FILE NOS: 811-08617
333-47541
SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [2]
and
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. [8]
(Check appropriate box or boxes.)
HUGHES FUNDS, INC.
(Exact name of Registrant as Specified in Charter)
741 Cox Road
Moorestown, NJ 08057
(Address of Principal Executive Office)
Registrant's Telephone Number, including Area Code:
609-234-3903
MR. CHARLES J. HUGHES
741 COX ROAD
MOORESTOWN, NJ 08057
(Name and Address of Agent for Service)
Please send copy of communications to:
DAVID D. JONES, ESQUIRE
518 Kimberton Road, # 134
Phoenixville, Pennsylvania 19460
610-718-5381
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Approximate Date of Proposed Public Offering: As soon as practicable following
effective date.
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)
/ X / 60 days after filing pursuant to paragraph (a)(1)
/ / on March 1, 1999 pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Registrant declares hereby that an indefinite number or amount of its securities
has been registered by this Registration Statement.
THE HUGHES VALUE FUND
CROSS-REFERENCE SHEET
(As required by Rule 495)
Item No. on Form N-1A Caption or Subheading in Prospectus
or Statement of Additional Information
PART A - INFORMATION REQUIRED IN PROSPECTUS
1. Front and Back Cover Pages. Cover Page; Back Cover Page
2. Risk/Return Summary: Investments,
Risks, and Performance. Risk/Return Summary; Fees and Expenses
3. Risk/Return Summary/ Fee Table. Fees and Expenses
4. Investment Objectives, Principal Risk/Return Summary; Investment
Investment Strategies, and Related Objectives and Policies, Risk Factors
Risks
5. Management's Discussion of Not included in this Registration
Fund Performance Statement. Included in the Fund's
Semi-Annual Report
6. Management, Organization and Management of the Fund; Investment
Capital Structure Adviser; General Information
7. Shareholder Information Investing in the Fund; How to Sell
(Redeem) Your Shares; Distribution Fee;
Federal Taxes; General Information;
Dividends and Distributions
8. Distribution Arrangements Distribution Fee;
9. Financial Highlights Information Financial Highlights
PART B. STATEMENT OF ADDITIONAL INFORMATION
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Not covered in Statement of Additional
Information (covered under Item 6 of
Part A)
12. Description of the Fund and its Investment Policies and Restrictions
Investments and Risks
13. Management of the Fund. Investment Adviser; Directors and
Officers
14. Control Persons and Principal Directors and Officers; Principal
Holders of Securities Holders of Securities
15. Investment Advisory and other Investment Adviser; Custodian; Transfer
Servicies Agent; Administration
16. Brokerage Allocation and Other
Practices Portfolio Transactions
17. Capital Stock and Other Portfolio Transactions
Securities.
18. Purchase, Redemption and Pricing Purchasing and Redeeming Shares
of Securities Being Offered
19. Taxation of the Fund. Tax Information
20. Underwriters Transfer Agent; Administration
and Transfer Agents
21. Calculations of Performance Data. Performance Information
22. Financial Statements Financial Statements
PART C
Information required to be included in PART C is set forth under the appropriate
Item, so numbered, in PART C of the Registration Statement.
______________________________________________________________________________
PART A
PROSPECTUS
Dated April 1, 1999
The Hughes Value Fund
(the "Fund")
A Portfolio of Hughes Funds, Inc.
The Fund's investment objective is to achieve capital growth. The Fund is
offered by Hughes Funds, Inc. (the "Company"), an open-end, diversified
management investment company.
The Fund offers three classes of shares so that you can choose the type of
shares that best suits your investment needs. The Fund offers Class A shares,
with a 3.75% front-end sales load, Class C shares,with a continuing annual 12b-1
fee of 1.00%, and a No-Load Class that requires an initial minimum investment
of $5,000.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Anyone who
tells you otherwise is committing a federal crime.
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TABLE OF CONTENTS
Risk/Return Summary
Fees And Expenses
Investment Objectives And Policies
Risk Factors
Investing In The Fund
How To Sell (Redeem) Shares
Dividends and Distributions
Hughes Funds, Inc
Management of the Fund
Fund Service Providers
Federal Taxes
General Information
Distribution Fee
Financial Highlights
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RISK/RETURN SUMMARY
The Fund is a diversified mutual fund whose primary investment objective is
growth of capital. The Fund seeks to achieve its objective by investing
primarily in the securities of companies whose stock is traded on the New York
Stock Exchange ("NYSE"), the American Stock Exchange ("ASE") and the NASDAQ
over-the-counter market.
Under normal market conditions, the Fund will invest at least 25% of its net
assets in stocks of national and state-chartered banks, thrifts, the holding or
parent companies of such institutions, and insurance companies ("Financial
Services Companies"). The Fund may also invest in savings accounts of mutual
thrifts. These investments may entitle the Fund to participate in future stock
conversions of the mutual thrifts.
The Fund intends to invest primarily in Financial Services Companies and other
publicly traded companies with an established record of earnings and dividends,
reasonable return on equity, and sound finances. The Fund may also, from time
to time, invest in securities that pay no dividends or interest if, in the
Adviser's opinion, such an investment would be beneficial to the Fund and
further its investment objective.
The principal risks of investing in the Fund are:
You may lose money by investing in the Fund. The Fund invests in common
stock, so the Fund will be subject to the risks associated with common stocks,
including price volatility and the creditworthiness of the issuing company.
The stock market trades in a cyclical price pattern, with prices generally
rising or falling over time. These cyclical periods may last for a significant
period of time.
Because the Fund's investment portfolio will be concentrated in Financial
Services Companies, the shares may be subject to greater risk than the shares
of a fund whose portfolio is less concentrated. Further, Financial Services
Companies are regulated at both the state and federal levels. Accordingly,
shares of the Fund may be subject to additional risks resulting from changes
in the laws of the states or the United States affecting these companies.
Additionally, the Fund may invest in the securities of Financial Services
Companies that are relatively smaller, engaged in business mostly within their
own geographic region, and less well-known to the investment community.
Accordingly, the shares may be subject to the additional risk that the Fund may
be limited in its ability to dispose of such companies at times and prices most
advantageous to the Fund.
The Fund may also invest in a variety of other securities. Accordingly,
you will be subject to the risks associated with those securities, including
the risk of price declines due to market factors and changes to the
creditworthiness of the issuer.
The Fund is appropriate for investors who want capital appreciation and are
willing to accept moderate amounts of volatility and risk.
Performance Bar
Chart and Table
Year-by-Year Total Returns as of 12/31
16.6%
July 29, 1998*
Through
December 31, 1998
Best Quarter Q4 1998 22.1%
Worst Quarter Q3 1998 - 4.1%
The Fund's total return from July 29, 1998 through December 31, 1998 was 16.6%.
The total return for the S&P 500 Index** for that same period was 9.9%
*The Fund's Inception Date
**The S&P 500 Index is a widely recognized, unmanaged index of the 500 largest
capitalization companies in the United States. The Index assumes reinvestment
of all dividends and distributions and does not reflect any asset-based
charges for investment management or other expenses.
FEES AND EXPENSES
This table describes the fees and expenses you may pay if you buy and hold
shares of the Fund.
Shareholder Transaction Expenses: Class A Class C No-Load
1. Maximum Sales Charges
Imposed on Purchases 3.75% NONE NONE
(as a percentage of offering price)
2. Maximum Deferred Sales Charges NONE NONE NONE
(as a percentage of offering price)
3. Maximum Sales Charges Imposed
On Reinvested Dividends NONE NONE NONE
(as a percentage of net asset value)
4. Redemption Fees NONE NONE NONE
(as a percentage of amount redeemed)
5. Exchange Fees NONE NONE NONE
Annual Fund Operating Expenses: (expenses that are deducted from Fund assets)
This table sets out the regular operating expenses that are paid out of the
Fund's average daily assets. These fees are used to pay for services such as
the investment management of the Fund, maintaining shareholder records and
furnishing shareholder statements.
Class A Class C No-Load
Management Fees* 1.00% 1.00% 1.00%
12b-1 Fees** 0.25% 1.00%*** 0.25%
Other Expenses (estimated) 0.05% 0.05% 0.05%
------- ------- -------
Total Fund Operating Expenses. 1.30% 2.05% 1.30%
* The Adviser has voluntarily agreed to waive its advisory fee and/or to
reimburse the Fund, if necessary, if the advisory fee or expenses would cause
the Total Fund Operating expenses to exceed 1.25% for the Class A or No-Load
Class Shares and 2.00% for the Class C shares. The Adviser may revise or cancel
these expense limitaitons at any time and will notify you of any such change.
** You should be aware that if you hold your shares for a substantial period of
time, you may indirectly pay more than the economic equivalent of the maximum
front-end sales charge allowed by the National Association of Securities Dealers
due to the recurring nature of Distribution (12b-1) fees.
*** Includes a fee of 0.75% for distribution-related expenses and 0.25% for
shareholder service expenses.
Example: This example is intended to help you compare the costs of investing in
the Fund with the costs of investing in other mutual funds.
The Example below assumes that you invest $1,000 in the Fund for the time
periods indicated and then redeem all your shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses that were described above remain the same.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be:
Time Period Class A Class C No-Load
One Year $14 $22 $14
Three Years $42 $66 $42
Because the Fund does not charge a redemption fee, you would pay the same fees
set forth above even if you did not redeem your shares.
The Fund is required by law to use a 5% assumed annual rate of return in the
example. The Fund's actual annual rate of return may be higher or lower than
the example.
INVESTMENT OBJECTIVES AND POLICIES
Information concerning the Fund's investment objective is set forth in the
Risk/Return Summary above. What follows is additional information how the
Fund will invest and what kind of securities the Fund will invest in.
The Advisor will allocate Fund assets among securities of particular issuers
and industry groups, based on the Advisor's analysis as to the best values
currently available in the marketplace. Elements included in that analysis
are, by way of example, a company's price value relative to its industry
peers, its history of dividend payments and capital growth, its ability to
show strong and consistent capital growth over the long term, and other
technical and fundamental analytical factors. The Advisor will, based on
its analysis, purchase securities that appear to be undervalued in
relation to the long-term earning power or asset value of their issuers.
Consistent earnings growth is also an important factor.
The fund is a diversified fund, meaning that the Fund limits the amount of
its assets invested in any one isurer and/or in any one industry, thereby
reducing the risk of loss incured by that issuer or industry. The Fund
may invest in the following securities.
Common Stock
The Fund seeks to realize capital appreciation by investing in a diversified
portfolio of common stocks that are, in the Adviser's opinion, undervalued in
the market. Common stock is issued by companies to raise cash for business
purposes and represents a proportionate equity interest in the issuing
companies. Therefore, the Fund participates in the success or failure of any
company in which it holds common stock. The market values of common stock can
fluctuate significantly, reflecting the business performance of the issuing
company, investor perception and general economic or financial market movements.
