreement with any shareholder purchase shares of the Corporation at a
price not exceeding the net asset value in effect at the time when such purchase
or contract to purchase is made or the net asset value next to be determined.
Any shares of its stock purchased or redeemed by the corporation pursuant to the
provisions of this Article shall be deemed retired and shall thereafter have the
status of authorized but unissued stock.
j. The holders of 25% of the shares of common stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the shareholders
for the transaction of business, except as otherwise provided by statute. If
such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time
(provided no adjournment shall be for more than three (3) months) without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted that might have been transacted at
the meeting as originally notified.
ARTICLE V
The Corporation shall not commence business until consideration of the
value of at least $1,000.00 has been received for the issuance of shares.
ARTICLE VI
The majority of the directors may adopt Bylaws for the Corporation which
are consistent with these Articles and the laws of the State of Utah, and such
Bylaws may
<PAGE>
be altered, amended or repealed, in whole or in part, to the extent that such
Bylaws do not reserve that right to the shareholders, and new Bylaws may be
adopted, by the Board of Directors, at any regular or special meeting of the
Board of Directors.
ARTICLE VII
a. The net asset value of each share of the Corporation outstanding shall
be determined in accordance with the Corporation's current prospectus.
The Board of Directors may suspend the determination of net asset value for
all or any part of any period during which the New York Stock Exchange is
normally closed, or during which trading on the New York Stock Exchange or in
the markets normally utilized by The Corporation is restricted by governmental
order, or during which an emergency exists such as would make disposal by the
Corporation of securities owned by the Corporation unreasonable or
impracticable, or would make determination of the net asset value of the assets
of the Corporation impracticable. The determination of whether trading on the
New York Stock Exchange or in the markets normally utilized by the Corporation
is restricted or whether such an emergency, as herein provided, exists shall be
by applicable rules and regulations of the Securities and Exchange Commission or
other governmental authority. The suspension shall become effective at such time
as the Board of Directors shall specify in their declaration or resolution, but
not later than the close of business on the next succeeding business day
following the declaration or resolution. After such suspension becomes
effective, there shall be no determination of net asset value until the Board of
Directors shall declare the suspension terminated. The suspension shall
terminate in any event on the first day on which the New York Stock Exchange is
open, the restricted trading on the New York Stock Exchange or in the markets
utilized by the Corporation has ended, or the emergency shall have expired in
accordance with the official ruling of the Securities and Exchange Commission or
other governmental authority or, in the absence of such ruling, upon the
determination of the Board of Directors.
c. The Board of Directors may delegate any of its powers and duties under
this article with respect to appraisal of assets and liabilities and
determination of net asset value or with respect to suspension of the
determination of net asset value to an officer or officers or agent or agents of
the Corporation designated from time to time by the Board of Directors.
ARTICLE VIII
a. The corporation may employ a custodian, which meets the qualifications
for custodians contained in the Investment Company Act of 1940, pursuant to such
terms and conditions as the Board of Directors may direct and as contained in
the bylaws.
<PAGE>
b. The Corporation may also employ such custodian as its agent to keep the
books and accounts of the Corporation, and to furnish clerical and accounting
services. The compensation to be paid to the custodian for such services as it
may render to the Corporation shall be in such amount as may be agreed upon by
the Corporation and the custodian. When so directed by the Board of Directors,
the custodian shall deliver and pay over all property of the Corporation held by
it as specified in such direction.
c. The Board of Directors in its discretion may employ a transfer agent,
registrar, or dividend disbursing agent for the Corporation under such terms and
conditions as the board shall deem advisable.
ARTICLE IX
a. The Board of Directors may in its discretion from time to time enter
into a contract or contracts with anyone or more parties as an underwriter,
providing for the sale of the shares of this Corporation. Such contract or
contracts may also provide for the repurchase of shares of this Corporation by
such underwriter as agent of the Corporation. The Board of Directors may in its
discretion enter into a plan of distribution pursuant to Rule 12b-1 of the
Investment Company Act of 1940, as amended.
b. The Board of Directors may in its discretion from time to time enter
into an investment advisory or management contract with any other person, firm,
or corporation, hereinafter called the "investment adviser" to furnish advice to
the Corporation with respect to the desirability of investing in, or purchasing
or selling securities, or other property; or to determine what securities or
other property shall be purchased or sold by the Corporation; or to furnish the
Board of Directors such management, investment advisory, statistical and
research facilities, and such other services and facilities, if any, as the
Board of Directors may deem desirable upon such terms and conditions as the
Board of Directors may determine. The compensation to be paid under the terms of
such contract or contracts shall be subject to the limitations contained in
Article X of these Articles of Incorporation.
c. The Board of Directors, subject to the provisions of this article, may
in its discretion enter into any contract with any person, firm, or corporation
irrespective of whether or not one or more of the directors or officers of this
Corporation may also be an officer, director, shareholder or member of such
other person, firm, or corporation, and such contract shall not be invalidated
or rendered voidable by reason of any such relationship. No person holding such
relationship shall be liable because of such relationship for any loss or
expense to the Corporation under or by reason of such contract, or accountable
for any profit realized directly or indirectly therefrom, provided that such
contract when executed was reasonable and fair, consistent with the provisions
of these articles of incorporation, and approved by a majority of the Board of
Directors of this Corporation who are not so related, or by the vote of a
majority of the outstanding share of this Corporation.
<PAGE>
d. Any contract entered into pursuant to the terms of this article shall
be consistent with and subject to the requirements of the Investment Company Act
of 1940, including any amendment thereto or other applicable act of Congress
hereafter enacted, with respect to its duration, termination, authorization,
approval, assignment, amendment, or renewal.
ARTICLE X
a. Subject to the limitations contained in this article, the directors
shall be entitled to reasonable remuneration from the Corporation for their
services as directors in such amount as may from time to time be fixed by vote
of the Board of Directors.
The Corporation may incur such expenses as are necessary to perform its
functions and such expenses may include but are not limited to the following:
compensation to be paid to any other party to an investment advisory contract
with the Corporation entered into pursuant to Article IX; the compensation to be
paid to the officers, consultants, and employees of the Corporation; office
hire; ordinary office expenses; investment advisory, statistical and research
facilities; directors' fees; legal and accounting expenses; taxes and
governmental fees; federal and state registration and qualification fees; cost
of stock certificates; cost of reports and notices to shareholders; association
dues; brokers' commissions; transaction costs; fees and expenses of any
custodian; expenses of computing the net asset value; and fees and expenses of
any transfer agent, registrar, and dividend disbursing agent. During any period
in which the determination of net asset value is suspended, as provided in these
Articles of Incorporation, the net asset value as last determined and effective
shall for the purposes of this article be deemed to be the net asset value as of
the close of business on each business day until a new net asset value is again
determined and made effective as provided herein.
c. The provisions of this article shall not preclude the payment of
reasonable fees for legal or accounting services to any firm of which a director
or officer of the Corporation may be a member, nor of customary brokerage
charges in connection with the purchase or sale of securities to any firm in the
brokerage business of which a director or officer of the Corporation may be a
member, officer or director; and no part of any such fee, charge, or
compensation shall be deemed compensation to such officer or director within the
purview of this article. No compensation, commission, fee, or profit which may
be received by the other party to a contract entered into pursuant to Article IX
shall be deemed compensation to any officer or director of the Corporation
simply because such officer or director is also an officer, director,
shareholder, or member of such other party.
ARTICLE XI
a. The Board of Directors may from time to time declare and pay
dividends with the amount, source, and payment thereof to be within their
discretion and calculated on the basis of generally accepted accounting
principles.
b. The Board of Directors may also declare dividends out of
accumulated and undistributed net realized capital gains.
<PAGE>
c. The Board of Directors has the power, in its discretion, to
distribute for any year as ordinary dividends and as capital gains
distributions, respectively, amounts sufficient to enable the Corporation as a
regulated investment company to avoid any liability for federal income tax in
respect to that year. The Board of Directors may at any time declare and
distribute pro rata among the shareholders a stock dividend out of authorized
but unissued shares of the Corporation. All dividends declared except as
provided above, shall be deemed liquidating dividends and the shareholders shall
be advised accordingly. In the case of a dividend payable in shares of stock or
cash at the election of a shareholder, the Board of Directors may prescribe
whether a shareholder failing to express his election before a given time shall
be deemed to have elected to take shares rather than cash, or to take cash
rather than shares, or to take shares with cash adjustment of fractions.
ARTICLE XII
The Board of Director shall submit to the shareholders at least
semiannually a written financial report of the transactions of the Corporation,
including financial statements.
The financial statements in such reports shall be certified to at least annually
by independent public accountants.
b. In the event holders of two-thirds of the outstanding shares of the
Corporation shall vote at any time to wind up and liquidate the Corporation, no
further shares of the Corporation shall be issued, sold, or purchased by the
Corporation and the directors shall immediately proceed to wind up the
Corporation's affairs, liquidate the assets, pay all liabilities and expenses of
the Corporation and distribute the remaining assets, if any, among the
shareholders of the Corporation in proportion to their holding of shares. The
Board of Directors shall also do any other acts necessary to secure and complete
the dissolution of the Corporation.
c. When the dissolution and liquidation of the Corporation has been
directed by vote of the shareholders, the directors then holding office shall
continue in office until the liquidation and dissolution of the Corporation has
been completed. During the period of liquidation and until final distribution to
the shareholders has been made, the compensation of the directors and all other
parties shall be determined on the same basis as if the computation of the net
asset value of the shares had been suspended, as provided in these articles of
incorporation.
ARTICLE XIII
No director of the Corporation shall have any personal liability to the
Corporation or its shareholders for monetary damages, for any breach of
fiduciary duty, except to the extent the elimination of personal liability of a
director is restricted by the provisions of 16-10-49.1, Utah Code (1953, as
amended) and by the provisions of Section 17(h) of the Investment Company Act of
1940. Section 17(h) prohibits the inclusion of any provision to protect any
director or officer of an investment company against liability to the company or
its security holders to which such director would otherwise
<PAGE>
be subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his/her office.
ARTICLE XIV
The address of the initial registered office of the Corporation in this
State is 9921 South Treasure Circle, South Jordan, Utah 84095. The initial
registered agent and incorporator of the Corporation at such address is Stanley
M. Wells.
ARTICLE XV
The number of directors constituting the initial board of Directors is
three (3). The number of directors may be increased or decreased by amendment of
the Bylaws, but the number of director shall not be less than three. Cumulative
voting shall not be permitted. The names and addresses of the persons who will
serve as directors until the first annual meeting of the shareholders or until
their successors are duly elected and qualified are as follows:
Stanley M. Wells 9921 So. Treasure Circle
South Jordan, Utah 84095
Rebecca S. Wells 9921 So. Treasure Circle
South Jordan, Utah 84095
Jerry J. Ohrn 10185 So. Springcrest Lane
South Jordan, Utah 84095
ARTICLE XVI
a. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, in the manner now or
hereafter prescribed by the Utah Revised Business Corporation Act upon the
affirmative vote of a majority of the outstanding shares of the Corporation; and
all rights conferred upon shareholders herein are granted subject to this
reservation.
b. The majority of the directors may adopt Bylaws for the corporation
which are consistent with these Articles and the laws of the State of Utah and
such Bylaws may be altered, amended, or repealed, in whole or in part, and new
Bylaws may be adopted, by the Board of Directors at any regular or special
meeting of the Board of Directors.
<PAGE>
These Articles are accepted as such,
Dated this 28 day of August 1996.