Smaller companies are especially sensitive to these factors. Despite the risk of
price volatility, however, common stocks historically have offered the greatest
potential for gain on investment, compared to other classes of financial assets.
In choosing common stocks for the Fund's portfolio, the Adviser conducts
extensive fundamental security analysis to develop earnings forecasts and to
identify attractive investment opportunities relative to market valuation.
Individual companies are scrutinized concerning their individual growth
prospects and their competitive positions within their respective industries.
Individual company analysis focuses upon the outlook for sales, profit margins,
returns on capital, cash flow and earnings per share. The Adviser may also
engage in short sales of stocks when the Adviser believes that a stock is
overvalued and poised to decline in price. Short sales require that the Fund
borrow securities during the period when the stock is sold short. At such
times, the Fund may be leveraged.
Futures and Options On Securities
The Fund may purchase futures contracts relating to equity, debt and index
securities, write (i.e. sell) covered put and call options, and purchase
put and call options, on equity, debt and index securities. The Fund
intends to use futures and options transactions to decrease its exposure
to the effects of changes in security prices, to hedge securities held, to
maintain cash reserves while remaining fully invested, to facilitate trading,
to reduce transaction costs, and to seek higher investment returns when a
futures or options contract is priced more attractively than the underlying
security or index.
Risk Factors
The primary risks associated with the use of options and futures are:
(1) imperfect correlation between a change in the value of the underlying
security or index and a change in the price of the option or futures contract,
and (2) the possible lack of a liquid secondary market for an options or futures
contract and the resulting inability of the Fund to close out the position prior
to the maturity date. The risk of imperfect correlation will be minimized by
investing only in those contracts whose price fluctuations are expected to
resemble those of the Fund's underlying securities. The risk that the Fund will
be unable to close out a position will be minimized by entering into such
transactions only on national exchanges and over-the-counter markets with an
active and liquid secondary market.
Preferred Stock
The Fund may invest in preferred stock. Preferred stock generally pays dividends
at a specified rate and generally has preference over common stock in the
payments of dividends and the liquidation of the issuer's assets. Dividends on
preferred stock are generally payable at the discretion of the issuer's board of
directors. Accordingly, Shareholders may suffer a loss of value if dividends are
not paid. The market prices of preferred stocks are also sensitive to changes in
interest rates and in the issuer's creditworthiness. Accordingly, shareholders
may experience a loss of value due to adverse interest rate movements or a
decline in the issuer's credit rating.
Foreign Securities
The Fund may invest in securities of foreign issuers which are publicly traded
on U.S. exchanges either directly or in the form of American Depository Receipts
(ADRs). The Fund will only invest in ADRs that are issuer sponsored. Sponsored
ADRs typically are issued by a U.S. bank or trust company and evidence ownership
of underlying securities issued by a foreign corporation. Investments in
foreign securities involve greater risks compared to domestic investments.
Foreign companies are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information about
issuers than is available in the reports and ratings published about companies
in the U.S. Additionally, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards. Dividends and interest
on foreign securities may be subject to foreign withholding taxes. Such taxes
may reduce the net return to shareholders. Although the Fund intends to invest
in securities of foreign issuers domiciled in nations which the Adviser
considers as having stable and friendly governments, there is the possibility of
expropriation, confiscation, taxation, currency blockage or political or social
instability which could affect investments of foreign issuers domiciled in such
nations.
Real Estate Investment Trusts
The Fund may invest in real estate investment trusts (REITs). Equity REITs
invest directly in real property while mortgage REITs invest in mortgages on
real property. REITs may be subject to certain risks associated with the direct
ownership of real estate including declines in the value of real estate, risks
related to general and local economic conditions, overbuilding and increased
competition, increases in property taxes and operating expenses, and variations
in rental income. REITs pay dividends to their shareholders based upon available
funds from operations. It is quite common for these dividends to exceed the
REITs taxable earnings and profits resulting in the excess portion of such
dividends being designated as a return of capital. The Fund intends to include
the gross dividends from such REITs in its distribution to its shareholders
and, accordingly, a portion of the Fund's distributions may also be designated
as a return of capital.
Money Market Funds
The Fund may invest in securities issued by other registered investment
companies that invest in short-term debt securities (i.e., money market fund).
As a shareholder of another registered investment company, the Fund would bear
its pro rata portion of that company's advisory fees and other expenses. Such
fees and expenses will be borne indirectly by the Fund's shareholders. The Fund
may invest in such instruments to the extent that such investments do not exceed
10% of the Funds net assets and/or 3% of any one investment company's
outstanding securities.
Restricted And Illiquid Securities
The Fund will not invest more than 15% of its net assets in securities that the
Advisor determines, under the supervision of the Board of Directors, to be
illiquid and/or restricted. Illiquid securities may be difficult to sell
promptly at an acceptable price because of lack of available market and other
factors. The sale of some illiquid and other types of securities may be subject
to legal restrictions.
Restricted and Illiquid Securities
The fund will not invest more than 15% of its net assets in securities that the
Advisor determines, under the supervision of the Board of directors, to be
illiquid and/or restricted. Illiquid securities may be difficult to sell
promptly at an acceptable price because of lack of available market and other
factors. The sale of some illiquid and other types of securities may be subject
to legal restrictions.
When-Issued Securities And Delayed-Delivery Transactions
The Fund may purchase securities on a when-issued basis, and it may purchase or
sell securities for delayed-delivery. These transactions occur when securities
are purchased or sold by the Fund with payment and delivery taking place at some
future date. The Fund may enter into such transactions when, in the Advisor's
opinion, doing so may secure an advantageous yield and/or price to the Fund that
might otherwise be unavailable. The Fund has not established any limit on the
percentage of assets it may commit to such transactions, but to minimize the
risks of entering into these transactions, the Fund will maintain a segregated
account with its Custodian consisting of cash, cash equivalents, U.S. Government
Securities or other high-grade liquid debt securities, denominated in U.S.
dollars or non-U.S. currencies, in an amount equal to the aggregate fair market
value of its commitments to such transactions.
Money Market Instruments
During periods when the Fund's Adviser deems it advisable for the Fund to be in
a defensive posture, the Fund may invest, without limit, in "money market
instruments," a term that includes, among other things, bank obligations (which
include U.S. Dollar denominated certificates of deposit, bankers acceptances and
time deposits issued or supported by the credit of U.S. or foreign banks or
savings institutions having total assets at the time of purchase in excess of $1
billion), commercial paper, obligations of the U.S. Government, its agencies and
instrumentalities, and repurchase agreements backed by U.S. Government
securities, and cash.
RISK FACTORS
You may lose money by investing in the Fund. The likelihood of loss is greater
if you invest for a shorter period of time. The Fund may be appropriate for
long-term investors who understand the potential risks and rewards of invest-
ing in common stocks. The value of the Fund's investments will vary from
day-to-day, reflecting changes in market conditions, interest rates and other
company, political, and economic news. Over the short-term, stock prices can
fluctuate dramatically in response to these factors. However, over longer time
periods, stocks, although more volatile, have historically shown greater growth
potential than other investments. The Fund is not, in itself, a balanced
investment plan, and the potential volatility of the Fund's investment may
present certain risks.The value of the Fund's shares will fluctuate to a greater
degree than the shares of funds utilizing more conservative investment
techniques, or those having as investment objectives the conservation of capital
and/or the realization of current income. When you sell your Fund shares, they
may be worth more or less than what you paid for them. There is no assurance
that the Fund can achieve its investment objectives, since all investments are
inherently subject to market risk.
A complete listing of the Fund's investment restrictions, including those that
may be changed only by a vote of the Fund's shareholders, may be found in the
Statement of Additional Information ("SAI") for the Fund.
INVESTING IN THE FUND
Opening And Adding To Your Account
You can invest directly in the Fund in a number of ways. Simply choose the one
that is most convenient for you. Any questions you may have can be answered by
calling 1-800-446-2987. You may also purchase Fund shares through broker-dealers
or other financial organizations.
Payments for Fund shares should be in U.S. dollars, and in order to avoid fees
and delays, should be drawn on a U.S. bank. Please remember that Fund
management reserves the right to reject any purchase order for Fund shares.
Your purchase of Fund shares is subject to the following minimum investment
amounts:
Minimum Investment To Open Account Additional Investments
Class A Shares
Regular Account $2,500 $1000
IRAs $1,000 $500
Class C Shares
Regular Account $2500 $1000
IRAs $1000 $500
No-Load Shares
Regular Accounts $5,000 $1000
IRAs $ 1,000 $500
TO OPEN AN ACCOUNT TO ADD TO ACCOUNT
By Mail Complete an Account Make your check payable to
Registration Form, make The Hughes Value Fund and
a check payable to The mail it to the address at left.
Hughes Value Fund
and mail the Form and check
to Hughes Funds, Inc. Please include your account
c/o Mutual Shareholder number on your check.
Services, 1301 East Ninth Or use the convenient form
Street, Suite 3600, Cleveland, attached to your regular
OH 44114. Fund statement.
By Telephone transactions may Call 1-800-446-2987 to make
Tele- not be used for initial purchases your purchase.
Phone If you want to make
Purchases subsequent transactions via
trans telephone, please select this
ferring service on your account
money Registration Form.
from
your
checking,
NOW or
bank
money
market
account.
Hughes Funds, Inc. wants you to be kept current regarding the status of your
account in the Fund. To assist you, the following statements and reports will
be sent to you:
Confirmation Statements After every transaction that affects your
account balance or your account registration.
Financial Reports Semi-annually -- to reduce Fund expenses, only
one copy of the Fund report will be mailed
to each taxpayer identification number even if
you have more than one account in the Fund.
Purchase By Mail
Your purchase order, if in proper form and accompanied by payment, will be
processed upon receipt by Mutual Shareholder Services, the Fund's Transfer
Agent. If the Transfer Agent receives your order and payment by the close of
regular trading on the Exchange (currently 4:00 p.m. East Coast time), your
shares will be purchased at the Fund's net asset value calculated at the close
of regular trading on that day. Otherwise, your shares will be purchased at the
net asset value determined as of the close of regular trading on the next
business day.
The Company does not consider the U.S. Postal Service or any other independent
delivery service to be its agent. Therefore, deposit in the mail or with such
services, or receipt at Mutual Shareholder Services' Post Office Box, of
purchase applications or redemption requests does not constitute receipt by the
Custodian or the Fund. Do not mail letters by overnight courier to the post
office box address. Correspondence mailed by overnight courier should be sent
to the Fund at:
Mutual Shareholder Services
1301 East Ninth Street, Suite 3600
Cleveland, OH 44114
All applications to purchase shares of the Fund are subject to acceptance or
rejection by authorized officers of the Company and are not binding until
accepted. Applications will not be accepted unless they are accompanied by
payment in U.S. funds. Payment must be made by check or money order drawn on a
U.S. bank, savings & loan or credit union. The Custodian will charge a $20.00
fee against your account, in addition to any loss sustained by the Fund, for any
payment check returned to the Custodian for insufficient funds. The Company
reserves the right to refuse to accept applications under circumstances or in
amounts considered disadvantageous to shareholders. If you place an order for
Fund shares through a securities broker, and you place your order in proper form
before 4:00 p.m. East Coast time on any business day in accordance with their
procedures, your purchase will be processed at the public offering price
calculated at 4:00 p.m. on that day, if the securities broker then transmits
your order to the Transfer Agent before the end of its business day (which is
usually 5:00 p.m. East Coast time). The securities broker must send to the
Transfer Agent immediately available funds in the amount of the purchase price
within three business days for the order.