/s/ Stanley M. Wells
<PAGE>
STATE OF UTAH )
:ss
COUNTY OF SALT LAKE )
I Lynne Clevenger Notary Public hereby certify that on the 26th day of
August 1996, personally appeared before me Stanley M. Wells, who being by me
first duly sworn, declared that he is the person who signed the foregoing
document as incorporator, and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 26th day of
August 1996.
/s/ Lynn Clevenger
Notary Public Residing in
West Jordan, Utah
My commission expires:
10-8-96
<PAGE>
ATTACHMENT B
<PAGE>
BY-LAWS
OF
ENSIGN INVESTORS, INC.
ARTICLE I
OFFICE
Principal Office
The principal office of the Corporation shall be in Salt Lake County, State of
Utah. Offices may also be maintained and meetings of stockholders and directors
may be held at such other place or places as may be designated from time to time
by the Board of Directors.
ARTICLE II
STOCKHOLDERS MEETING
SECTION 1. ANNUAL MEETING
The annual meeting of the shareholders and all meetings of the shareholders for
the election of directors shall be held at such place within, or without, the
State of Utah as may be determined by the Board of Directors and as shall be
designated in the notice of said meeting. Special meetings of the shareholders
may be held at such time and place as shall be stated in the notice of the
meeting. The annual meeting of the shareholders shall be held at such time and
on such day within the month of May as may be determined by the Board of
Directors and as shall be designated in the notice of said meeting. At such
meeting the shareholders shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS
Special meetings of the shareholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the president at any time and
shall be called by the president at the request of a majority of the Board of
Directors, or at the request in writing of one or more shareholders who
collectively hold at least twenty-five percent (25%) of the common stock of the
Corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the meeting. Business transacted at all special
meetings shall be confined to the objects stated in the call.
SECTION 3. NOTICE OF MEETING
Written notice of every meeting of the shareholders, stating the time, place,
and purpose or purposes for which the meeting is called, shall be given by the
secretary to each shareholder entitled to vote thereat and to any shareholder
entitled by law to such notice. Such notice shall be given to each shareholder
by mailing the same, postage prepaid, to the address of the shareholder as it
appears on the books of the Corporation not less than ten (10) days nor more
than fifty (50) days before the time fixed for such meeting.
<PAGE>
SECTION 4. QUORUM
The holders of a majority of the shares of common stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the shareholders
for the transaction of business, except as otherwise provided by statute. If
such quorum shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time
(provided no adjournment shall be for more than three (3) months) without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION 5. RECORD DATE FOR VOTING
At any meeting of the shareholders only such persons shall be entitled to vote
in person or by proxy as appear as shareholders upon the transfer books of the
company at the time of such meeting unless the Board of Directors shall, by
resolution, fix a date not more than ninety (90) days in advance of the date of
the shareholders meeting as the record date for the meeting in which case only
those so appearing as shareholders on the date so fixed shall be entitled to
vote. Additionally, the Board may similarly fix a record date for determination
of shareholders entitled to receive a dividend or for a determination of
shareholders for any other purpose.
SECTION 6. RIGHT TO VOTE
When a quorum is present at any meeting, the vote of the holders of a majority
of the shares having the right to vote thereat, present in person, or
represented by proxy, shall determine any question brought before such meeting,
unless the question is one upon which by express provision of the applicable
statutes, articles of incorporation or these by-laws, a different vote is
required in which case such express provision shall control.
At any meeting of the shareholders, every shareholder having the right to vote
shall be entitled to vote in person or by proxy appointed by an instrument in
writing subscribed by such shareholder and bearing a date not more than eleven
(11) months prior to said meeting, which instrument shall be filed with the
secretary of the meeting before being voted. Each shareholder shall have one
vote or fraction thereof for each share or fraction thereof held.
SECTION 7. VOTING OF SHARES BY CERTAIN HOLDERS
Shares standing in the name of another company or corporation may be voted by
such officer, agent or proxy as the by-laws of such company or corporation may
prescribe, or, in the absence of such provision, as the Board of Directors of
such company or corporation may determine.
Shares held by an administrator, personal representative, guardian, or
conservator may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name, if authority so to do be contained
in an appropriate order of the court by which such receiver was appointed.
Shares of its own stock belonging to the Corporation shall not be voted,
directly or indirectly, at any meeting and shall not be counted in determining
the total number of outstanding shares entitled to vote.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS
The business and affairs of the Corporation shall be managed by its Board of
Directors.
SECTION 2. NUMBER AND TENURE
The number of directors comprising the full Board of Directors shall be not less
than three (3) nor more than fifteen (15). The present board consists of three
(3) directors. Hereafter, within the limits specified herein, the shareholders
shall determine the number of directors at the annual meeting and elect the
number so fixed. The number of directors may be changed by the Board of
Directors or at any special meeting of the shareholders, but not so as to
shorten the term of any director then in office. Subject to death, resignation
or removal, each director shall hold office until the next annual meeting and
until his successor is elected and qualified. Directors need not be shareholders
of the Corporation.
If the number of directors is increased by the Board of Directors, the resulting
vacancies may be filled by a majority vote of the entire Board of Directors. If
the office of any director or directors becomes vacant for any other reason, a
majority of the remaining directors, though less than a quorum, may choose a
successor or successors, who shall hold office for the unexpired term in respect
to which such vacancy occurred or until the next election of directors, provided
that, immediately after filling any such vacancy, at least two-thirds (2/3) of
the directors then holding office shall have been elected to such office by the
shareholders of the Corporation entitled to vote at any annual or special
meeting of the shareholders; otherwise such vacancy shall be filled by vote of
the shareholders at a special meeting called for such purpose.
SECTION 3. MANNER OF ACTING
The property and business of the Corporation shall be managed by its Board of
Directors which may exercise all such powers of the Corporation and do business
such lawful acts and things as are not by statute, the articles of
incorporation, or these by-laws prohibited or directed or required to be
exercise or done by the shareholders.
At all meetings of the Board of Directors, a majority of the directors shall be
necessary and sufficient to constitute a quorum for the transaction of business,
and the act of the majority of the directors present at any meeting at which
there is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute, by the articles of incorporation or
by these by-laws. If a quorum shall not be present at any meeting of the Board
of Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
SECTION 4. REGULAR MEETINGS AND MAINTENANCE OF BOOKS AND RECORDS
The Board of Directors may hold their meetings and keep the books of the
Corporation at the office of the Corporation in the City of South Jordan, State
of Utah, or at such other places as they may from time to time determine, and
telephone meetings may be held. The original or duplicate stock ledger shall be
kept at the office of the Corporation in the City of South Jordan, State of
Utah, or at the office of any transfer agent which may be employed by the
Corporation.
SECTION 5. SPECIAL MEETINGS
Special meetings of the Board of Directors may be held at any time when
called by the president or two (2) or more
<PAGE>
directors. Not less than twenty-four (24) hours notice of any special meeting
shall be given by the secretary or other officer calling such meeting to each
director either in person, by telephone, by mail or by telegram. Such notice may
be waived by any director either in person or in writing or by telegram. Such
special meetings shall be held at such time and place, within or without the
State of Utah, as the notice thereof or waiver shall specify. Unless otherwise
specified in the notice thereof, any and all business may be transacted at any
meeting of the board of directors.
SECTION 6. RESIGNATION AND REMOVAL
Any director may resign at any time. The shareholders entitled to vote for the
election of directors may remove a director with or without cause. However, no
director may be removed when the vote cast against his removal would be
insufficient to elect him if voted cumulatively at an election of directors at
which the same number of votes were cast and the full board were then being
elected.
SECTION 7. COMPENSATION
By resolution of the Board of Directors, the directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. Directors who serve as directors or officers of
the Corporation's investment adviser shall not receive compensation for their
service as director or officer of the Corporation.
SECTION 8. PRESUMPTION
A director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
minutes of the meeting, or unless he shall file his written dissent to such
action with the person acting as the Secretary of the meeting immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
SECTION 9. COMMITTEES
The Board of Directors may elect from their own number, by resolution or
resolutions passed by a majority of the whole board, an executive committee to
consist of two (2) or more directors, which shall have the power to conduct the
current and ordinary business of the Corporation while the Board of Directors is
not in session. The Board of Directors may also in the same manner elect from
their own number from time to time other committees, the number composing such
committees and the powers conferred thereon to be determined from the resolution
creating the same.
ARTICLE IV
NOTICES
Whenever, under the provisions of applicable statute, the articles of
incorporation or these by-laws, notice is required to be given to any
shareholder or director, it shall not be construed to mean personal notice
unless the context otherwise provides. Such notice may be given in writing, by
mail, by depositing the same in a post office or letter box, in a postpaid
sealed wrapper, addressed to such shareholder or director at such address as
appears on the books of the Corporation, and such notice shall be deemed to be
given at the time when the same shall be thus mailed.
Whenever any notice is required to be given under the provision of applicable
statute, the articles of incorporation, or by these by-laws, a waiver thereof in
writing signed by the person or persons entitled to said notice, whether before
or after the time stated therein, shall be equivalent thereto.
<PAGE>
ARTICLE V
OFFICERS
SECTION 1. GENERAL OFFICERS
The officers of the Corporation shall be chosen by the Board of Directors at the
first meeting of each newly elected board. The Board of Directors may elect one
of its own members as chairman of the board and shall elect a president,
secretary, and treasurer. The Board of Directors may also choose additional vice
presidents and one or more assistant secretaries and assistant treasurers. Two
or more offices, when consistent, may be held by the same person, except that
any person holding the office of president shall not hold the office of
secretary. The president of the Corporation shall be a director. All other
officers may be, but need not be, directors.
SECTION 2. OTHER OFFICERS
The Board of Directors may appoint such other officers, agents and
representatives of the Corporation as shall be deemed necessary, with such
powers for such term and to perform such acts and duties on behalf of the
Corporation as the Board of Directors may see fit to the extent authorized or
permitted by law, the articles of incorporation, and these by-laws.
SECTION 3. CHAIRMAN OF THE BOARD
The chairman of the board, if one shall be elected, shall preside at all
meetings of the shareholders and Board of Directors and shall perform such other
duties as the Board of Directors may from time to time prescribe.
SECTION 4. PRESIDENT
The president shall be the chief executive officer of the Corporation and shall
in the absence of the chairman preside at all meetings of the shareholders and
Board of Directors. The president shall have power to sign all certificates for
shares of stock. The president shall perform such other duties as the Board of
Directors shall from time to time prescribe.
SECTION 5. VICE PRESIDENTS
The vice presidents, in the order of their seniority or as designated by the
Board of Directors, shall in the absence or disability of the president perform
the duties and exercise the powers of the president and shall perform such other
duties as the Board of Directors may from time to time prescribe.
SECTION 6. SECRETARY
The secretary shall record all votes and proceedings of meeting of the
shareholders and of the Board of Directors in the corporate records. He shall
give, or cause to be given, notice of all meetings of the shareholders and
meetings of the Board of Directors when notice thereof is required. The
secretary shall have custody of the corporate seal of the Corporation and may
affix the same to any instrument requiring the corporate seal and attest to the
same with his signature. He shall have power to sign all certificates for shares
of stock and shall perform such other duties as the Board of Directors may from
time to time prescribe.
The assistant secretaries, in order of their seniority or as directed by the
Board of Directors, shall in the absence or disability of the secretary perform
the duties and exercise the powers of the secretary and shall perform such other
duties as the Board of Directors may prescribe.