By Financial Service Organization
If you are a client of a securities broker or other financial organization, you
should note that such organizations may charge a separate fee for administrative
services in connection with investments in Fund shares and may impose account
minimums and other requirements. These fees and requirements would be in
addition to those imposed by the Fund. If you are investing through a
securities broker or other financial organization, please refer to its program
materials for any additional special provisions or conditions that may be
different from those described in this Prospectus (for example, some or all of
the services and privileges described may not be available to you). Securities
brokers and other financial organizations have the responsibility of
transmitting purchase orders and funds, and of crediting their customers'
accounts following redemptions, in a timely manner in accordance with their
customer agreements and this Prospectus.
Telephone Purchases
In order to be able to purchase shares by telephone, your account authorizing
such purchases must have been established prior to your call. Your initial
purchase of shares may not be made by telephone. Shares purchased by telephone
will be purchased at the per share net asset value determined at the close of
business on the day that the transfer agent receives payment through the
Automatic Clearing House. Call the Transfer Agent for details.
You may make purchases by telephone only if you have an account at a bank that
is a member of the Automated Clearing House. Most transfers are completed
within three business days of your call. To preserve flexibility, the Company
may revise or eliminate the ability to purchase Fund shares by phone, or may
charge a fee for such service, although the Company does not currently expect to
charge such a fee.
Mutual Shareholder Services, the Fund's transfer agent, employs certain
procedures designed to confirm that instructions communicated by telephone are
genuine. Such procedures may include, but are not limited to, requiring some
form of personal identification prior to acting upon telephonic instructions,
providing written confirmations of all such transactions, and/or tape recording
all telephonic instructions. Assuming procedures such as the above have been
followed, neither the Transfer Agent nor the Fund will be liable for any loss,
cost, or expense for acting upon telephone instructions that are believed to be
genuine. The Company shall have authority, as your agent, to redeem shares in
your account to cover any such loss. As a result of this policy, you will bear
the risk of any loss unless the Fund has failed to follow procedures such as the
above. However, if the Fund fails to follow such procedures, it may be liable
for such losses.
Wire Purchases
If you purchase Fund shares by wire, you must complete and file an Account
Registration Form with the Transfer Agent before any of the shares purchased can
be redeemed. You should contact your bank (which will need to be a commercial
bank that is a member of the Federal Reserve System) for information on sending
funds by wire, including any charges that your bank may make for these services.
Miscellaneous Purchase Information
Federal regulations require that you provide a certified taxpayer identification
number whenever you open or reopen an account. Congress has mandated that if
any shareholder fails to provide and certify to the accuracy of the
shareholder's social security number or other taxpayer identification number,
the Company will be required to withhold a percentage, currently 31%, of all
dividends, distributions and payments, including redemption proceeds, to such
shareholder as a backup withholding procedure.
For economy and convenience, share certificates will not be issued.
The public offering price for Class C and No-Load shares of the Fund is based
upon the Fund's net asset value per share. Net asset value per share is
calculated by adding the value of Fund investments, cash and other assets,
subtracting Fund liabilities, and then dividing the result by the number of
shares outstanding. The assets of the Fund are valued at market value or, if
market quotes cannot be readily obtained, fair value is used as determined by
the Board of Directors. The net asset value of the Fund's shares is computed
on all days on which the New York Stock Exchange is open for business at the
close of regular trading hours on the Exchange, currently 4:00 p.m. East Coast
time. The public offering price for Class A shares is the NAV plus a sales
charge of 3.75% of your investment.
HOW TO SELL (REDEEM) YOUR SHARES
You may sell (redeem) your shares at any time. You may request the sale of your
shares either by mail, by telephone or by wire.
By Mail
Sale requests should be mailed via U.S. mail or overnight courier service to:
Mutual Shareholder Services
1301 East Ninth Street, Suite 3600
Cleveland, OH 44114
The selling price of the shares being redeemed will be the Fund's per share net
asset value next calculated after receipt of all required documents in Good
Order. Payment of redemption proceeds will be made no later than the third
business day after the valuation date unless otherwise expressly agreed by the
parties at the time of the transaction.
Good Order means that the request must include:
1. Your account number.
2. The number of shares to be sold (redeemed) or the dollar value of the
amount to be redeemed.
3. The signatures of all account owners exactly as they are registered on the
account.
4. Any required signature guarantees.
5. Any supporting legal documentation that is required in the case of estates,
trusts, corporations or partnerships and certain other types of accounts.
Signature Guarantees --
A signature guarantee of each owner is required to redeem shares in the
following situations, for all size transactions:
i) if you change the ownership on your account;
ii) when you want the redemption proceeds sent to a different address than is
registered on the account;
iii) if the proceeds are to be made payable to someone other than the account's
owner(s);
iv) any redemption transmitted by federal wire transfer to your bank; and
v) if a change of address request has been received by the Company or
Declaration Service Company within 15 days previous to the request for
redemption.
In addition, signature guarantees are required for all redemptions of $2,500 or
more from any Fund shareholder account. A redemption will not be processed
until the signature guarantee, if required, is received in Good Order.
Signature guarantees are designed to protect both you and the Fund from fraud.
To obtain a signature guarantee, you should visit a bank, trust company, member
of a national securities exchange or other broker-dealer, or other eligible
guarantor institution. (Notaries public cannot provide signature guarantees.)
Guarantees must be signed by an authorized person at one of these institutions,
and be accompanied by the words "Signature Guarantee."
By Telephone
You may redeem your shares in the Fund by calling the Transfer Agent at 1-800-
446-2987 if you elected to use telephone redemption on your account application
when you initially purchased shares. Redemption proceeds must be transmitted
directly to you or to your pre-designated account at a domestic bank. You may
not redeem by telephone if a change of address request has been received by the
Company or the Transfer Agent within 15 days previous to the request for
redemption. During periods of substantial economic or market changes,
telephone redemptions may be difficult to implement. If you are unable to
contact the Transfer Agent by telephone, shares may be redeemed by delivering
the redemption request in person or by mail. You should understand that with
the telephone redemption option, you may be giving up a measure of security that
you might otherwise have had were you to redeem your shares in writing. In
addition, interruptions in telephone service may mean that you will be unable to
effect a redemption by telephone if desired.
Shares purchased by check for which a redemption request has been received will
not be redeemed until the check or payment received for investment has cleared.
By Wire
You may request the redemption proceeds be wired to your designated bank if it
is a member bank or a correspondent of a member bank of the Federal Reserve
System. A $10 fee is charged for outgoing wires.
Redemption At The Option Of The Fund
If the value of the shares in your account falls to less than $1000, the Company
may notify you that, unless your account is increased to $1000 in value, it
will redeem all your shares and close the account by paying you the redemption
proceeds and any dividends and distributions declared and unpaid at the date of
redemption. You will have thirty days after notice to bring the account up to
$1000 before any action is taken. This minimum balance requirement does not
apply to IRAs and other tax-sheltered investment accounts. This right of
redemption shall not apply if the value of your account drops below $1000 as the
result of market action. The Company reserves this right because of the expense
to the Fund of maintaining very small accounts.
DIVIDENDS AND DISTRIBUTIONS
Dividends paid by the Fund are derived from its net investment income. Net
investment income will be distributed at least annually. The Fund's net
investment income is made up of dividends received from the stocks it holds, as
well as interest accrued and paid on any other obligations that might be held in
its portfolio.
The Fund realizes capital gains when it sells a security for more than it paid
for it. The Fund may make distributions of its net realized capital gains
(after any reductions for capital loss carryforwards), generally, once a year.
Unless you elect to have your distributions paid in cash, your distributions
will be reinvested in additional shares of the Fund. You may change the manner
in which your dividends are paid at any time by writing to Mutual Shareholder
Services,1301 East Ninth Street, Suite 3600, Cleveland, OH 44114.
HUGHES FUNDS, INC.
Hughes Funds, Inc (the "Company") was organized on December 15, 1997 as a
Maryland corporation, and is a mutual fund of the type known as an open-end,
diversified management investment company. It did not begin operations
until 1998 nor commence offering its shares until that time. A mutual fund
permits an investor to pool his or her assets with those of others in order to
achieve economies of scale, take advantage of professional money managers and
enjoy other advantages traditionally reserved for large investors. The
Conpany is authorized to issue 100,000,000 shares of .001 cent par value
common capital stock. The Company's Articles of Incorporation permit its
Board of Directors to classify any unissued shares into one or more classes of
shares. The Board has authorized the issuance of 25,000,000 shares of The
Hughes Value Fund which are offered by this prospectus. The Fund shares are
fully paid and non-assessable. They are entitled to such dividends and
distributions as may be paid with respect to the shares and shall be entitled
to such sums on liquidation of the Fund as shall be determined. Other than
these rights,they have no preference as to conversion, exchange, dividends,
retirement or other features and have no preemption rights.
Shareholder meetings will not be held unless required by Federal or State law or
in connection with an undertaking given by the Fund (See Statement of
Additional Information).
MANAGEMENT OF THE FUND
The business affairs of the Fund are managed under the general supervision of a
Board of Directors.
Investment Adviser
Management Agreements: The Company has entered into an Investment Advisory
Contract (the "Contract") with Hughes Investment Advisors LLC, (the "Adviser"),
741 Cox Road, Moorestown NJ 08057. Charles J Hughes is the president of and
controls the Adviser and is responsible for all its investment decisions,
including the day-to-day management of the Fund. Mr. Hughes also serves as the
President and as a Director of the Company. The Adviser manages the investment
of the assets of the Fund in accordance with the Fund's investment objective,
policies, and restrictions. The Adviser was formed on December 9, 1997 and
registered as an Investment Advisory Firm with the Securities and Exchange
Commission on March 13, 1998. The Advisor formerly operated as Hughes Trading
L.L.C., and developed financial futures and timing model software for equity
trading. In addition, Mr. Hughes has been a commercial airline pilot for
American Airlines since 1988. Although Mr. Hughes has extensive experience
managing portfolios for himself and his family, Mr. Hughes does not have any
previous experience in providing investment management services to any
registered investment company.
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.50% of the Fund's net
assets.
Operating Services Agreement; the Company has also entered into an Operating
Services Agreement with the Adviser where the Adviser will provide, or arrange
to provide, essentially all other services needed to the Fund. These services
include transfer agent, accounting, distribution and custodial services. The
effect of the Investment Advisory Agreement and the Operating Services Agreement
is to cap the Fund's normal operating expenses. These contracts do not cover
expenses incurred by the Fund for taxes, interest, brokerage fees, legal
expenses for litigation, and other extraordinary expenses.
The Adviser receives from the Fund, as compensation for its services, a fee,
accrued daily and payable monthly, at an annual rate of 0.50% of the Fund's net
assets.
Under these agreements, the Adviser furnishes at its own expense office space to
the Company and all necessary office facilities, equipment, and personnel for
managing the assets of the Fund. The Adviser also pays all expenses of marketing
shares of the Fund, and related bookkeeping.
FUND SERVICE PROVIDERS
The Fund could not function without the services provided by certain companies.
With the Board's permission, the Adviser and the Fund have entered into
contracts with the following companies. All fees charged by these companies
will be paid by the Adviser.
Custodian
Fifth Third National Bank, N.A., Cincinnati, Ohio, holds the investments and
other assets that the Fund owns. The Custodian is responsible for receiving
and paying for securities purchased, delivering against payment securities
sold, receiving and collecting income from investments, making all payments
covering expenses of the Fund, and performing other administrative duties, all
as directed by persons authorized by the Fund. The Custodian does not exercise
any supervisory function in such matters as the purchase and sale of portfolio
securities, payment of dividends, or payment of expenses of the Fund.
Portfolio securities of the Fund are maintained in the custody of the
Custodian, and may be entered in the Federal Reserve Book Entry System, or the
security depository system of The Depository Trust Company.
Transfer, Dividend Disbursing And Accounting Services Agent
Mutual Shareholder Services provides transfer agency and dividend disbursing
services for the Fund. This means that its job is to maintain, accurately, the
account records of all shareholders in the Fund as well as to administer the
distribution of income earned as a result of investing in the Fund. Mutual
Shareholders Services also provides accounting services to the Fund including
portfolio accounting services, expense accrual and payment services, valuation
and financial reporting services, tax accounting services and compliance control
services.
FEDERAL TAXES
As with any investment, you should consider the tax implications of an
investment in the Fund. The following is only a short summary of the important
tax considerations generally affecting the Fund and its shareholders. You should
consult your tax adviser with specific reference to your own tax situation.
The Fund intends to qualify and maintain its qualification as a "regulated
investment company" under the Internal Revenue Code (hereafter the "Code"),
meaning that to the extent a fund's earnings are passed on to
shareholders as required by the Code, the Fund itself is not required to pay
federal income taxes on the earnings. Accordingly, the Fund will pay dividends
and make such distributions as are necessary to maintain its qualification as a
regulated investment company under the Code.
Before you purchase shares of the Fund, you should consider the effect of both
dividends and capital gain distributions that are expected to be declared or
that have been declared but not yet paid. When the Fund makes these payments,
its share price will be reduced by the amount of the payment, so that you will
in effect have paid full price for the shares and then received a portion of
your price back as a taxable dividend distribution.
The Fund will notify you annually as to the tax status of dividend and capital
gains distributions paid by the Fund. Such dividends and capital gains may
also be subject to state and local taxes.
You may realize a taxable gain or loss when redeeming shares of the Fund
depending on the difference in the prices at which you purchased and sold the
shares.
Because your state and local taxes may be different than the federal taxes
described above, you should see your tax adviser regarding these taxes.
GENERAL INFORMATION
Total return for the Fund may be calculated on an average annual total return
basis or an aggregate total return basis. Average annual total return reflects
the average annual percentage change in value of an investment over the
measuring period. Aggregate total return reflects the total percentage change in
value of an investment over the measuring period. Both measures assume the
reinvestment of dividends and distributions.
Total return of the Fund may be compared to those of mutual funds with
similar investment objectives and to bond, stock or other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor mutual fund performance.
DISTRIBUTION FEE
The Fund has adopted a distribution plan (the "Distribution Plan"), pursuant to
which the Fund may incur shareholder servicing expenses of up to .25% per
annum of the Fund's average daily net assets on all of its share classes.
The Fund has also adopted a distribution plan (the "Distribution Plan"),
pursuant to which the Fund may incur distribution expenses of up to .75% per
annum of the Fund's average daily net assets on its Class C shares. This fee is
available to broker, dealers and other persons who provide distribution and
other services to the Fund to help sell Class C shares.
The Distribution Plans provide that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares, including but not
limited to, advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising materials and
sales literature, and payments to dealers and shareholder servicing agents.
Year 2000 Risks: As with other mutual funds, financial and business
organizations and individuals around the world, the Fund could be adversely
affected if the computer systems used by the Adviser and the Fund's other
service providers don't properly process and calculate date-related information
and data from and after January 1, 2000. This is commonly known as the "Year
2000" or "Y2K" problem. The Adviser is taking steps to address the Y2K problem
with respect to the computer systems that it uses and to obtain assurances that
comparable steps are being taken by the Fund's other major service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the Fund.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance since its inception on July 29, 1998. Certain infor-
mation reflects financial results for a single Fund share. The total returns
in the table represent the rate that an investor would have earned (or lost)
on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has not been audited. These Financial
Highlights, along with other information concerning the Fund are included
in the Fund's semi-annual report, which is available without charge upon
request.
July 29, 1998*
Through
December 31, 1998
Net Asset Value-
Beginning of Period $10.00
Investment Operations:
Net Investment Income $ 0.06
Net Realized and
Unrealized Gain on
Investments $ 1.66
Total from Investment
Operations $ 1.72
Distributions:
From Net
Investment Income $(0.06)
From Net Realized
Capital Gains $ 0.00
Total Distributions $(0.06)
Net Asset Value-
End of Period $11.66
Total Return 16.60%
Ratios/Supplemental Data**
Net Assets, end of period
(in 000's) $117
Ratio of Expenses to
Average Net Assets(4,5) 1.00%
Ratio of Net Investment
Income to Average Net
Assets 0.95%
Portfolio Turnover Rate 46.12%
*Commencement of Operations
**Annualized Commencements of Operations
See notes to financial statement contained in the Fund's Semi- Annual Report.
FOR MORE INFORMATION
Additional information about the Fund is available in the Fund's semi-
annual report to shareholders. In the Fund's semi-annual report, you
will find a discussion of the market conditions and investment strategies
that significantly affected th Fund's performance during its first six
months of operations.
Statement of Additional By Mail:
Information (SAI)
Hughes Funds, Inc.
The SAI contains more detailed c/o Mutual Shareholder Services
Information on all aspects of the 1301 East Ninth Street, Suite 3600
Fund. A current SAI, dated May 1, Cleveland, OH 44114
1999, has been filed with the SEC
and is incorporated by reference By Phone: 1-800-446-2987
into (is legally a part of) this
prospectus.
To request a free copy of the SAI,
or the Fund's latest semi-annual Or you may view or obtain these
Report, please contact the Fund. documents from the SEC.
In person: at the SEC's Public Reference Room in Washington, D.C.
By Phone: 1-800-SEC-0330
By Mail: Public Reference Section,Securities and Exchange Commission,
Washington, D.C. 20549-6009 (duplicating fee required)
On the Internet: www.sec.gov
The Hughes Value Fund
c/o Mutual Shareholder Services
1301 East Ninth Street, Suite 3600
Cleveland, OH 44114
1-800-446-2987
Investment Company Act No.
811-08617
STATEMENT OF ADDITIONAL INFORMATION
Dated April 1, 1999
THE HUGHES VALUE FUND
741 Cox Road
Moorestown NJ 08057
This Statement of Additional Information is not a prospectus
and should be read in conjunction with the Prospectus of
Hughes Value Fund, Inc., dated April 1, 1999.
Requests for copies of the Prospectus should be made by
writing to Hughes Funds, Inc., 741 Cox Road, Moorestown NJ
08057 or by calling 609-234-3903.
TABLE OF CONTENTS
Investment Policies and Restrictions Custodian
Investment Adviser Transfer Agent
Directors and Officers Administration
Performance Information Independent Accountants
Purchasing and Redeeming Shares Independent Auditors Report*
Tax Information Financial Statements
Portfolio Transactions Principal Holders of Securities
* Previously filed by Amendment to Form N-1A
INVESTMENT POLICIES AND RESTRICTIONS
The Fund's investment objective and the manner in which the
Fund pursues its investment objective is discussed in the
prospectus. The Fund's investment limitations and
restrictions are listed below:
The Fund will not:
1. To the extent of 75% of its assets (valued at time of
investment), invest more than 5% of its assets in securities
of any one issuer, except in obligations of the United
States Government and its agencies and instrumentalities;
2. Acquire securities of any one issuer that at the time of
investment (a) represent more than 10% of the voting
securities of the issuer or (b) have a value greater than
10% of the value of the outstanding securities of the
issuer;
3. Invest less than 25% of its assets (valued at time of investment)
in securities of Financial Services Companies, except for temporary or
defensive purposes;
4. Borrow money except from banks for temporary or emergency
purposes in amounts not exceeding 5% of the value of the
Fund's assets at the time of borrowing;
5. Underwrite the distribution of securities of other
issuers, or acquire "restricted" securities that, in the
event of a resale, might be required to be registered under
the Securities Act of 1933;
6. Make margin purchases or short sales of securities;
7. Invest in companies for the purpose of management or the
exercise of control;
8. Lend money (but this restriction shall not prevent the
Fund from investing in debt securities or repurchase
agreements), or lend its portfolio securities.
9. Acquire or retain any security issued by a company, an
officer or director of which is an officer or director of
the Company or an officer, director or other affiliated
person of the Advisor.
10. Invest in oil, gas or other mineral exploration or
development programs, although it may invest in marketable
securities of companies engaged in oil, gas or mineral
exploration;
11. Purchase or sell real estate or real estate loans or
real estate limited partnerships, although it may invest in
marketable securities of companies that invest in real
estate or interests in real estate.
12. Purchase warrants on securities.
13. Issue senior securities.
14. Invest in commodities, or futures and options on commodities.
15. Except for Financial Services Companies, invest more than 25% of its
net assets (valued at the time of investment) in securities of any one
industry.
Restrictions 1 through 15 listed above are fundamental
policies, and may be changed only with the approval of a
"majority of the outstanding voting securities" of the Fund
as defined in the Investment Company Act of 1940.
The Fund has also adopted the following restrictions that
may be changed by the Board of Directors without shareholder
approval:
The Fund may not:
a. Invest more than 15% of its net assets in securities that
are not readily marketable;
b. Acquire securities of other investment companies except (a) by purchase in
the open market, where no commission or profit to a sponsor or dealer results
from such purchase other than the customary broker's commission and (b) where
acquisition results from a dividend or merger,consolidation or other
reorganization (in addition to this investment restriction, the Investment
Company Act of 1940 provides that the Fund may neither purchase more
than 3% of the voting securities of any one investment company
nor invest more than 10% of the Funds assets (valued at time of investment)
in all investment company securities purchased by the Fund);
c. Pledge, mortgage or hypothecate its assets, except for temporary or emergency
purposes and then to an extent not greater than 5% of its total assets at
cost;
d. Invest more than 10% of the Fund's assets (valued at the time of investment)
in initial margin deposits of options or futures contracts.