<PAGE>
SECTION 7. TREASURER
The treasurer shall deliver all funds and securities of the Corporation which
may come into his hands to such bank or trust company as the Board of Directors
may designate as custodian. He shall keep such records of the financial
transactions of the Corporation as the Board of Directors shall prescribe. The
treasurer shall have power to sign all certificates for shares of stock and
shall perform such other duties as the Board of Directors may from time to time
prescribe.
The assistant treasurers, in order of their seniority or as directed by the
Board of Directors, shall in the absence or disability of the treasurer perform
the duties and exercise the powers of the treasurer and shall perform such other
duties as the Board of Directors may prescribe.
SECTION 8. TERM OF OFFICE
The officers of the Corporation shall hold office until their successors are
chosen and qualified. Any officer elected or appointed by the Board of Directors
may be removed at any time by the affirmative vote of a majority of the whole
Board of Directors. If the office of any officer shall become vacant for any
reason, the vacancy shall be filled by the Board of Directors.
ARTICLE VI
STOCK CERTIFICATES
SECTION 1. CERTIFICATES
The Board of Directors, in lieu of issuing stock certificates, may elect to
maintain records of all shareholders at the corporate headquarters and notify
each shareholder of the number of shares held at the time the shareholder
invests or redeems shares of the company, or in the event there has been no
activity in a shareholder account, notice of the number of shares held will be
given quarterly.
Should the Board of Directors elect to issue certificates, the certificates of
stock of the Corporation shall be in the form prescribed by the Board of
Directors and shall be signed by the president or a vice president and the
secretary treasurer or an assistant secretary or an assistant treasurer. The
Board of Directors may require all certificates for shares of stock to be signed
(1) by a transfer agent or an assistant transfer agent or (2) by a transfer
clerk acting on behalf of the Corporation. The signature of any officer of the
Corporation and the seal of the Corporation thereon may be facsimiles. All
certificates for shares shall be consecutively numbered, or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the stock ledger books of the Corporation.
In case any officer who has signed or whose facsimile signature has been used on
a certificate cease to be an officer before the certificate has been delivered,
such certificate may, nevertheless, be adopted and issued and delivered by the
Corporation as though such officer had not ceased to hold such office. In the
event any officer of the Corporation authorized to sign certificates for shares
of stock of the Corporation shall die or cease to hold office, otherwise valid
certificates bearing the signature, either real or facsimile, of such officer
will remain valid and may be issued.
SECTION 2. TRANSFER OF SHARES
Transfer of shares shall be made only upon the transfer books of the
Corporation. Before a new certificate is issued the old
<PAGE>
certificate shall be surrendered for cancellation. Such transfers shall be made
only by the holder of record thereon, or by his legal representative, who shall
furnish proper evidence of authority to transfer, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation.
The Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
Corporation which are alleged to have been lost, mutilated, or destroyed upon
such terms and upon such conditions as may be prescribed by the Board of
Directors.
ARTICLE VII
INVESTMENT AND OTHER RESTRICTIONS
The Corporation may not:
1. Purchase, with respect to 75 percent of its total assets, securities of an
issuer (other than obligations of, or guaranteed by, the United States
government, its agencies or instrumentalities) if, as a result, more than 5
percent of the value of the Fund's assets would be invested in the
securities of that issuer.
2. Purchase more than 10 percent of any class of securities of any issuer. All
debt securities and all preferred stocks are each considered as one class.
3. Invest any of the Fund's assets in securities of issuers which with their
predecessors have a record of less than three years continuous operation,
and securities of issuers which are not readily marketable.
4. Make loans to others (except through the purchase of debt obligations in
accordance with its investment objectives and policies.
5. Borrow money except as a temporary measure for extraordinary or emergency
purposes and then only in an amount up to 5 percent of the value of its
total assets, in order to meet redemption requests.
6. Make short sales of securities, purchase any security on margin, or write
put or call options.
7. Concentrate more than 25 percent of the value of its assets in any one
industry.
8. Purchase or retain the securities of any issuer if any of the officers or
directors of the Fund or its Investment Adviser own beneficially more than
1/2 of one percent of the securities of such issuer and together own more
than 5 percent of the securities of such issuer.
9. Invest for the purpose of exercising control or management of another
issuer.
10. Invest in commodities or commodity futures contracts or in real estate
mortgage loans, although it may invest up to 5 percent in securities which
are secured by real estate and securities of issuers which invest or deal
in real estate.
11. Invest in interests in oil, gas, or other mineral exploration or
development programs, although it may invest in the securities of issuers
which invest in or sponsor such programs.
<PAGE>
12. Purchase securities of other open-end investment companies, except by
purchases in the open market involving only customary brokers' commissions
and no sales charges or in connection with a merger, consolidation,
reorganization, or acquisition of assets. Closed-end investment company
securities will not be purchased except those purchased in the open market
and only those with no commission or profit other than those with regular
brokerage commissions, subject to Section 12 of the Investment Company Act
of 1940.
13. Underwrite securities issued by others except to the extent the Fund may be
deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
14. Issue senior securities as defined in the Investment Company Act of 1940.
15. Invest any of the Fund's assets in securities restricted as to disposition
under federal securities laws.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values of net assets will not be considered a violation except the
investment restriction on borrowing money.
The Investment Company Act imposes certain additional restrictions upon
acquisition by the Corporation of securities issued by insurance companies,
brokers, dealers, underwriters, or investment advisers, and upon transactions
with affiliated persons as therein defined. It also defines and forbids the
creation of cross and circular ownership.
ARTICLE VIII
CUSTODIAN
The Corporation shall employ a custodian which shall be a bank or trust company
having an aggregate capital, surplus and undivided profits of at least
$2,000,000, pursuant to a contract with the Corporation which shall contain in
substance the following provisions:
a. The Corporation will cause all securities and funds owned by the
Corporation to be delivered or paid to the custodian.
b. The custodian will receive and receipt for any monies due to the
Corporation and deposit the same in an account in its own banking
department or in such other banking institution, if any, as the Board of
Directors may direct. The custodian shall have the sole power to draw upon
any such account.
c. The custodian shall release and deliver securities owned by the Corporation
in the following cases only:
1. Upon the sale of such securities for the account of the Corporation and the
receipt of payment therefor;
2. To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable, provided that in any such
case the cash proceeds thereof shall be delivered to the custodian;
3. To the issuer thereof or its agent for transfer into the name of the
Corporation or the custodian, or a nominee of either, or for exchange for a
different number of bonds or certificates representing the same number of
shares or aggregate face amount, provided that in any such case the new
securities replacing such securities are delivered to the custodian;
4. To the broker selling the same for examination in accordance with the
"street delivery" custom;
5. For exchange or conversion pursuant to any plan of merger consolidation,
reorganization, recapitalization,
<PAGE>
or readjustment of the securities of the issuer of such securities,
or pursuant to provisions for conversion contained in such
securities, provided that in any such case the new securities and
cash, if any, are delivered to the custodian;
6. In the case of warrants, rights or similar options, the surrender thereof
shall be only for the exercise of such warrants, rights, or other options
on behalf of the Corporation upon interim receipts or temporary securities
for definitive securities;
7. For any other proper purpose.
d. The custodian shall pay out moneys of the Corporation only upon the
purchase of securities for the account of the Corporation and the delivery
in due course of such securities to the custodian, or in connection with
the conversion, exchange, or surrender of securities owned by the
Corporation as set forth herein, or for the repurchase of shares issued by
the Corporation, or for the making of any disbursements authorized by the
Board of Directors pursuant to the articles of incorporation and the
by-laws, or for the payment of any expenses or liabilities incurred by the
Corporation.
e. The custodian shall make deliveries of securities and payments of cash
only upon written instructions signed by such officer or officers or other
agent or agents of the Corporation, including the investment adviser, as
may be authorized to sign such instructions by resolution of the Board of
Directors. The Directors may, from time to time, authorize different
persons to sign instructions for different purposes.
The contract between the Corporation and the custodian may contain any other
provisions not inconsistent with the articles of incorporation or with these
by-laws, which the Board of Directors may approve.
Such contract shall be terminable by either party upon written notice to the
other; provided that upon termination of the contract or inability of the
custodian to continue to serve, the custodian, upon written notice of the
appointment of another bank or trust company as successor custodian, shall
deliver and pay over to such successor custodian all securities and moneys held
by it for the account of the Corporation. In such case, the Board of Directors
shall promptly appoint a successor custodian, but in the event no successor
custodian can be found having the required qualifications and willing to serve,
it shall be the duty of the Board of Directors to call as promptly as possible a
special meeting of the shareholders to determine whether the Corporation shall
function without a custodian or shall be liquidated. If so directed by vote of
the holder of a majority of the outstanding shares of the Corporation, as shown
by proper certified resolution, the custodian shall deliver and pay over all
property of the Corporation held by it as specified in such vote.
ARTICLE IX
INVESTMENT ADVISER
The Board of Directors, with the approval of the shareholders and consistent
with the articles of incorporation, may enter into a contract with any person,
firm or corporation to act as investment adviser for the Corporation and to
perform such duties and render such other services as shall be deemed necessary.
Any such contract shall provide that it may be terminated at any time by the
Corporation without penalty and upon not more than sixty (60) days written
notice and shall be automatically terminated in the event of its assignment. Any
such contract shall continue in effect only if approved in accordance with the
provisions of the Federal Investment Company Act of 1940, or any successor
statute as amended from time to time. Such contract may contain any other
provision not inconsistent with the articles of incorporation and these by-laws.
If expenses borne by the Fund in any fiscal year (including the Adviser's fee,
but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities and, to the extend permitted, extraordinary expenses),
exceed 1.5% of average
<PAGE>
daily net assets up to $50,000,000, and 1.0% of average daily net assets over
$50,000,000, the Adviser will reduce its fee or reimburse the fund for any
excess.
ARTICLE X
TRANSACTIONS BY OFFICERS AND OTHERS
SECTION 1. INVESTMENTS
No director or officer of the Corporation and, insofar as the Corporation can
enforce this prohibition, neither the investment adviser nor any member,
officer, director, trustee, or shareholder of such investment adviser shall take
a long or short position in the securities issued by the Corporation provided;
however, that any director or officer of this Corporation, or of the investment
adviser may purchase from this Corporation at any time, or from time to time,
share issued by the Corporation at the price available to the public at the
moment of such purchase or to the extent that such person is a shareholder, at
the price available to shareholders generally at the moment of such purchase or
at a price determined as set forth in the Corporation's current prospectus, no
such purchase to be in contravention of any applicable state or federal
requirement.
SECTION 2. USE OF CORPORATE ASSETS
The Corporation shall not lend any of its assets to the investment adviser or to
any officer or director of the investment adviser or of this Corporation and
shall not permit any officer or director, or any officer or director of the
investment adviser, to deal for or on behalf of the Corporation with himself as
principal or agent, or with any partnership, association or corporation in which
he has a financial interest; provided that the foregoing provisions shall not
prevent (a) officers and directors of the Corporation from buying, holding, or
selling shares in the Corporation, or form being partners, officers, or
directors of or otherwise financially interested in the investment adviser; (b)
employment of legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian which is, or has a partner, shareholder, officer of director
who is, an officer or director of the Corporation, if only customary fees are
charged for services to the Corporation; or (c) purchases or sales of securities
or other property of such transaction is permitted by or is exempt or exempted
under applicable provisions of the Federal Investment Act of 1940.