INVESTMENT ADVISER
Information on the Fund's investment adviser, Hughes
Investment Advisors LLC, is set forth in the prospectus.
The adviser is a New Jersey Limited Liability Company.
Charles J Hughes is the President with a 51% interest in the company and his
brother Daniel J Hughes has a 49% interest and is a member of the company.
Although Mr. Hughes has extensive experience in managing personal investment
portfolios for himself and his family, he does not have any previous
experience in providing investment management services to any registered
investment company.
The Advisory Agreement provides that the adviser shall not
be liable for any loss suffered by the Fund or its
shareholders as a consequence of any act or omission in
connection with services under the Agreement, except by
reason of the adviser's willful misfeasance, bad faith,
gross negligence, or reckless disregard of its obligations
and duties under the Advisory Agreement.
The Advisory Agreement expires on March 31, 2001, but may be
continued from year to year so long as its continuance is
approved annually (a) by the vote of a majority of the
Directors of the Fund who are not "interested persons" of
the Fund or the adviser cast in person at a meeting called
for the purpose of voting on such approval, and (b) by the
Board of Directors as a whole or by the vote of a majority
(as defined in the 1940 Act) of the outstanding shares of
the Fund. The Agreement will terminate automatically in the
event of its assignment (as defined in the 1940 Act).
DIRECTORS AND OFFICERS
The board of directors has overall responsibility for
conduct of the Company's affairs. The day-to-day operations
of the Fund are managed by the Advisor subject to the bylaws
of the Company and review by the Board of Directors. The
directors of the Company, including those directors who are
also officers, are listed below:
Name, Age, Address, Position Principal Occupation For the
with Fund Last Five Years
Charles J Hughes Age 48 * Fund Adviser
741 Cox Road President Hughes Trading LLC since
Moorestown NJ 08057 February, 1996. Pilot for American
President, Treasurer & Director Airlines since 1988.
BA Degree LaSalle University
Frank G Solecki Age 52 Director of Manufacturing PCD
48 Cove Road Division of FMC Corporation
Moorestown NJ 08057 BS Degree Penn State University
Secretary and Director
Neal K Smith Age 47 Sales Engineer for Del-Val
144 Knotty Oak Dr. Equipment, Inc.
Mount Laurel NJ 08054 BS Degree Grove City College
Director
* Indicates an "interested person" as defined in the
Investment Company Act of
1940.
The Corporation was organized as a Maryland Corporation on
December 15, 1997. The table below sets forth the
compensation anticipated to be paid by the Corporation to
each of the directors of the Corporation during the fiscal
year ending June 30, 1999.
Name of Director Compensation Pension Annual Total Compensation
from Corp. Benefits Benefits Paid to Director
Charles J Hughes 0 0 0 0
Frank G Solecki $500 0 0 $500
Neal K Smith $500 0 0 $500
PRINCIPAL HOLDERS OF SECURITIES
As of December 31, 1998, Charles J Hughes and Daniel J. Hughes owned 50%
each of the Fund's outstanding shares. Accordingly, they are deemed to
then control the Fund.
The Company will call a meeting of shareholders for the
purpose of voting upon the question of removal of a director
or directors when requested in writing to do so by record
holders of at least 10% of the Fund's outstanding common
shares. The Corporation's bylaws contain procedures for the
removal of directors by its stockholders. At any meeting of
stockholders, duly called and at which a quorum is present,
the stockholders may by the affirmative vote of the holders
of a majority of the votes entitled to be cast thereon,
remove any director or directors from office and may elect a
successor or successors to fill any resulting vacancies for
the unexpired terms of the removed directors.
PERFORMANCE INFORMATION
From time to time the Fund may quote total return figures.
"Total Return" for a period is the percentage change in
value during the period of an investment in Fund shares,
including the value of shares acquired through reinvestment
of all dividends and capital gains distributions. "Average
Annual Total Return" is the average annual compounded rate
of change in value represented by the Total Return
Percentage for the period.
Average Annual Total Return is computed as follows: P(1+T)[n] = ERV
Where: P =a hypothetical initial investment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of shares at the end of the period
Yield. The Fund may advertise performance in terms of a 30-
.day yield quotation. The 30-day yield quotation is computed
by dividing the net investment income per share earned
during the period by the maximum offering price per share on
the last day of the period, according to the following
formula:
Yield = 2[(a-b/cd + 1)6 - 1]
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursement)
c = the average daily number of shares outstanding during the
period that they were entitled to receive dividends
d = the maximum offering price per share
on the last day of the period
Income taxes are not taken into account. The Fund's
performance is a function of conditions in the securities
markets, portfolio management, and operating expenses.
Although information such as that shown above is useful in
reviewing the Fund's performance and in providing some basis
for comparison with other investment alternatives, it should
not be used for comparison with other investments using
different reinvestment assumptions or time periods.
In sales literature, the Fund's performance may be compared
with that of market indices and other mutual funds. In
addition to the above computations, the Fund might use
comparative performance as computed in a ranking determined
by Lipper Analytical Services, Morningstar, Inc., or that of
another service.
PURCHASING AND REDEEMING SHARES
Purchases and redemptions are discussed in the Fund's
prospectus.
Redemptions will be made at net asset value. The Fund's net
asset value is determined on days on which the New York
Stock Exchange is open for trading.
TAX INFORMATION
Taxation Of The Fund. The Fund intends to qualify as a
"regulated investment company" under Subchapter M of the
Internal Revenue Code. To qualify as a regulated investment
company, the Fund must, among other things, derive at least
90% of its gross income from dividends, interest, payments
with respect to securities loans, gains from the sale or
other disposition of stock, securities, or other income
derived with respect to its business of investing in such
stock or securities.
If the Fund qualifies as a regulated investment company and
distributes at least 90% of its net investment income, the
Fund will not be subject to Federal income tax on the income
so distributed. However, the Fund would be subject to
corporate income tax on any undistributed income other than
tax-exempt income from municipal securities.
Taxation Of The Shareholder. Taxable distributions
generally are included in a shareholder's gross income for
the taxable year in which they are received. However,
dividends declared in October, November and December and
made payable to shareholders of record in such month will be
deemed to have been received on December 31st if paid by the
Fund during the following January.
Distributions by the Fund will result in a reduction in the
fair market value of the Fund's shares. Should a
distribution reduce the fair market value below a
shareholder's cost basis, such distribution would be taxable
to the shareholder as ordinary income or as a long-term
capital gain, even though, from an investment standpoint, it
may constitute a partial return of capital. In particular,
investors should be careful to consider the tax implications
of buying shares of the Fund just prior to a distribution.
The price of such shares include the amount of any
forthcoming distribution so that those investors may receive
a return of investment upon distribution which will,
nevertheless, be taxable to them.
A redemption of shares is a taxable event and, accordingly,
a capital gain or loss may be recognized. Each investor
should consult a tax advisor regarding the effect of
federal, state, local, and foreign taxes on an investment in
the Fund.
Dividends. A portion of the Fund's income may qualify for
the dividends-received deduction available to corporate
shareholders to the extent that the Fund's income is derived
from qualifying dividends. Because the Fund may earn other
types of income, such as interest, income from securities
loans, non-qualifying dividends, and short-term capital
gains, the percentage of dividends from the Fund that
qualifies for the deduction generally will be less than
100%. The Fund will notify corporate shareholders annually
of the percentage of Fund dividends that qualifies for the
dividend received deductions.
A portion of the Fund's dividends derived from certain U.S.
Government obligations may be exempt from state and local
taxation. Short-term capital gains are distributed as
dividend income. The Fund will send each shareholder a
notice in January describing the tax status of dividends and
capital gain distributions for the prior year.
Capital Gain Distribution. Long-term capital gains earned
by the Fund from the sale of securities and distributed to
shareholders are federally taxable as long-term capital
gains, regardless of the length of time shareholders have
held their shares. If a shareholder receives a long-term
capital gain distribution on shares of the Fund, and such
shares are held six months or less and are sold at a loss,
the portion of the loss equal to the amount of the long-term
capital gain distribution will be considered a long-term
loss for tax purposes. Short-term capital gains distributed
by the Fund are taxable to shareholders as dividends, not as
capital gains.
PORTFOLIO TRANSACTIONS
The Fund will generally purchase and sell securities without
regard to the length of time the security has been held.
Accordingly, it can be expected that the rate of portfolio
turnover may be substantial. Since investment decisions are
based on the anticipated contribution of a security to the
Fund's investment objective, the rate of portfolio turnover
is not a factor when the Adviser believes a change is in
order to achieve those objectives. The Fund expects that
its annual portfolio turnover rate will not exceed 100% under
normal conditions. However, there can be no assurance that
the Fund will not exceed this rate, and the portfolio
turnover rate may vary from year to year.
High portfolio turnover in any year will result in the
payment by the Fund of above-average transaction costs and
could result in the payment by shareholders of above-average
amounts of taxes on realized investment gains. Distributions
to shareholders of such investment gains, to the extent they
consist of short-term capital gains, will be considered
ordinary income for federal income tax purposes.
Decisions to buy and sell securities for the Fund are made
by the Adviser subject to review by the Corporation's Board
of Directors. In placing purchase and sale orders for
portfolio securities for the Fund, it is the policy of the
Adviser to seek the best execution of orders at the most
favorable price. In selecting brokers to effect portfolio
transactions, the determination of what is expected to
result in the best execution at the most favorable price
involves a number of largely judgmental considerations.
Among these are the Adviser's evaluation of the broker's
efficiency in executing and clearing transactions. Over-the-
counter securities are generally purchased and sold directly
with principal market makers who retain the difference in
their cost in the security and its selling price. In some
instances, the Adviser feels that better prices are
available from non-principal market makers who are paid
commissions directly.
CUSTODIAN
Fifth Third National Bank, N.A., Cincinnati, Ohio, acts as
custodian for the Fund. As such, it holds all securities and
cash of the Fund, delivers and receives payment for
securities sold, receives and pays for securities purchased,
collects income from investments and performs other duties,
all as directed by officers of the Company. Fifth Third does
not exercise any supervisory function over management of the
Fund, the purchase and sale of securities or the payment of
distributions to shareholders.
TRANSFER AGENT
Mutual Shareholder Services acts as transfer, dividend
disbursing, and shareholder servicing agent for the Fund
pursuant to a written agreement with the Company and the
Adviser, dated March 31, 1999. Under the agreement, Mutual
Shareholder Services is responsible for administering and
performing transfer agent functions, dividend distribution,
shareholder administration, and maintaining necessary
records in accordance with applicable rules and regulations.
All fees charged by the transfer agent will be paid by the
Adviser. For the services to be rendered as transfer agent,
The Adviser shall pay mutual Shareholder Services an annual
fee, paid monthly, based on the average net assets of the
Fund, as determined by valuations made as of the close of
each business day of the month.
ADMINISTRATION
Mutual Shareholder Services also acts as Administrator to
the Fund pursuant to a written agreement with the Company
and the Adviser, dated March 31, 1999. The Administrator
supervises all aspects of the operations of the Fund except
those performed by the Fund's investment adviser under the
Fund's investment advisory agreement. The Administrator is
responsible for:
(a) calculating the Fund's net asset value
(b) preparing and maintaining the books and accounts specified in Rule 31a-1
and 31a-2 of the Investment Company Act of 1940
(c) preparing financial statements contained in reports to stockholders of the
Fund
(d) preparing the Fund's federal and state tax returns
(e) preparing reports and filings with the Securities and Exchange Commission
(f) preparing filings with state Blue Sky authorities
(g) maintaining the Fund's financial accounts and records
For the services to be rendered as Administrator, The
Adviser shall pay mutual Shareholder Services an annual fee,
paid monthly, based on the average net assets of the Fund,
as determined by valuations made as of the close of each
business day of the month.
INDEPENDENT ACCOUNTANTS
DeAngelis & Higgins LLC, 39 North Main Street, Cranbury NJ 08512 has been
selected as the independent accountants for the Fund. As such, DeAngelis &
Higgins LLC performs audits of the Fund's financial statements.
FINANCIAL STATEMENTS
The Hughes Value Fund unaudited financial statement as of December 31,1998
appear in the report which is attached to this Statement of Additional
Information.
HUGHES VALUE FUND
741 Cox Road
Moorestown NJ 08057
January 7, 1999
Dear Shareholder:
I am pleased to present the first semi-annual report (unaudited) of the Hughes
Value fund for the period July 29, 1998 through December 31, 1998.
The Hughes Value Fund's net asset per share at inception on July 29, 1998 was
$10.00 as compared to $11.66 on December 31, 1998. After adjusting for dividend
payments of $0.06 per share, the Fund registered a return of 16.6% during
the period.
Sincerely,
/s/ Charles J Hughes
President
Schedule of Investments (Unaudited)
December 31, 1998
Shares/Principal Amount Market Value % of Assets
Cigarettes
96 Philip Morris Companies, Inc. 5,136 4.38%
Computer Networks
68 Cisco Systems, Inc.*B36 6,311 5.39%
Department Stores
66 Wal-Mart Stores, Inc. 5,375 4.59%
Eating and Drinking Places
70 McDonalds Corporation 5,377 4.59%
Electric Housewares and Fans
68 General Electric Co. 6,936 5.92%
Federal and Federally Sponsored
Credit Agencies
76 Fedl National Mortgage Assoc. 5,624 4.80%
Fire, Marine and Casualty Insurance
140 Citicorp 6,956 5.94%
Life Insurance
80 Jeferson Pilot 6,000 5.12%
Lumber and Other Building
Materials Dealers
80 Home Depot, Inc. 4,895 4.18%
Medical, Dental, and Hospital
Equipment and Supplies
58 Johnson and Johnson 4,865 4.15%
Nondeposit Trust Facilities
56 Morgan (J.P.) & Co., Inc. 5,883 5.02%
Paint, Glass and Wallpaper Stores
216 Sherwin Williams Co. Ohio 6,345 5.42%
Perfumes, Cosmetics and Other
Toilet Preparations
52 Procter & Gamble Co. 4,748 4.05%
Petroleum Refining
64 Exxon Corp. 4,680 3.99%
Pharmaceutical Preparations
34 Merck & Co., Inc. 5,015
86 Schering-Plough Corp. 4,752
9,767 8.34%
Prepackaged Software
44 Microsoft Corp.* 6,102 5.21%
Semiconductors and Related Devices
50 Intel Corp. 5,928 5.06%
State Commercial Banks
100 Wilmington Trust 6,163 5.26%
Telephone Communications,
Except Radiotelephone
86 Bell Atlantic Corp. 4,558 3.89%
Telephone and Telegraph Apparatus
46 Lucent 5,057 4.32%
Cash and Equivalents
309 Fountain Square Treasury 309 0.26%
Total Investments 117,015 99.86%
Other Assets Less Liabilities 159 0.14%
Net Assets - Equivalent to $11.66
per share on 117,174 100%
*Non-income producing securities. The accompanying notes are an integral
part of the financial statements.
STATEMENT OF ASSETS AND LIABILITIES
Assets:
Investment Securities at Market Value
(Identified Cost - 101,829) $117,015
Cash -
Receivables:
Dividends and Interest 133
Total Assets 117,148
Liabilities
Payables:
Investment Securities Purchased -
Accured Expenses -
Total Liabilities -
Net Assets 117,148
Net Assets Consist of:
Capital Paid In 100,552
Undistributed Net Investment Income -
Accumulated realized Gain (Loss) on
Investments - Net 1,410
Unrealized Appreciation in Value
of Investments Based on Identified Cost - Net 15,186
Net Assets for 10,047 Shares Outstanding 117,148
Net Asset Value and Redemption Price
Per Share ($117,148/10,047 shares) 11.66
Offering Price Per Share 11.66
STATEMENT OF OPERATIONS
July 29, 1998 to December 31, 1998
Investment Income:
Dividends 102
Interest 450
Total Investment Income 552
Expenses
Management Fees (Note 2) 282
Total Expenses 282
Reimbursed Fees (282)
Total Expenses after Reimbursements -
Net Investment Income 552
Realized and Unrealized Gain (Loss)
on Investments:
Realized Gain (Loss) on Investments 1,410
Distribution of Realized Captial Gains
from other Investment Companies -
Unrealized Gain (Loss) from Appreciation
(Depreciation) on Investments 15,186
Net Realized and Unrealized Gain (Loss)
on Investments 16,596
Net Increase (Decrease) in Net Assets
from Operations 17,148
STATEMENT OF CHANGES IN NET ASSETS
7/29/98 to 12/31/98
From Operations:
Net Investment Income 552
Net Realized Gain (Loss) on Investments 1,410
Net Unrealized Appreciation (Depreciation) 15,186
Increase (Decrease) in Net Assets from Operations 17,148
From Distributions to Shareholders
Net Investment Income (552)
Net Realized Gain (Loss) from Security
Transactions 0
Net Increase (Decrease) from Distributions (552)
From Capital Share Transactions:
Proceeds From Sale of 10,000 Shares 100,000
Net Asset Value of 47 Shares Issued on
Reinvestment of Dividends 552
Cost of 0 Shares Redeemed 0
100,552
Net Increase in Net Assets 117,148
Net Assets at Beginning of Period
(inc. undistributed net investment income of $0) 0
Net Assets at End of Period (inc. undistributed
net investment income of $0) 117,148
FINANCIAL HIGHLIGHTS
Selected data for a share of common stock outstanding
throughout the period: 7/29/98 to 12/31/98
Net Asset Value -
Beginning of Period 10.00
Net Investment Income 0.06
Net Gains or Losses on Securities
(realized and unrealized) 1.66
Total from Investment Operations 1.72
Dividends
(from net investment income) (0.06)
Distributions (from capital gains) 0.00
Return of Capital 0.00
Total Distributions (0.06)
Net Asset Value -
End of Period 11.66
Total Return 16.60%
Ratios/Supplemental Data
Net Assets - End of Period (Thousands) 117
Before reimbursements
Ratio of Expenses to Average Net Assets* 1.00%
Ratio of Net Income to Average Net Assets* 0.96%
After reimbursements
Ratio of Expenses to Average Net Assets* 0.00%
Ratio of Net Income to Average Net Assets* 1.96%
Portfolio Turnover Rate 46.12%
Average commission per share 0.23270
*Annualized
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
1.) SIGNIFICANT ACCOUNTING POLICIES
The Fund is an open-end management investment company, organized as a
Maryland Corporation in December 1997. The fund is a diversified mutual
fund whose primary investment objective is growth of capital. The Fund
will seek to achieve its objective by investing primarily in the securities
of companies whose stock is traded on the New York Stock Exchange ("NYSE"),
the American Stock Exchange ("ASE") and the NASDAQ over-the-counter market.
There can be no assurance that the Fund's objective will be achieved.
Significant accounting policies of the Fund are presented below:
SECURITY VALUATION:
The Fund intends to invest in a wide variety of equity and debt securities.
The investments insecurities are carried at market value. The market
quotation used for common stocks, including those listed on the NASDAQ
National Market system, is the last sale price on the date on which the
valuation is made or, in the absence of sales, at the closing bid price.
Over-the-counter securities will be valued on the basis of the bid price
at the close of each business day. Short-term investments are valued at
amortized cost, which approximates market. Securities for which market
quotations are not readily available will be valued at fair value as
determined in good faith pursuant to procedures established by the Board
of Directors.
SECURITY TRANSACTION TIMING
Security transactions are recorded on the dates transactions are entered
into (the trade dates). Dividend income and distributions to shareholders
are recorded on the ex-dividend date. Interest income is recorded as
earned. The Fund uses the identified cost basis in computing gain or loss
on sale of investment securities. Discounts and premiums on securities
purchased are amortized over the life of the respective securities.
INCOME TAXES:
It is the Fund's policy to distribute annually, prior to the end of the
calendar year, dividends sufficient to satisfy excise tax requirements
of the Internal Revenue Service. This Internal Revenue Service requirement
may cause an excess of distributions over the book year-end accumulated
income. In addition, it is the Fund's policy to distribute annually, after
the end of the fiscal year, any remaining net investment income and net
realized capital gains.
ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2.)INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an investment advisory and administration
agreement with Hughes Investment Advisors LLC. The Investment Advisor
receives from the Fund as compensation for its services an annual fee
of 1.0% on the Fund's net assets. Hughes Investment Advisors LLC
receives from the Fund as compensation for its administrative services
an annual fee of 0.1% of the fund's net assets. Hughes Investment
Advisors LLC has agreed to be responsible for payment of all operation
expenses of the Fund except for brokerage and commission expenses, and
any extraordinary and non-reccuring expenses. From time to time, Hughes
Investment Advisors LLC may waive some or all of the fees. During the
period ending December 31, 1998 all management and administrative fees
have been waived.
3.) RELATED PARTY TRANSACTIONS
Certain owners of Hughes Investment Advisors LLC are also owners and/or
directors of the Hughes Value Fund. These individuals may receive benefits
from any management and or administration fees paid to the Advisor.
4.) CAPITAL STOCK AND DISTRIBUTION
At December 31, 1998 an indefinite number of shares of capital stock
($.10 par value) were authorized, and paid-in capital amounted to
$100,552. Transactions in common stock were are follows:
Shares sold 10,047
Shares issued to shareholders in
reinvestment of dividends 47
Shares redeemed 0
Net increase 10,047
Shares Outstanding:
Beginning of Period 0
End of Period 10,047
5.) PURCHASES AND SALES OF SECURITIES
During the period from inception to December 31, 1998, purchases and
sales of investment securities other than U.S. Government obligations
and short-term investments aggregated $148,029 and $47,920 respectively.