SECTION 3. SALE AND PURCHASE OF SHARES
Any officer, director or agent of the Corporation may acquire, own, or dispose
of shares of the Corporation to the same extent as if he were not such officer,
director, or agent. The Board of Directors may issue and sell or cause to be
issued and sold, or buy or cause to be bought shares in the Corporation to or
from any person or company of which such person is an officer, director, or
shareholder, subject only to applicable law, limitations contained in the
articles of incorporation, and the limitations and restrictions contained in the
by-laws.
ARTICLE XI
AUDITOR
An auditor shall be selected annually in accordance with the Investment Company
Act of 1940, or any successor statute.
<PAGE>
ARTICLE XII
FISCAL YEAR
The fiscal year of the Corporation shall end on December 31st of each year.
ARTICLE XIII
SEAL
The Corporate seal shall, subject to alteration by the Board of Directors,
consist of a flat-faced circular die upon which shall be engraved or cut the
name of the Corporation and the year of its incorporation and the words
"Corporate Seal."
ARTICLE XIV
INDEMNIFICATION
1. The Corporation shall indemnify each director and officer to the full
extent permitted by Part 9 of the Utah Revised Business Corporation Act, or
any successor statute, and by the articles of incorporation, as amended
from time to time.
2. The Board of Directors in its discretion may authorize or provide the
above-described indemnification to an employee or agent.
3. Any indemnification provided by this article:
a) Continues as to a director, officer, employee, or agent who has ceased to
be such and inures to the benefit of his heirs and personal representative;
and
b) Does not exclude any other right to which a person is or may be entitled by
law, any agreement, vote of stockholders or disinterested directors, or
otherwise as to;
1) Action in his official capacity; and
2) Action in another capacity while holding the office.
4. The indemnification provided by this article shall be made with respect to
an action, suit or proceeding arising from an act or omission or alleged
act or omission, whether occurring before or after the adoption of this
article.
5. Nothing in this article protects or purports to protect or may be
interpreted or construed to protect, any director or officer against any
liability to the Corporation or its security holders to which he 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 office.
6. Each section or portion thereof of this article shall be deemed severable
from the remainder, and the invalidity of any such section or portion shall
not affect the validity of the remainder of this article.
<PAGE>
ARTICLE XV
OPINION
Prior to making any offer to sell or sale or any purchase or solicitation to
sell or exchange, the Board of Directors shall consult with and obtain the
opinion of legal counsel for the Corporation with reference to the legal
propriety and validity of any such transaction, especially in reference to the
applicability of the Securities Act of 1933, the Blue Sky Laws of any state
where the Corporation's securities will be sold, and other laws regulating
transactions involving securities.
ARTICLE XVI
AMENDMENT OF BY-LAWS
Alterations, amendments, or repeals of the by-laws may be made by a majority of
the stockholders entitled to vote at any meeting, if the notice of such meeting
contains a statement of the proposed alteration, amendment or repeal, or by the
Board of Directors by a majority vote of the whole Board of Directors at any
regular meeting, provided the proposed alteration, amendment or repeal has been
set out in the notice to each director in writing prior to said meeting. The
Board of Directors shall not repeal any by-law especially adopted by the
stockholders nor make any amendment thereof or of other by-laws in conflict
therewith, but may amend any such by-law in any manner not inconsistent with its
purpose and intent.
ARTICLE XVII
WAIVER OF NOTICE
Wherever notice of a meeting is required by law or by these by-laws to be given
to any director, officer or stockholder, such requirement shall not be construed
to be limited to personal notice; such notice may be given in writing by
depositing the same in a post office or letter box, postage paid addressed to
such director, officer or stockholder at his address as the same appears in the
books of the Corporation. Delivery shall be deemed complete upon deposit in the
mail.
A waiver of any such notice signed by a stockholder, director or officer,
whether before or after the time of the meeting, shall be deemed equivalent to
any meeting notice required to be given.
ARTICLE XVIII
CONFLICTING PROVISIONS
In the event of any conflict between these by-laws and the provisions of the
applicable laws of the State of Utah, as from time to time amended, or with any
applicable regulation issued thereunder, such applicable law or regulation shall
control. In the event of any conflict between these by-laws and the Articles of
Incorporation of the Corporation, as from time to time amended, the provisions
in the Articles shall control.
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
<PAGE>
The foregoing by-laws were duly and regularly adopted as the by-laws of the said
Corporation by the Board of Directors of the Corporation in a meeting at which a
quorum was present, which was duly called and held on March 6, 1997.
That I was duly elected or appointed to serve, and I did serve as Secretary of
such meeting.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
the said Corporation on March 6, 1997.
/S/ Rebecca S. Wells
Secretary
<PAGE>
ATTACHMENT C
<PAGE>
ADVISORY AND SERVICE CONTRACT
between
ENSIGN INVESTORS, INC.
and
WELLS INVESTMENT SERVICES, INC.
AGREEMENT entered into the 7th day of September 1996, by and between
ENSIGN INVESTORS, INC. a Utah corporation (hereinafter referred to as "Fund")
and WELLS INVESTMENT SERVICES, INC. a Utah corporation (hereinafter referred to
as "Adviser").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
Section 1.
The Fund hereby employs Adviser to act as the investment adviser for the
Fund, to manage the investment and reinvestment of the assets of the Fund in
accordance with the Fund's investment objective and policies and limitations,
and to administer its affairs to the extent requested by and subject to the
supervision of the Board of Directors of the Fund for the period and upon the
terms herein set forth. The investment of funds shall be subject to all
applicable restrictions of the Articles of Incorporation and Bylaws of the Fund
as may from time to time be in force.
The Adviser accepts such employment and agrees during such period to
render such services; to furnish office facilities and equipment; to provide
clerical, bookkeeping, and administrative services for the Fund; to provide
shareholder and information services; to permit any of its officers or employees
to serve without compensation as directors or officer of the Fund, if elected to
such positions; and to assume the obligations herein set forth for the
compensation herein provided. The Adviser 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 Fund
in any way or otherwise be deemed an agent of the Fund. It is understood and
agreed that the Adviser, by separate agreement with the Fund, may also act as
underwriter for the Fund.
Section 2.
For the services and facilities described in Section 1, the Fund will pay
to the Adviser an investment management fee computed at the annual rate of 1.0%
of the average daily net assets of the Fund up to $50,000,000, plus 0.75% of the
next $450,000,000, and 0.5% of the excess over $500,000,000. The fee will be
calculated daily and paid at the end of each month after services have been
rendered.
If expenses borne by the Fund in any fiscal year (including the Adviser's
fee, but excluding interest, taxes, fees incurred in acquiring and disposing of
portfolio securities and, to the extent permitted, extraordinary expenses),
exceed 1.5% of average daily net assets up to $50,000,000, and 1.0% of average
daily net assets over $50,000,000, the Adviser will reduce its fee or reimburse
the
<PAGE>
fund for any excess. If for any month the expenses of the Fund properly
chargeable to the income account shall exceed 1/12 of the percentage of daily
net assets allowable as expenses the payment to the Adviser for that month shall
be reduced, and, if necessary, the Adviser shall make a refund payment to the
Fund so that the total net expense will not exceed such percentage. As of the
end of the Fund's fiscal year; however, the foregoing computations and payments
shall be readjusted so that the aggregate compensation payable to the Adviser
for the year is equal to the percentage set forth herein of the average daily
net assets throughout the fiscal year, diminished only to the extent necessary
so that the total of said expense item shall not exceed the expense limitation.
The aggregate of repayments, if any, by the Adviser to the fund for the year
shall be the amount necessary to limit the said net expense to said percentage.
The net asset value of the Fund shall be calculated as of the close of the
New York Stock Exchange on each day the Exchange is open for trading or as of
such other time or times as the directors of the Fund may determine in
accordance with the provisions of the Investment Company Act of 1940. On each
day when net asset value is not calculated, the net asset value of a share of
common stock of the Fund shall be deemed to be the net asset value of such a
share as of the close of business on the last day on which such calculation was
made for the purpose of the foregoing computations.
For the month and year in which this Agreement becomes effective or
terminates, there shall be an appropriate proration on the basis of the number
of days that the Agreement is in effect during the month and year, respectively.
The services of the Adviser to the Fund under this Agreement are not to be
deemed exclusive, and the Adviser shall be free to render similar services or
other services to others so long as its services hereunder are not impaired
thereby.
Section 3.
In addition to the fee of the Adviser, the Fund shall assume and pay any
expenses for services rendered by a custodian for the safekeeping of the fund's
securities or other property, for keeping its books of account and for any other
charges of the custodian. The Adviser pays all of the Fund's expenses except
brokerage, taxes, interest, fees and expenses of the noninterested person
directors (including counsel fees) and extraordinary expenses. The Fund shall
not pay or incur any obligation for any management or administrative expenses
for which the Fund intends to seek reimbursement from the Adviser as herein
provided without first obtaining the written approval of the Adviser. The
Adviser shall arrange, if desired by the Fund, for officers or employees of the
Adviser to serve, without compensation from the Fund, as directors, officers, or
agents of the fund if duly elected or appointed to such positions and subject to
their individual consent and to any limitations imposed by law.
<PAGE>
Section 4.
Subject to applicable statutes and regulations, it is understood that
directors, officers, or agents of the Fund are or may be interested in the
Adviser as officers, directors, agents, shareholders, or otherwise, and that the
officers, directors, shareholders, and agents of the Adviser may be interested
in the Fund otherwise than as a director, officer, or agent.
Section 5.
The Adviser shall not be liable for any error of judgment or of law, or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except loss resulting from willful misfeasance, bad faith, or
gross negligence on the part of the Adviser in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under this Agreement.
Section 6.
This Agreement shall become effective on the date hereof and shall remain
in full force until 7 September 1998 , unless sooner terminated as hereinafter
provided. This Agreement shall continue in force from year to year thereafter,
but only as long as such continuance is specifically approved at least annually
in the manner required by the Investment Company Act of 1940.
This Agreement shall automatically terminate in the event of its
assignment, and may be terminated at any time without the payment of any penalty
by the Fund or by the Adviser on sixty (60) days written notice to the other
party. The Fund may effect termination by action of the Board of Directors or by
vote of a majority of the outstanding shares of common stock of the Fund,
accompanied by appropriate notice.
This Agreement may be terminated at any time, without the payment of any
penalty, by the Board of Directors or by vote of a majority of the outstanding
shares of common stock of the Fund in the event that it shall have been
established by a court of competent jurisdiction that the Adviser or any officer
or director of the Adviser has taken any action which results in a breach of the
covenants of the Adviser set forth herein.
Termination of this Agreement shall not affect the right of the Adviser to
receive payments on any unpaid balance of the compensation described in Section
2 earned prior to such termination.
Section 7.
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.
<PAGE>
Section 8.
In the event of any action to enforce the provisions of this Agreement
against a party hereto, the prevailing party shall be entitled to recover all
costs and expenses incurred in connection therewith including, without
limitation, attorneys fees and expenses.
Section 9.
Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this Agreement to
be executed on the day and year first above written.
Ensign Investors, Inc. Attest: /s/ Jerry J. Ohrn
A Corporation
By /s/ Stanley M. Wells /s/ Rebecca S. Wells
Its President Secretary
Wells Investment Services, Inc. Attest: /s/ Jerry J. Ohrn
A Corporation
By /s/ Stanley M. Wells /s/ Rebecca S. Wells .