Purchases and sales of U.S. Government obligations aggregated $0 and $0
respectively.
6.) FINANCIAL INSTRUMENTS DISCLOSURE
There are no reportable financial instruments that have any off-balance
sheet risk as of December 31, 1998.
7.) SECURITY TRANSACTIONS
For Federal income tax purposes, the cost of investments owned at December 31,
1998 was the same as identified cost.
At December 31, 1998, the compensation of unrealized appreciation (the
excess of value over tax cost) and depreciation (the excess of tax cost
over value) was as follows:
Appreciation (Depreciation) Net Appreciation (Depreciation)
15,362 (176) 15,186
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
1. Articles of Incorporation*
2. By-Laws of Registrant*
3. Instruments defining rights of Shareholders---None,
See Articles of Incorporation
4. See Exhibit 1, Articles of Incorporation, Article IV
5. Operating Services Agreement
6. Underwriting Contracts--- none
7. Bonus or Profit Sharing Contracts--- None
8. Custodian Agreements
9. Transfer Agent Contracts
9.1 Accounting Services Agreement
10 Opinion of Counsel*
11 Consent of Independent Auditors*
12 Omitted Financial statements--- None
13 Initial Capital Agreements--- not Applicable
14 Not Applicable
15 Rule 12b-1 Plan
16 Not Applicable
27 Financial Data Schedule--- Not Applicable
18 Not Applicable
* Previously filed by amendment to the Registrant's Registration Statement on
Form N-1A and incorpoated herein by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant
See Caption "Principal Holders of Securities" in the Statement of
Additional Information
Item 26. Number of Holders of Secuities
As of December 31, 1998, there were 2 holders of the shares of
beneficial interest of the Hughes Value Fund.
Item 27. Indemnification
(a) General. The Articles of Amendment and Restatement of Charter
(the "Articles") of the Corporation provide that to the fullest
extent permitted by Maryland and federal statutory and decisional
law, as amended or interpreted, no director or officer of this
Corporation shall be personally liable to the Corporation or the
holders of Shares for money damages for breach of fiduciary duty
as a director and each director and officer shall be indemnified
by the Corporation; provided, however, that nothing herein shall
be deemed to protect any director or officer of the Corporation
against any liability to the Corporation or the holders of Shares
to which such director or officer would otherwise be subject by
reason of breach of the director's or officer's duty of loyalty
to the Corporation or its stockholders, for acts or omissions not
in good faith or which involved intentional misconduct or a
knowing violation of law or for any transaction from which the
director derived any improper personal benefit.
The By-Laws of the Corporation provide that the Corporation shall
indemnify any individual who is a present or former director or
officer of the Corporation and who, by reason of his or her
position was, is or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(hereinafter collectively referred to as a "Proceeding") against
judgments, penalties, fines, settlements and reasonable expenses
actually incurred by such director or officer in connection with
such Proceeding, to the fullest extent that such indemnification
may be lawful under Maryland law.
(b) Disabling Conduct. The By-Laws provide that nothing therein shall
be deemed to protect any director or officer against any
liability to the Corporation or its shareholders to which such
director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office (such conduct hereinafter referred to as "Disabling
Conduct").
The By-Laws provide that no indemnification of a director or
officer may be made unless: (1) there is a final decision on the
merits by a court or other body before whom the Proceeding was
brought that the director or officer to be indemnified was not
liable by reason of Disabling Conduct; or (2) in the absence of
such a decision, there is a reasonable determination, based upon
a review of the facts, that the director or officer to be
indemnified was not liable by reason of Disabling Conduct, which
determination shall be made by: (i) the vote of a majority of a
quorum of directors who are neither "interested persons" of the
Corporation as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(c) Standard of Conduct. Under Maryland law, the Corporation may not
indemnify any director if it is proved that: (1) the act or
omission of the director was material to the cause of action
adjudicated in the Proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty; or
(2) the director actually received an improper personal benefit;
or (3) in the case of a criminal proceeding, the director had
reasonable cause to believe that the act or omission was
unlawful. No indemnification may be made under Maryland law
unless authorized for a specific proceeding after a determination
has been made, in accordance with Maryland law, that
indemnification is permissible in the circumstances because the
requisite standard of conduct has been met.
(d) Required Indemnification. Maryland law requires that a director
or officer who is successful, on the merits or otherwise, in the
defense of any Proceeding shall be indemnified against reasonable
expenses incurred by the director or officer in connection with
the Proceeding. In addition, under Maryland law, a court of
appropriate jurisdiction may order indemnification under certain
circumstances.
(e) Advance Payment. The By-Laws provide that the Corporation may pay
any reasonable expenses so incurred by any director or officer in
defending a Proceeding in advance of the final disposition
thereof to the fullest extent permissible under Maryland law. In
accordance with the By-Laws, such advance payment of expenses
shall be made only upon the undertaking by such director or
officer to repay the advance unless it is ultimately determined
that such director or officer is entitled to indemnification, and
only if one of the following conditions is met: (1) the director
or officer to be indemnified provides a security for his
undertaking; (2) the Corporation shall be insured against losses
arising by reason of any lawful advances; or (3) there is a
determination, based on a review of readily available facts, that
there is reason to believe that the director or officer to be
indemnified ultimately will be entitled to indemnification, which
determination shall be made by: (i) a majority of a quorum of
directors who are neither "interested persons" of the
Corporation, as defined in Section 2(a)(19) of the Investment
Company Act of 1940, nor parties to the Proceeding; or (ii) an
independent legal counsel in a written opinion.
(f) Insurance. The By-Laws provide that, to the fullest extent
permitted by Maryland law and Section 17(h) of the Investment
Company Act of 1940, the Corporation may purchase and maintain
insurance on behalf of any officer or director of the
Corporation, against any liability asserted against him or her
and incurred by him or her in and arising out of his or her
position, whether or not the Corporation would have the power to
indemnify him or her against such liability.
Item 28. Business and Other Connections of Investment Adviser
None
Item 29. Principal Underwriter
The Fund does not have a principal underwriter
Item 30. Location of Accounts and Records
The books and records of the Fund, other than the accounting and
transfer agency (including dividend disbursing) records, are
maintained by the Fund at 741 Cox Road,Moorestown NJ 08057; the Fund's
accounting and transfer agency records are maintained at Mutual
Shareholder Services, 1301 East ninth Street, Suite 3600, Cleveland,
OH 44114.
Item 31. Management Services
There are no management service contracts not described in Part A or
Part B of Form N-1A.
Item 32. Undertakings
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933 and the Investment Company Act of 1940, the Registrant has
duly caused this Post-Effective Amendment No. 1 to its Registration Statement
to be signed on its behalf by the undersigned, hereunto duly authorized
in Moorestown, NJ on the 26th day of January, 1999.
HUGHES FUNDS, INC.
/s/ Charles J Hughes.
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in
the capacitate indicated:
NAME TITLE DATE
/s/ Charles J. Hughes President & January 26, 1999
Director
/s/ Frank G. Soleki Secretary & January 26, 1999
Director
/s/ Neal K. Smith Director January 26, 1999
EXHIBIT INDEX
Exhibit No. Exhibit
EX-99.B1 Registrant's Articles of Incorporation*
EX-99.B2 Registrants Bylaws*
EX-99.B4 See Exhibit B1, Articles of Incorporation, Article IV
EX-99.B5 Operating Services Agreement
EX-99.B8 Custodian Agreement
EX-99.B9 Transfer Agent Agreement
EX-99.B9.1 Accounting Services Agreement
EX-99.B10 Opinion of Counsel*
EX-99.B11 Consent of Independent Auditors *
EX-99.B13 Subscription Agreement *
EX-99.B15 Rule 12b-1 Plan
EX-27 Financial Data Schedule *
* Previously filed by amendment to the Registrant's Registration Statement on
Form N-1A and incorporated herein by reference.
OPERATING SERVICES AGREEMENT
HUGHES FUNDS, INC.
This Agreement is made and entered into as of the 31st day of March,
1999, by and between Hughes Funds, Inc., a Maryland corporation (the "Fund"),
and Hughes Investment Advisors, LLC, a New Jersey Limited Liability
Company (hereinafter referred to as "Manager").
WHEREAS, the Fund is a diversified, open-end management investment company,
registered under the Investment Company Act of 1940, as amended (the "Act"),
and authorized to issue shares representing interests in The Hughes Value
Fund (the "Portfolio"); and
WHEREAS, Manager is registered as an investment advisor under the Investment
Advisors act of 1940, and engages in the business of asset manaagement and
the provision of certain other administrative recordkeeping in connection
therewith; and
WHEREAS, the Fund wishes to engage Manager, to provide, or arrange for the
provision of, certain operational services which are necessary for the day-
to-day operations of the Portfolio in the manner and on the terms and
conditions hereinafter set forth, and Manager wishes to accept such
engagement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Manager agree as follows:
Obligations of Manager
(a) Services. The Fund hereby retains Manager to provide, or, upon receipt
of written approval of the Fund arrange for other companies to provide, the
following services to the Portfolio in the manner and to the extent that
such services are reasonably necessary for the operation of the Portfolio
(collectively, the "Services"):
accounting services and functions, including costs and expenses of any
independent public accountants;
non-litigation related legal and compliance services, including the
expenses of maintaining registration and qualification of the Fund and
the Portfolio under federal, state and any other applicable laws and
regulations;
dividend disbursing agent, dividend reinvestment agent, transfer agent,
and registrar services and functions (including answering inquiries
related to shareholder Portfolio accounts);
custodian and depository services and functions;
distribution, marketing, and/or underwriting services;
independent pricing services;
preparation of reports describing the operations of the Portfolio, including
the costs of providing such reports to broker-dealers, financial institutions
and other organizations which render services and assistance in connection
with the distribution of shares of the Portfolio;
sub-accounting and recordkeeping services and functions (other than those
books and records required to be maintained by Manager under the Investment
Advisory Agreement between the Fund and Manager dated June 30, 1998),
including maintenance of shareholder records and shareholder information
concerning the status of their Portfolio accounts by investment advisors,
broker-dealers, financial institutions, and other organizations on behalf
of Manager;
shareholder and board of directors communication services, including the
costs of preparing, printing and distributing notices of shareholders'
meetings, proxy statements, prospectuses, statements of additional
information, Portfolio reports, and other communications to the Fund's
Portfolio shareholders, as well as all expenses of shareholders' and
board of directors' meetings, including the compensation and reimbursable
expenses of the directors of the Fund;
other day-to-day administrative services, including the costs of designing,
printing, and issuing certificates representing shares of the Portfolio, and
premiums for the fidelity bond maintained by the Fund pursuant to
Section 17(g) of the Act and rules promulgated thereunder (except for such
premiums as may be allocated to third parties, as insureds thereunder).