Its President Secretary
<PAGE>
ATTACHMENT D
<PAGE>
CUSTODIAN AGREEMENT
ENSIGN INVESTORS, INC.
THIS AGREEMENT, made December 27, 1996, by and between Ensign Investors,
Inc. a corporation existing under the laws of the State of Utah, having its
principal place of business at South Jordan, Utah (hereinafter referred to as
the Fund), and Central Bank a banking corporation organized and existing under
the laws of the State of Utah, having its principal place of business at Provo,
Utah (hereinafter referred to as the Custodian),
W I T N E S S E T H:
WHEREAS, the Fund wishes the Custodian to have custody of the Fund's
portfolio securities and moneys pursuant to this Agreement; and
WHEREAS, Custodian wishes to accept such appointment;
NOW, THEREFORE, for and in consideration of the mutual promises herein
contained, the parties hereto, intending to be legally bound, mutually covenant
and agree as follows:
1. Appointment of Custodian. The Fund hereby constitutes and appoints the
Custodian as custodian of the securities and moneys of the Fund, excepting that
it shall have no responsibility for the safekeeping of those securities and
moneys held by a sub-custodian for the Fund, as provided for in Paragraph 3Q of
this Agreement. The Custodian hereby accepts the appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
2. Delivery of Corporate Documents. The Fund has delivered or will deliver
prior to the effective date of this Agreement, to the Custodian, copies of the
following documents and all amendments or supplements thereto, properly
certified or authenticated:
A. Resolutions of the Board of Directors of the Fund appointing the Custodian
as Custodian hereunder and approving the form of this Agreement; and
B. Resolutions of the Board of Directors of the Fund designating certain
persons to give instructions on behalf of the Fund to the Custodian and
authorizing the Custodian to rely upon Proper Instructions.
C. Resolutions of the Board of Directors of the Fund appointing the Custodian
as disbursing agent, including dividends and capital gains, for the fund.
3. Duties and Responsibilities of Custodian.
A. Delivery of Assets. All the fund's securities and moneys will be delivered
to the Custodian. The Fund will deliver or cause to be delivered to the
Custodian on the effective date of this agreement, or as soon thereafter as
practicable, and from time to time thereafter, certain portfolio securities
and moneys then owned by it or from time to time coming into its possession
during the time this Agreement shall continue in effect. The Custodian
shall have no responsibility or liability whatsoever for or on account of
securities or moneys not so delivered. All securities so delivered to the
Custodian (other than bearer securities) shall be registered in the name of
the Fund, or of a nominee of the Custodian, or shall be properly endorsed
and in form for transfer satisfactory to the Custodian.
B. Safekeeping. The Custodian will receive delivery and keep safely the assets
of the Fund delivered to it from time to time. The Custodian will not
deliver any such assets to any person except as permitted by the provisions
of this Agreement. The Custodian is responsible for securities and moneys
of the Fund until they have been transmitted to and received by a
sub-custodian or other person as permitted by the provisions of this
Agreement.
The Custodian may be authorized to combine securities and moneys of
the Fund, but only with securities and moneys of other investment
companies managed by Wells Investment Services, Inc. and only for
the purpose of delivering or transmitting such securities and moneys
to the extent set forth in a supplemental agreement or amendment
hereto.
The Custodian shall be responsible only for the moneys and
securities of the Fund held directly by it or its nominees under
this Agreement, and shall not be liable or responsible for any
moneys or securities held by any sub-custodian or other custodian
for the Fund. The Custodian may participate directly or indirectly
through a sub-custodian in the Depository Trust Company or
Treasury/Federal Reserve book entry system (as such entity is
defined at 17 CFR para. 270.17f-4(b)).
C. Registration of Securities. The Custodian will hold stocks and other
registerable portfolio securities of the Fund registered in the name of the
Fund or in the name of any registered nominee of the Custodian for whose
fidelity and liabilities the Custodian shall be fully responsible, or in
street certificate form, so-called, with or without any indication of
fiduciary capacity. Unless otherwise instructed, the custodian will
register all such portfolio securities in the name of its authorized
registered nominee.
D. Purchases of Investments of the Fund. The Fund shall, on each business day
on which a purchase of securities shall be made by it, deliver to the
Custodian Proper Instructions (as defined in paragraph 4 hereof) which
shall specify with respect to each such purchase:
(1) The name of the issuer and description of the security;
<PAGE>
(2) The number of shares or the principal amount purchased,
and accrued interest if any;
(3) The trade date;
(4) The settlement date;
(5) The purchase price per unit and the brokerage
commission, taxes and other expenses payable in
connection with the purchase;
(6) The total amount payable upon such purchase; and
(7) The name of the person from whom or the broker or dealer
through whom the purchase was made.
In accordance with such Proper Instructions, the Custodian shall pay
for out of moneys held for the account of the Fund, but only insofar
as moneys are available therein for such purpose, and receive the
portfolio securities so purchased by or for the account of the Fund.
Such payment shall be made only upon receipt by the Custodian of the
securities so purchased in form for transfer satisfactory to the
Custodian.
E. Exchange of Securities. Upon receipt of Proper Instructions, the Custodian
will exchange, or cause to be exchanged, portfolio securities held by it
for the account of the Fund for other securities or cash issued or paid in
connection with any reorganization, recapitalization, merger,
consolidation, split-up of shares, change of par value, conversion or
otherwise, and will deposit any such securities in accordance with the
terms of any reorganization or protective plan. Without instructions, the
Custodian is authorized to exchange securities held by it in temporary form
for securities in definitive form, to effect an exchange of shares when the
par value of the stock is changed, and, upon receiving payment therefor, to
surrender bonds or other securities held by it at maturity or when advised
of earlier call for redemption, except that the Custodian shall receive
Proper Instructions prior to surrendering any convertible security.
F. Sales and Deliveries of Investments of the Fund. The Fund shall, on each
business day on which a sale of investment securities of the Fund shall
have been made, deliver to the Custodian Proper Instructions specifying
with respect to each such sale: (1) The name of the issuer and description
of the securities;
(2)The number of shares or principal amount sold, and accrued interest, if
any;
(3)The date when the securities sold were purchased by the Fund or other
<PAGE>
information identifying the securities sold and to be delivered;
(4) The trade date;
(5) The settlement date;
(6)The sales price per unit and the brokerage commission, taxes, or other
expenses payable in connection with such sale;
(7)The total amount to be received by the Fund upon such sale; and
(8)The name of the broker or dealer through whom or person to whom the sale
was made.
In accordance with such Proper Instructions, the Custodian will
deliver or cause to be delivered the securities thus designated as
sold for the account of the Fund to the broker or other person
specified in the Proper Instructions relating to such sale, such
delivery to be made only upon receipt of payment therefor in such
form as shall be satisfactory to the Custodian, with the
understanding that the Custodian may deliver or cause to be
delivered securities for payment in accordance with the customs
prevailing among dealers in securities.
G. Pledges or Loans of Portfolio Securities.
(1) Upon receipt of Proper Instructions, the Custodian will
release or cause to be released securities held in
custody to the Pledgee designated in such instructions
by way of pledge or hypothecation to secure any loan
incurred by the Fund; provided, however, that the
securities shall be released only upon payment to the
Custodian of the moneys borrowed, except that in cases
where additional collateral is required to secure a
borrowing already made, further securities may be
released or caused to be released for that purpose upon
receipt of Proper Instructions. Upon receipt of Proper
Instruction, the Custodian will pay, but only from funds
available for such purpose, any such loan upon
redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or
notes evidencing such loan.
(2) Upon receipt of Proper Instructions, the Custodian will
release securities held in custody to the Borrower
designated in such instructions; provided; however, that
the Borrower is a bank or securities broker-dealer, that
the securities shall be released only upon deposit with
the Custodian of full cash collateral as specified in
such instructions, and that the Fund will retain the
right to any dividends, interest, or distribution on
such loaned securities. Upon receipt of Proper
Instructions and the loaned securities,
<PAGE>
the Custodian will release the cash collateral to the Borrower.
H. Routine Dealings in Portfolio Securities. The Custodian will in general
attend to all routine and mechanical matters in connection with the sale,
exchange, substitution, purchase, transfer, or other dealings with
securities or other property of the Fund except as may be otherwise
provided in this Agreement or directed from time to time by the Board of
Directors of the Fund.
I. Bank Account. The Custodian will open and maintain in its Trust Department
an account or accounts in the name of the Custodian, subject only to draft
or order by the Custodian upon receipt of Proper Instructions. All moneys
received by the Custodian from or for the account of the Fund shall be
deposited in said account or accounts. At least one demand deposit account
shall have a minimum balance in collected funds of $1,000.00 or such amount
as thereafter may be mutually agreed to from time to time. Custodian agrees
to make Federal Funds available to Fund in the amount of any check
deposited into a Fund account after such deposit becomes collected funds.
Fund agrees to hold Custodian harmless for any costs, expenses, charges,
assessments, etc. resulting from a check deposited in an account of Fund
which is returned to Custodian for whatever reason from the payor financial
institution.
When properly authorized by a resolution of the Board of Directors
of the Fund, the Custodian may open and maintain an additional
account or accounts in such other banks or trust companies as may be
designated in such resolution, such accounts; however, to be in the
name of the Custodian and subject only to its draft or order.
J. Collections. The Custodian will:
(1) Collect, claim, receive, and deposit for the account of
the Fund all income and other payments which become due
and payable on or after the effective date of this
Agreement with respect to the securities deposited under
this Agreement, and credit the account of the Fund with
such income on the payable date;
(2) Execute ownership and other certificates and affidavits
for all Federal, state, and local tax purposes in
connection with the collection of bond and note coupons;
and
(3) Take such other action as may be necessary or proper in
connection with:
(a) the collection, receipt, and deposit of such
income and other payments (including but not
limited to the presentation for payment of (i) all
coupons and other income items requiring
presentation and (ii) all other securities which
may mature or be called, redeemed, retired, or
otherwise become payable and regarding which the
Custodian has actual knowledge, or notice of which
is contained in publications to which it normally
subscribes
<PAGE>
for such purpose); and
(b) the endorsement for collection, in the name of
the Fund, of all checks, drafts, or other
negotiable instruments.
The Custodian; however, shall not be required to institute suit nor
take other extraordinary action to enforce collection except upon
receipt of Proper Instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or other
action. The Custodian will receive, claim, and collect all stock
dividends, rights and other similar items and will deal with the
same pursuant to Proper Instructions. Unless prior instructions have
been received to the contrary, the Custodian will, without further
instructions, sell any rights held for the account of the Fund on
the last trade date prior to the date of expiration of such rights.
K. Distribution on the Fund Shares. On the declaration of any
dividend or other distribution on the shares of Capital Stock
of the Fund (Fund Shares) by the Board of Directors of the
Fund, the Fund shall deliver to the Custodian Proper
Instructions with respect thereto, including a copy of the
Resolution of said Board of Directors certified by the
Secretary or an Assistant Secretary of the Fund wherein there
shall be set forth:
(1) the record date as of which shareholders entitled to
receive such dividend or other distribution shall be
determined,
(2) the date of payment of such dividend or distribution,
and
(3) the amount payable per share on such dividend or
distribution.
On the date specified in such Resolution for the payment of such
dividend or other distribution, the Custodian shall pay out of the
moneys held for the account of the Fund, insofar as the same shall
be available for such purpose, and credit to the account of the
Dividend Disbursing Agent for the Fund, such amount as may be
necessary to pay the amount per share payable in cash on the Fund
Shares issued and outstanding on the record date established by such
Resolution.
L. Purchase of Fund Shares by the Fund. Whenever any Fund Shares
are purchased by the Fund, the Fund or its agent shall advise
the Custodian of the aggregate dollar amount to be paid for
such shares and shall confirm such advice in writing. Upon
receipt of such advice, the Custodian shall charge such
aggregate dollar amount to the custody account of the Fund and
either deposit the same in the account maintained for the
purpose of paying for the purchase of Fund Shares or deliver
the same in accordance with such advice.
The Custodian shall not have any duty or responsibility to determine
that the Fund Shares purchased have been removed from the proper
shareholder account or accounts or that the proper number of such
shares have been cancelled and removed from the shareholder records.
<PAGE>
M. Fund Share Purchases from the Fund. Whenever Funds Shares are purchased
from the Fund, the Fund will deposit or cause to be deposited with the
Custodian the amount received for such shares.
N. Proxies, Notices, etc. The Custodian will promptly deliver or mail to the
Fund all proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests, or announcements affecting or
relating to securities held by the Custodian for the Fund and will, upon
receipt of Proper Instructions, execute and deliver or cause its nominee to
execute and deliver such proxies or other authorizations as may be
required. Except as provided by this Agreement or pursuant to Proper
Instructions hereafter received by the Custodian, neither it nor its
nominee shall exercise any power inherent in any such securities, including
any power to vote the same, or execute any proxy, power of attorney, or
other similar instrument voting any of such securities, or give any
consent, approval or waiver with respect thereto, or take any other similar
action.
O. Disbursements. The Custodian will pay or cause to be paid insofar as funds
are available for the purpose, bills, statements, and other obligations of
the Fund (including but not limited to obligations in connection with the
conversion, exchange, or surrender of securities owned by the Fund,
interest charges, dividend disbursements, taxes, management fees, custodian
fees, legal fees, auditor's fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating expenses of the
Fund) pursuant to Proper Instructions of the Fund setting forth the name of
the person to whom payment is to be made, the amount of the payment, and
the purpose of the payment.
Paragraph deleted
P. Books, Records, and Accounts. The Custodian shall, within a reasonable
time, render to the fund as of the close of business each day a detailed
statement of the amounts received or paid and of securities received or
delivered for the account of the Fund during said day. The Custodian shall,
from time to time, upon request by the Fund, render a detailed statement of
the securities and moneys held for the Fund under this Agreement, and the
Custodian shall maintain such books and records as are necessary to enable
it to do so and shall permit such persons as are authorized by the Fund to
examine said securities, books and records. Upon the written instruction of
the Fund, the Custodian shall instruct any sub-custodian to permit such
persons as are authorized by the Fund to examine the books, records, and
securities of the sub-custodian which relate to the Fund.
Q. Sub-Custodian. Notwithstanding any other provisions of this Agreement,
all or any of the moneys or securities of the Fund may be held in the
Custodian's own custody or in the custody of one or more other banks
or trust companies acting as sub-custodians approved by the Fund. Any
such sub-custodian must have the qualifications required for
custodians under the Investment Company Act of 1940. The Custodian
shall not be liable or responsible for the safekeeping of any moneys
or securities held by any such sub-custodian for the Fund. The
Sub-Custodian may participate directly or indirectly in the Depository
Trust Company or Treasury/Federal Reserve book entry system (as such
entity is defined at 17 CFR para. 270.17f-4(b)). The Custodian shall
not be entitled to reimbursement by the Fund for any fees or expenses
of any sub-custodian.
The Custodian may also hold securities in account or accounts
at securities brokers, within the limits of their insurance
protection, and may keep funds on deposit in such accounts to
facilitate trading and accounting. Custodian's brokerage
accounts will be registered as described elsewhere in this
Agreement and the Custodian is protected when using such
accounts as it would be with any sub-custodial account at any
bank or trust company. The Fund and its investment advisors
may be given limited power to transact securities trades in
the Custodian's brokerage accounts but without any power to
remove or disburse property from any account.
R. Adoption of Procedures. The Custodian and the Fund may from
time to time adopt procedures as they agree upon, and
Custodian may conclusively assume that no procedure approved
by the Fund, or directed by the Fund, conflicts with or
violates any requirements of its prospectus, articles of
incorporation, by-laws, or any rule or regulation of any
regulatory body or governmental agency.
4. Proper Instructions. the term "Proper Instructions" as used herein means:
A. Written Instructions. A certified copy of a resolution of the
Board of Directors of the Fund naming one or more persons
authorized to give instructions in the name and on behalf of the
Fund may be received and accepted by the Custodian as conclusive
evidence of the authority of any person to act and may be
considered to be in full force and effect (and the Custodian
shall be fully protected in acting in reliance thereon) until
receipt by the Custodian of notice to the contrary. Unless the
resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone
else shall first have been obtained, the Custodian shall be under
no obligations to inquire into the right of the person giving
such instructions to do so. Notwithstanding any of the foregoing
provisions of this paragraph 4, no authorizations, or
instructions received by the Custodian from the Fund, shall be
deemed to authorize or permit any director, officer, employee, or
agent of the Fund to withdraw any of the securities or similar
investments of the Fund upon the mere receipt of such director,
officer, employee, or agent.
B. Oral Instructions.
(1) Notwithstanding any other provision of this Agreement, upon
receipt and acknowledgment of the oral request or instructions of
a designated representative of the Fund, as hereinafter defined,
Custodian shall undertake to deliver moneys for the Fund's
account, provided such moneys are on hand or available; and in
connection with such transactions, to wire transfer moneys in the
Custodian Account to such broker, dealer, sub-custodian, bank or
other agent specified in such oral instructions by the designated
representative of the Fund.
(2) The term "designated representative" as used herein means such
persons as the Board of Directors of the Fund shall from time to
time designate by resolution, certified copies of which shall be
provided to the Custodian; and the Custodian shall be fully
protected in acting in accordance with and in reliance thereon
until receipt by it of notice to the contrary.
(3) No later than the next business day immediately following each
oral instruction referred to herein, the Fund shall give
Custodian written confirmation of each such oral instruction.
5. Limitation of Liability of Custodian.
A. The Custodian shall not be liable for any loss or damage
resulting from its action or omission to act or otherwise,
except for any such loss or damage arising out of its own
gross negligence or willful misconduct. The Custodian may
request and obtain the advice opinion of counsel for the Fund
or of its own counsel with respect to questions or matters of
law, and it shall be without liability to the Fund or its
stockholders for any action taken or omitted by it in good
faith, in conformity with such advice or opinion.
B. If the Fund requires the Custodian in any capacity to take,
with respect to any securities, any action which involves the
payment of money by it or which in the Custodian's opinion
might make it or its nominee liable for payment of money or in
any other way, the Custodian shall be and be kept indemnified
by the Fund in an amount and form satisfactory to the
Custodian against any liability on account of such action.
C. The Custodian shall be entitled to receive, and the Fund
agrees to pay to the Custodian, on demand, reimbursement for
such cash disbursements, costs, and expenses as may be agreed
upon from time to time by the Custodian and the Fund.
D. The Custodian shall be protected in acting as custodian
hereunder upon any instructions, advice, notice, request,
consent, certificate, instrument, or paper appearing to it to
be genuine and to have been properly executed and shall,
unless otherwise specifically provided herein, be entitled to
receive as conclusive proof of any fact or matter required to
be ascertained from the Fund hereunder a certificate signed by
the Fund's President, Vice President, Secretary, or Treasurer
or other officer specifically authorized for such purpose.
<PAGE>
E. Without limiting the generality of the foregoing, the Custodian
shall be under no duty or obligation to inquire into, and shall
not be liable for:
(1) The validity of the issue of any securities purchased by or for
the Fund, the legality of the purchase thereof, or the propriety
of the amount paid therefor;
(2) The legality of the sale of any securities by or for the Fund; or
the propriety of the amount for which the same is sold;
(3) The legality of the issue or sale of any shares of the Capital
Stock of the Fund, or the sufficiency of the amount to be
received therefor;
(4) The legality of the purchase of any shares of Capital Stock of
the Fund, or the propriety of the amount to be paid therefor; or
(5) The legality of the declaration of any dividend by the Fund, or
the legality of the issue of any shares of the Fund's Capital
Stock in payment of any stock dividend.
F. The Custodian shall not be liable for, or considered to be the
custodian of, any money represented by any check, draft, wire
transfer, clearing house funds, uncollected funds, or instrument
for the payment of money received by it on behalf of the Fund,
until the Custodian actually receives such money, provided only
that it shall advise the Fund promptly if it fails to receive any
such money in the ordinary course of business, and use its best
efforts and cooperate with the Fund toward the end that such
money shall be received.
G. The Custodian shall not be responsible for loss occasioned by the
acts, neglects, defaults, or insolvency of any broker, bank,
trust company, or any other person whom the Custodian may deal
with in the absence of negligence or willful misconduct.
H. Notwithstanding anything herein to the contrary, the Custodian
shall, from time to time, provide the Fund for its approval by
its Board of Directors, agreements with banks or trust companies
which will act as sub-custodians for the Fund as specified in
section 6 of this Agreement. Upon the approval by the Board of
Directors of the Fund of any such sub-custodian agreement, it is
expressly understood and agreed that the Custodian shall have no
responsibility, to the Fund or its shareholders, for moneys or
securities of the Fund held by such banks or trust companies as
sub-custodians.
6. Sub-Custodian. Under the provisions of Paragraph 3Q hereof, the
Custodian has the right to use one or more sub-custodians from
time to time as approved by the Fund. The Custodian does hereby
assign to the Fund, and will cooperate with the Fund as
reasonably requested in actions to assert and perfect, any rights
or causes of action which it may have against such sub-custodian
to the extent of any loss incurred by the Fund.
<PAGE>
7. Compensation. The Fund shall pay to the Custodian such compensation at
such times as may from time to time be agreed in writing by the Custodian and
the Fund. The Custodian may charge such compensation against money held by it
for the account of the Fund. The Custodian shall also be entitled,
notwithstanding the provisions of paragraph 5C hereof, to charge against any
moneys held by it for the account of the Fund the amount of any loss, damage,
liability, or expense for which it shall be entitled to reimbursement under the
provisions of this Agreement. The Custodian shall not be entitled to
reimbursement by the Fund for any loss or expenses of any sub-custodian.
8. Termination. Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the other party
hereto not less than one hundred eighty (180) days prior to the date upon which
such termination shall take effect. Upon termination of this Agreement the Fund
shall pay to the Custodian such compensation for reimbursable disbursements,
costs, and expenses paid or incurred to such date, and the Fund shall use its
best efforts to obtain a successor custodian. Unless the holders of a majority
of the outstanding shares of Capital Stock of the Fund vote to have the
securities, funds, and other properties held under this Agreement delivered and
paid over to some other person, firm, or corporation specified in the vote,
having not less than two million dollars ($2,000,000) aggregate capital, surplus
and undivided profits, as shown by its last published report and meeting such
other qualifications for custodian as set forth in the By-Laws of the Fund, the
Board of Directors of the Fund shall, forthwith upon giving or receiving notice
of termination of this Agreement, appoint, a successor custodian bank or trust
company having such qualifications. The Custodian shall, upon termination of
this Agreement, deliver to the successor custodian so specified or appointed, at
the Custodian's office, all securities then held by the Custodian hereunder,
duly endorsed and in form for transfer, all funds or other properties of the
Fund deposited with or held by the Custodian hereunder. In the event no such
vote has been adopted by the stockholders of the Fund and no written order
designating a successor custodian shall have been delivered to the Custodian on
or before the date when such termination shall become effective, then the
Custodian shall deliver the securities, funds and properties of the Fund to a
bank or trust company at the selection of the Custodian and meeting the
qualifications for custodian, if any, set forth in the ByLaws of the Fund and
having not less than two million dollars ($2,000,000) aggregate capital, surplus
and undivided profits, as shown by its last published report. Thereafter such
bank or trust company shall be the successor custodian under this Agreement and
shall be entitled to reasonable compensation for its services. In the event that
no such successor custodian can be found, the Fund will submit to its
shareholders, before permitting delivery of the cash and securities owned by the
Fund to anyone other than a successor custodian, the question of whether the
Fund shall be liquidated or shall function without a custodian. Notwithstanding
the foregoing requirement as to delivery upon termination of this Agreement, the
Custodian may make any other delivery of the securities, funds and property of
the Fund which shall be permitted by the Investment Company Act of 1940 and the
Fund's Certificate of Incorporation and By-Laws then in effect.
Subject to the provisions of this Section, this Agreement may not be
assigned by the Custodian without the consent of the Fund, authorized or
approved by a resolution of its Board of Directors.
9. Notices. Notices, requests, instructions and other writings delivered
to the Fund at 9921 South Treasure Circle, South Jordan, Utah 84095, or mailed
postage prepaid to the Fund at such address or at such other address as the Fund
may have designated to the Custodian in writing, shall be deemed to have been
properly delivered or given to the Fund hereunder. Notices, requests,
instructions and other writings delivered to the Custodian at its office at P.O.
Box 1488, Provo, Utah 84603 or to such other address as it may have designated
to the Fund in writing, or mailed to the
<PAGE>
Custodian postage prepaid to the Custodian shall be deemed to have been properly
delivered or given to the Custodian hereunder.
10. Miscellaneous.
A. This Agreement is executed and delivered in the State of Utah and
shall be governed by the laws of the said state.
B. All the terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto.
C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement executed by both parties
hereto, and authorized or approved by the Board of Directors of
the Fund.
D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
E. This Agreement shall become effective on the date hereof.
F. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
G. If any part, term, or provision of this Custodian Agreement is by
the courts held to be illegal, in conflict with any law or
otherwise invalid, the remaining portion or portions shall be
considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if
the Agreement did not contain the particular part, term, or
provision held to be illegal or invalid.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective corporate officers, thereunto duly authorized, and
their respective corporate seals to be hereunto affixed, as of the day and year
first above written.
<PAGE>
ENSIGN INVESTORS, INC.
ENSIGN INVESTORS, INC.
BY: /s/ Stanley M. Wells ATTEST: Stephen K. Benson
------------------------------ -----------------------------
TITLE: President
------------------------------
CENTRAL BANK:
BY: David W. Macbeth ATTEST: /s/ Jennifer S.
------------------------------ -----------------------------
TITLE: Vice President & Trust Officer
------------------------------
<PAGE>
SERVICE CHARGE SCHEDULE
THIS SERVICE CHARGE SCHEDULE sets forth charges for custodial services
provided by CENTRAL BANK (Custodian) to ENSIGN INVESTORS, INC. (Fund) pursuant
to a Custodial agreement entered into between Custodian and Fund dated December
27, 1996, (Agreement). This service charge schedule shall remain in force from
the date hereof until superseded by a new service charge schedule executed by
Custodian and Fund or until the agreement is terminated as provided in the
Agreement.
1. Monthly Fee. A monthly fee (Monthly Fee) shall be imposed upon
Fund by Custodian for services rendered to Fund pursuant to the
terms of Agreement. The Monthly Fee shall be calculated by
applying the appropriate rate, as set forth below, to the current
monthly average net assets. Net assets will be determined each
day during the month, the sum of these daily values will be
divided by the number of days in the month to derive the monthly
average net assets. Monthly Fee shall be payable to Custodian by
Fund no later than the fifteenth day of the month following the
month for which Monthly Fee is imposed.
Monthly Net Average Assets Rate
- --------------------------- ----------------- ----------------
First $ 200,000 1/24 of 1%
Next $ 9,800,000 1/60 of 1%
Next $ 15,000,000 1/120 of 1%
Next $ 15,000,000 1/180 of 1%
Next $ 25,000,000 1/240 of 1%
Next $ 35,000,000 1/360 of 1%
Over $ 100,000,000 Negotiable
- --------------------------- ----------------- ----------------
2. Service Charge on Account of Fund. If measured services for the
account(s) of Fund maintained at Custodian are not offset by the
compensating balance, the account(s) will be assessed against the
commercial account service charge then in effect. Custodian
agrees to send Fund a copy of the new commercial account service
charges as such charges are changed or modified.
3. Modification of Fees and Charges. Custodian and Fund agree that
the foregoing fees and charges are for one year only. The
schedule will be reviewed annually and may be adjusted and
executed by Custodian and Fund.
IN WITNESS WHEREOF, the parties have executed this service charge schedule
this 27th day of December, 1996.
CENTRAL BANK
<PAGE>
BY: /s/ David W. Macbeth
TITLE: Vice President & Trust Officer
ENSIGN INVESTORS, INC.
BY: Stanley M. Wells
TITLE: President
<PAGE>
ATTACHMENT E
<PAGE>
AGENCY AGREEMENT
between
ENSIGN INVESTORS, INC.
and
WELLS INVESTMENT SERVICES, INC.
THIS AGREEMENT (Agreement), made the 6 day of March , 1997, by and between
Ensign Investors, Inc. (Fund), a corporation existing under the laws of the
State of Utah, and Wells Investment Services, Inc. (Management), a corporation
existing under the laws of the State of Utah:
WITNESSETH:
WHEREAS Fund desires to appoint Management as Transfer agent, and Management
desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Documents to be Filed with Appointment. In connection with the
appointment of Management as Transfer Agent the Fund will make
available to Management for inspection the following documents:
a. Certified copy of the resolution of appointment adopted by the
Fund's Board of Directors,
b. Certified copy of the Articles of Incorporation of Fund and all
amendments thereto,
c. Certified copy of the Fund's By-laws,
d. Certified copy of the order or consent of each governmental
regulatory authority, required by law to the issuance of the
stock,
e. Specimens of all forms of outstanding stock certificates, in the
forms approved by the Fund's Board of Directors, with a
certificate of the Funds' Secretary, as to such approval,
f. Two signature cards bearing specimens of the signatures of the
officers authorized to sign stock certificates or sign written
instructions and requests.
2. Certain Representations and Warranties of Management. Management
represents and warrants to Fund that:
a. It is a corporation duly organized and existing and in good
standing under the laws of the State of Utah.
b. It is duly qualified to carry on its business in the State of
Utah.
c. It is empowered under applicable laws and by its articles of
incorporation and by-laws to
<PAGE>
enter into and perform the services contemplated in this Agreement.
d. All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
e. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
3. Certain Representations and Warranties of Fund. Fund represents
and warrants to Management that:
a. It is a corporation duly organized and existing and in good
standing under the laws of the State of Utah.
b. It is or will be an open-end diversified management investment
company registered under the Investment Company Act of 1940, as
amended.
c. A registration statement under the Securities Act of 1933 is or
will be effective with respect to all shares of Fund being
offered for sale.
d. All requisite steps have been or will be taken to register Fund's
shares for sale in all applicable states.
e. Fund is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
4. Scope of Services.
a. Management hereby accepts employment and appointment and agrees
that it will act as Fund's Transfer Agent.
b. Management agrees to provide the necessary facilities, equipment
and personnel to perform its duties and obligations hereunder in
accordance with industry practice.
c. Management agrees that it will perform all of the usual and
ordinary services of Transfer Agent for various shareholder
accounts including without limitation, the following: issuing,
transferring and canceling stock certificates, maintaining all
shareholder accounts, preparing shareholder meeting lists,
mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses, preparing and filing U.S.
Treasury Department form 1099 for all shareholders, preparing and
mailing confirmation forms to shareholders with respect to all
purchases and liquidations of Fund shares and other transactions
in shareholder accounts for which confirmations are required,
recording reinvestment of dividends and distributions in Fund
shares, and recording redemption of Fund shares.
5. Limit of Authority. Unless otherwise expressly limited by the
resolution of appointment or by
<PAGE>
subsequent corporate action, the appointment of Management as Transfer
Agent will be construed to cover the full amount of authorized
stock or the class or classes for which Management is appointed
as the same will, from time to time, be constituted and any
subsequent increases in such authorized amount.
6. Expenses and Compensation. No service or other fee shall be paid
to Management for services rendered as transfer agent; the Fund
and Management agree that these services are to be rendered for
the remuneration Management receives as investment adviser to the
Fund.
7. Efficient Operation of Management System.
a. In connection with the performance of its services under this
Agreement, Management is responsible for the accurate and
efficient functioning of its system at all times, including:
1. The accuracy of all entries in Management's records reflecting
orders and instructions received by Management from shareholders
of the Fund;
2. The continuous availability and accuracy of shareholder lists,
shareholder account verifications, confirmations, and other
shareholder account information to be produced from its records
or data; and
3. The accuracy of redemption transactions and payments in
accordance with redemption instructions received from dealers,
shareholders, or the Fund.
8. Indemnification. Management will hold harmless and indemnify Fund
from and against any loss or liability arising out of
Management's failure to comply with the terms of this Agreement
or arising out of Management's gross negligence, misconduct, or
bad faith.
9. Certain Covenants of Management and Fund.
a. All requisite steps will be taken by Fund from time to time when
and as necessary to register Fund's shares for sale in all states
in which Fund's shares will be at the time offered for sale and
require registration. If at any time fund receives notice of any
stop order or other proceeding in any such state affecting such
registration or sale of Fund's shares, or any stop order or other
proceeding under the Federal securities laws affecting the sale
of Fund's shares, Fund will give prompt notice thereof to
Management.
b. Management hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to Fund for safekeeping of stock
certificates, check forms, and facsimile signature imprinting
devices, if any; and for the preparation or use, and for keeping
account of, such certificates, forms, and devices.
c. To the extent required by Section 31 of the Investment Company
Act of 1940, as amended,
<PAGE>
and rules thereunder, Management agrees that all records maintained
by Management relating to the services to be performed by
Management under this Agreement are the property of Fund and will
be preserved and will be surrendered promptly to Fund on request.
d. Management represents and agrees that it will use its best
efforts to maintain current knowledge of the trends of the
investment company industry relating to shareholder services and
will use its best efforts to continue to modernize and improve
its system without additional cost to Fund.
e. Management will permit Fund and its authorized representatives to
make periodic inspections of its operations at reasonable times
during business hours.
10. Death, Resignation, or Removal of Signing Officer. Fund shall
file promptly with Management written notice of any change in the
officers authorized to sign stock certificates, written
instructions or requests, together with two signature cards
bearing the specimen signature of each newly authorized officer.
In case any officer of fund who will have signed manually or
whose facsimile signature will have been affixed to blank stock
certificates will die, resign, or be removed prior to the
issuance of such stock certificates, Management may issue or
register such stock certificates as the stock certificates of
Fund notwithstanding such death, resignation, or removal, until
specifically directed to the contrary by Fund in writing. In the
absence of such direction, Fund will file promptly with
Management such approval, adoption, or ratification as may be
required by law.
11. Future Amendments of Article and By-Laws. Fund will promptly file
with Management certified copies of all material amendments to
its Articles of Incorporation or By-Laws made after the date
hereof.
12. Management will maintain customary records in connection with its
agency as required by Rule 31a-1 under the Investment Company Act
of 1940.
13. Disposition of Books, Records, and Cancelled Certificates.
Management shall make available to Fund all books, documents, and
all records no longer deemed needed for current proposes and
stock certificates which have been cancelled in transfer or in
exchange, upon the understanding that such books, documents,
records, and stock certificates will not be destroyed by fund
without the consent of Management, but will be safely stored for
possible future reference. Such consent shall not be unreasonably
withheld.
14. Provisions Relating to Management As Transfer Agent.
a. Management will supply a stockholder's list to Fund for its
annual meeting upon receiving a request from an officer of Fund.
It will also supply lists at such other times as may be requested
by an officer of Fund.
b. Upon receipt of written instructions of an officer of Fund,
Management will address and mail notices to stockholders.
c. In case of any request or demand for the inspection of the stock
books of Fund or any other books in the possession of Management,
Management will endeavor to notify Fund and to
<PAGE>
secure instructions as to permitting or refusing such inspection.
Management reserves the right; however, to exhibit the stock books or
other books to any person in case it is advised by its counsel that it
may beheld liable for the failure to exhibit the stock books or other
books to such person.
15. Condition Precedent. This Agreement shall take effect only if, as
a condition precedent, the Agreement is approved at a meeting of
the Fund's Board of Directors by a majority of the Fund's
directors and by a majority of the disinterested directors, and
further, only if this Agreement is approved by a majority of the
disinterested directors pursuant to the following findings:
a. That the proposed Agreement is in the best interests of the Fund
and its shareholders;
b. That the services to be performed pursuant to the proposed
Agreement are services required for the operation of the Fund;
c. That Management can provide services the nature and quality of
which are at least equal to those provided by others offering the
same or similar services;
d. That the fees for such services are fair and reasonable in light
of the usual and customary charges made by others for services of
the same nature and quality.
16. Effective Date. Provided the condition precedent stated in
paragraph 15 of this Agreement has been met, this Agreement shall
become effective at the close of business on March 6, 1997.
17. Termination of Agreement.
a. This Agreement is automatically terminated without further action
by either party if (i) not approved by a majority of the Fund's
outstanding voting securities at such times as that certain
Advisory and Service Contract between Wells Investment Services,
Inc., and Ensign Investors, Inc. is presented to the Fund's
shareholders for renewal; or (ii) not approved by a majority of
the Fund's directors and a majority of the Fund's disinterested
directors upon the annual shareholders' meeting scheduled for May
1997, and annually thereafter; or (iii) assigned in whole or in
part by Management.
b. This Agreement may be terminated by either party upon receipt of
60 days written notice from the other party.
c. Fund, in addition to any other rights and remedies, shall have
the right to terminate this Agreement forthwith upon the
occurrence at any time of any of the following events:
1. Any interruption or cessation of operations by Management which
materially interferes with the business operation of Fund;
2. The bankruptcy of Management or the appointment of a receiver for
Management;
3. Any merger, consolidation or sale of substantially all the assets
of Management;
4. The acquisition of a controlling interest in management, by any
broker, dealer,
<PAGE>
investment adviser or investment company except as may presently
exist; or
5. Failure by Management to perform its duties in accordance with
the agreement, which failure materially adversely affects the
business operations of Fund and which failure continues for 30
days after receipt of written notice from Fund.
If at any time this Agreement is terminated by Fund pursuant to clause 1, 2,
or 5, Fund will have and is hereby granted the right, at its option, to use
or cause its agents, employees or independent contractors to use, for as
long as Fund deems necessary for its own operations, and no other, and
without payment of any compensation or reimbursement to Management,
Management's systems including all of the programs, manuals and other
materials and information necessary to operate the systems.
18. Assignment. neither this Agreement nor any rights of obligations
hereunder may be assigned by management without automatic
termination of the Agreement.
19. Confidentiality. Management agrees that, except as provided in
this agreement, or as otherwise required by law, Management will
keep confidential all records of and information in its
possession relating to fund or its shareholders or shareholder
accounts and will not disclose the same to any person except at
the request or with the consent of Fund.
20. Survival of Representations and Warranties. All representations
and warranties by either party herein contained will survive the
execution and delivery of this Agreement.
21. Miscellaneous.
a. This Agreement is executed and delivered in the State of Utah and
shall be governed by the laws of said state.
b. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and
executed by both parties hereto.
c. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or
effect.
d. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
e. If any part, term, or provision of this Agreement is by the
courts held to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be considered
severable and not be affected, and the rights and obligations of
the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term, or provision held to
be illegal or invalid.
<PAGE>
IN WITNESS WHEREOF, the parties have cause this Agreement to be executed and
their corporate seal to be affixed by their respective duly authorized officers.
Ensign Investors, Inc.
By /s/ Stanley M. Wells
Attest:
/s/ Rebecca S. Wells
Secretary
Wells Investment Services, Inc.
By /s/ Stanley M. Wells
Attest:
/s/ Rebecca S. Wells
Secretary
<PAGE>
ATTACHMENT F
<PAGE>
November 13, 1997
Board of Directors
Ensign Investors, Inc.
9921 South Treasure Circle
South Jordan, UT 84095
Re: Form N-1A Registration Statement
Opinion of Counsel
Gentlemen:
At your request we have examined the Articles of Incorporation, Bylaws, and
Minutes of the Ensign Investors, Inc., a Utah corporation (the "Corporation")
and such other corporate records and documents and have considered such
questions of law as we deemed relevant for the purpose of this opinion. We have
also examined the Registration Statement on Form N-1A, the ("Registration
Statement"), covering a public offering of 5,000,000 Shares of the Corporation's
common stock, $.10 par value per share (the "Common Stock").
Based upon the foregoing, we are of the opinion that:
1. The Corporation is a duly organized and validly existing corporation
under the laws of the State of Utah, with corporate power to conduct the
business it conducts as described in the Registration Statement.
2. The Common Stock has been duly and validly authorized and created and,
subject to payment therefore pursuant to the terms contemplated by the
Registration Statement, the Common Stock will be duly and validly issued as
fully paid and non- assessable shares of Common Stock.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement referred to above.
Sincerely,
/s/ Cohne, Rappaport & Segal
<PAGE>
ATTACHMENT G
<PAGE>
SUBSCRIPTION AGREEMENT
ENSIGN INVESTORS, INC.
This agreement sets forth the terms under which the undersigned
(hereinafter called the Subscriber) will invest in the above named corporation
(hereinafter called the Fund), and further sets forth statements and
representations which Wells Investment Securities, Inc. (hereinafter called the
Adviser) may rely upon in determining the suitability of the Subscriber to
invest in the Fund.
The subscriber hereby tenders this subscription and applies for the
purchase of the number of shares of Ensign Investors Value Fund as hereinafter
set forth, each representing a one dollar ($1.00) investment in the Fund.
The subscriber hereby represents and warrants as follows:
A. If an individual Subscriber, he/she is over the age of eighteen (18) years
and is purchasing the shares for investment in his/her own account and not
with a view to the sale, offer for sale, or distribution thereof; transfer
or pledge the shares subscribed for, or any part thereof; he/she has no
present plans to enter into any such contract, agreement or arrangement;
and he/she understands the meaning of the foregoing representations and
warranties.
B. Subscriber has read and is familiar with the Articles of Incorporation,
pertaining to the subject investment, copies of which have been furnished
to him either before or simultaneously herewith; Subscriber further
confirms that all requested documents and other information pertaining to
the investment have been made available to him and/or his/her tax and
legal advisors. Subscriber and/or his/her representative, have made an
independent investigation of the investment offered herein and are relying
upon the results of that investigation in determining whether or not to
become a stockholder of the Fund.
C. Subscriber is experienced in investments and business matters in general.
Subscriber recognizes that the Fund will be newly organized and has no
history of operation or earnings, is a speculative venture, and that there
are no warranties, guarantees, or representations as to the merits or
future performance of this venture given by the Adviser. Subscriber
further recognizes that he/she may lose his/her investment if the venture
proves unprofitable.
D. Subscriber is aware that this investment has not been registered with the
Securities and Exchange Commission under the Securities Act of 1933 or
qualified with any other federal or state securities commission (or
comparable regulatory body), and that the offering is being made in
reliance upon various exemptions provided under federal and state law.
E. Subscriber understands and acknowledges that there are other parties to
the investment and agrees that these other parties shall have the same
rights and obligations thereunder as will the subscriber, at least to the
degree of their capital contribution.
<PAGE>
F. Subscriber recognizes that prior to this subscription agreement there has
been no public market for interests in the Fund. In addition, Subscriber
understands that any right to transfer his/her interest in the Fund is
restricted under the terms of the Securities Act of 1933.
G. Subscriber understands that any federal income tax benefits which may
be available to him/her may be lost through adoption of new laws or
regulations, amendments to existing laws or regulations, or changes in
the interpretation of existing laws and regulations.
The Subscriber hereby understands and agrees as follows:
A. If this subscription is accepted by the Adviser on or before thirty (30)
days from the date hereof, he/she shall:
1. Become a stockholder of the Fund, and
2. Execute any and all additional documents necessary or appropriate
to becoming a stockholder in the Fund.
B. Subscriber understands and agrees further that the Adviser and the Fund
are under no obligation to accept any subscription and may reject any
prospective subscription for any reason within thirty (30) days after
receipt thereof.
C. Subscriber agrees not to transfer or assign this subscription or any
interest therein and agrees that, if accepted, the assignment and
transferability of the shares subscribed for by the undersigned will be
governed by applicable federal and state law.
D. Subscriber hereby acknowledges and agrees that, except as may be
specifically provided herein, he/she is not entitled to cancel, terminate,
or revoke this subscription, any agreements of the undersigned thereunder,
and that such subscription agreements shall survive the death or
disability of the undersigned or any assignment by the undersigned.
IN WITNESS WHEREOF, Subscriber has executed this Subscription Agreement
this day of , 1997.
Signature of Subscriber Tax ID or Social Security Number
$
Name and address of Subscriber Payment tendered
Number of shares
(at approximately $1.00 per share)
( )
<PAGE>
Telephone Number
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933, and has duly causes this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Salt Lake, and State of Utah on the 18th day of June
, 1997.
Ensign Investors, Inc.
Registrant
By /s/ Stanley M. Wells
Stanley M. Wells
Pursuant to the requirements of the Securities Act of 1993, this registration
statement has been signed below by the following persons in the capacities and
on the date indicated.
/s/ Stanley M. Wells President June 18, 1997
Signature Title Date
/s/ Jerry J. Ohrn Director June 18, 1997
Signature Title Date
/s/ Jim M. Bagley Director June 18, 1997
Signature Title Date
/s/ Rebecca S. Wells Corporate Secretary June 18, 1997
Signature Title Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTS FROM ENSIGN
INVESTMENT CORPORATION'S FINANCIAL STATEMENTS AND IS QUALIRIFED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 275,537
<RECEIVABLES> 781
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 276,318
<CURRENT-LIABILITIES> 2,201
<BONDS> 0
0
0
<COMMON> 274,117
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 276,318
<SALES> 0
<TOTAL-REVENUES> 9,674
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,643
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,431
<INCOME-TAX> 200
<INCOME-CONTINUING> 6,231
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,231
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