(b)Exclusions from Service. Notwithstanding the provisions of Paragraph 1(a)
above, the Services shall not include and Manager will not be responsible
for any of the following:
all brokers' commissions, issue and transfer taxes, and other costs
chargeable to the Fund or the Portfolio in connection with securities
transactions to which the Fund or the Portfolio is a party or in
connection with securities owned by the Fund or the Portfolio;
the taxes, including franchise, income, issue, transfer, business
license, and other corporate fees payable by the Fund or the Portfolio
to federal, state, county, city, or other governmental agents;
the expenses, including fees and disbursements of counsel, in connection
with litigation by or against the Fund or the Portfolio; and
any other extraordinary expense of the Fund or Portfolio.
(c)Books and Records. All books and records prepared and maintained by
Manager for the Fund under this Agreement shall be the property of the
Fund and, upon request therefor, Manager shall surrender to the Fund
such of the books and records so requested.
(d)Staff and Facilities. Manager assumes and shall pay for maintaining
the staff, personnel, space, equipment and facilities necessary to
perform its obligations under this Agreement.
Obligations of the Fund
Fee. The Fund will pay to Manager on the last day of each month a fee at
an annual rate equal to 0.50% of average net asset of the Portfolio, such
fee to be computed daily based upon the net asset value of the Portfolio
as determined by a valuation made in accordance with the Fund's procedure
for calculating Portfolio net asset value as described in the Fund's
Prospectus and/or Statement of Additional Information. During any period
when the determination of a Portfolio's net asset value is suspended by
the directors of the Fund, the net asset value of a share of that Portfolio
as of the last business day prior to such suspension shall, for the purpose
of this Paragraph 2(a), be deemed to be the net asset value at the close
of each succeeding business day until it is again determined.
Information. The Fund will, from time to time, furnish or otherwise make
available to Manager such information relating to the business and affairs
of the Portfolio as Manager may reasonably require in order to discharge
its duties and obligations hereunder.
3.Term. This Agreement shall remain in effect until no later than March
31, 2001, and from year to year thereafter provided such continuance is
approved at least annually by (1) the vote of a majority of the Board of
Directors of the Fund or (2) a vote of a "majority" (as that term is
defined in the Investment Company Act of 1940) of the Fund's outstanding
securities, provided that in either event the continuance is also approved
by the vote of a majority of the directors of the Fund who are not parties
to this Agreement or "interested persons" (as defined in the Act) of any
such party, which vote must be cast in person at a meeting called for
the purpose of voting on such approval; provided, however, that;
(a)the Fund, at any time and without the payment of any penalty may
terminate this Agreement upon 120 days written notice to Manager;
(b)the Agreement shall immediately terminate in the event of its assignment
(within the meaning of the Act and the Rules thereunder); and
(c)Manager may terminate this Agreement without payment of penalty on
120 days written notice to the Fund.
4. Notices. Except as otherwise provided in this Agreement, any notice
or other communication required by or permitted to be given in connection
with this Agreement will be in writing and will be delivered in person
or sent by first class mail, postage prepaid or by prepaid overnight
delivery service to the respective parties as follows:
If to the Fund: If to the Manager:
Hughes Funds, Inc. Hughes Investment Advisors, LLC
741 Cox Road 741 Cox Road
Moorestown, NJ 08057 Moorestown, NJ 08057
Attention: Charles J. Hughes Attention: Charles J. Hughes
President President
5. Miscellaneous
Performance Review. Manager will permit representatives of the Fund,
including the Fund's independent auditors, to have reasonable access to
the personnel and records of Manager in order to enable such representatives
to monitor the quality of services being provided and the level of fees
due Manager pursuant to this Agreement. In addition, Manager shall promptly
deliver to the board of directors of the Fund such information as may
reasonably be requested from time to time to permit the board of directors
to make an informed determination regarding continuation of this Agreement
and the payments contemplated to be made hereunder.
(b)Choice of Law. This Agreement shall be construed in accordance with
the laws of the State of Maryland and the applicable provisions of the
Act. To the extent the applicable law of the State of Maryland or any
of the provisions herein conflict with the applicable provisions of the
Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
Hughes Funds, Inc. Hughes Investment Advisors, LLC
By: Charles J. Hughes By: Charles J. Hughes
President President
ATTEST: ATTEST:
By: Frank G Solecki By: Frank G Solecki
Secretary Secretary
CUSTODY AGREEMENT
THIS AGREEMENT, is made as of June 24, 1998, by and between HUGHES VALUE
FUND, INC., a corporation organized under the laws of the State of Maryland (the
"Company"), and THE FIFTH THIRD BANK, a banking company organized under the laws
of the State of Ohio (the "Custodian").
WITNESSETH:
WHEREAS, the Company desires that the Securities and cash of each of the
investment portfolios identified in Exhibit A hereto (such investment portfolios
and individually referred to herein as a "Fund" and collectively as the
"Funds"), be held and administered by the Custodian pursuant to this Agreement;
and
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Company and the Custodian hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Directors to give Oral Instructions and Written
Instructions on behalf of the Company and named in Exhibit B hereto or in such
resolutions of the Board of Directors, certified by an Officer, as may be
received by the Custodian from time to time.
1.2 "Board of Directors" shall mean the Directors of the Company.
1.3 "Book-Entry System" shall mean a federal book-entry system as provided
in Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR
Part 350, or in such book-entry regulations of federal agencies as are
substantially in the form of such Subpart O.
1.4 "Business Day" shall mean any day recognized as a settlement day by
The New York Stock Exchange, Inc. and any other day for which the Fund computes
the net asset value of the Fund.
1.5 "NASD" shall mean The National Association of Securities Dealers, Inc.
1.6 "Officer" shall mean the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the
Company.
1.7 "Oral Instructions" shall mean instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably
believed by the Custodian to have been given by an Authorized Person, (ii)
recorded and kept among the records of the Custodian made in the ordinary course
of business and (iii) orally confirmed by the Custodian. The Company shall
cause all Oral Instructions to be confirmed by Written Instructions. If such
Written Instructions confirming Oral Instructions are not received by the
Custodian prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Company. If Oral Instructions
vary from the Written Instructions which purport to confirm them, the Custodian
shall notify the Company of such variance but such Oral Instructions will govern
unless the Custodian has not yet acted.
1.8 "Custody Account" shall mean any account in the name of the Company,
which is provided for in Section 3.2 below.
1.9 "Proper Instructions" shall mean Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
1.10 "Securities Depository" shall mean The Participants Trust Company or
The Depository Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Directors, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Company) any other clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities and Exchange Act of 1934 (the
"1934 Act"), which acts as a system for the central handling of Securities where
all Securities of any particular class or series of an issuer deposited within
the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.11 "Securities" shall include, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.12 "Shares" shall mean the units of beneficial interest issued by the
Company.
1.13 "Written Instructions" shall mean (i) written communications actually
received by the Custodian and signed by one or more persons as the Board of
Directors shall have from time to time authorized, or (ii) communications by
telex or any other such system from a person or persons reasonably believed by
the Custodian to be Authorized, or (iii) communications transmitted
electronically through the Institutional Delivery System (IDS), or any other
similar electronic instruction system acceptable to Custodian and approved by
resolutions of the Board of Directors, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Company hereby constitutes and appoints the
Custodian as custodian of all Securities and cash owned by or in the possession
of the Company at any time during the period of this Agreement, provided that
such Securities or cash at all times shall be and remain the property of the
Company.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set forth and
in accordance with the 1940 Act as amended. Except as specifically set forth
herein, the Custodian shall have no liability and assumes no responsibly for any
non-compliance by the Company or a Fund of any laws, rules or regulations.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund, except Securities maintained in a
Securities Depository or Book-Entry System, shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
3.2 Custody Account. The Custodian shall open and maintain in its Company
department a custody account in the name of each Fund, subject only to draft or
order of the Custodian, in which the Custodian shall enter and carry all
Securities, cash and other assets of the Fund which are delivered to it.
3.3 Appointment of Agents. In its discretion, the Custodian may appoint,
and at any time remove, any domestic bank or trust company, which has been
approved by the Board of Directors and is qualified to act as a custodian under
the 1940 Act, as sub-custodian to hold Securities and cash of the Funds and to
carry out such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank or trust
company (any such accounts to be in the name of the Custodian and subject only
to its draft or order), provided, however, that the appointment of any such
agent shall not relieve the Custodian of any of its obligations or liabilities
under this Agreement.
3.4 Delivery of Assets to Custodian. The Fund shall deliver, or cause to
be delivered, to the Custodian all of the Fund's Securities, cash and other
assets, including (a) all payments of income, payments of principal and capital
distributions received by the Fund with respect to such Securities, cash or
other assets owned by the Fund at any time during the period of this Agreement,
and (b) all cash received by the Fund for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.5 Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Funds in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of the Board of Directors, certified by an
Officer, authorizing and instructing the Custodian on an on-going
basis to deposit in such Securities Depository or Book-Entry System
all Securities eligible for deposit therein and to make use of such
Securities Depository or Book-Entry System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities. So long as such Securities
Depository or Book-Entry System shall continue to be employed for the
deposit of Securities of the Funds, the Company shall annually re-
adopt such resolution and deliver a copy thereof, certified by an
Officer, to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
(c) The records of the Custodian and the Custodian's account on the
books of the Book-Entry System and Securities Depository as the case
may be, with respect to Securities of a Fund maintained in a Book-
Entry System or Securities Depository shall, by book-entry, or
otherwise identify such Securities as belonging to the Fund.
(d) If Securities purchases by the Fund are to be held in a Book-
Entry System or Securities Depository, the Custodian shall pay for
such Securities upon (i) receipt of advice from the Book-Entry System
or Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the account
of the Fund. If Securities sold by the Fund are held in a Book-Entry
System or Securities Depository, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities depository that payment for such Securities has been
transferred to the Depository Account, and (ii) the making of an entry
on the records of the Custodian to reflect such transfer and payment
for the account of the Fund.
(e) Upon request, the Custodian shall provide the Fund with copies of
any report (obtained by the Custodian from a Book-Entry System or
Securities Depository in which Securities of the Fund is kept) on the
internal accounting controls and procedures for safeguarding
Securities deposited in such Book-Entry System or Securities
Depository.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall be liable to the Company for any loss or damage to the
Company resulting (i) from the use of a Book-Entry System or
Securities Depository by reason of any negligence or willful
misconduct on the part of Custodian or any sub-custodian appointed
pursuant to Section 3.3 above or any of its or their employees, or
(ii) from failure of Custodian or any such sub-custodian to enforce
effectively such rights as it may have against a Book-Entry System or
Securities Depository. At its election, the Company shall be
subrogated to the rights of the Custodian with respect to any claim
against a Book-Entry System or Securities Depository or any other
person for any loss or damage to the Funds arising from the use of
such Book-Entry System or Securities Depository, if and to the extent
that the Company has been made whole for any such loss or damage.
3.6 Disbursement of Moneys from Custody Accounts. Upon receipt of Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody Account
but only in the following cases:
(a) For the purchase of Securities for the Fund but only upon
compliance with Section 4.1 of this Agreement and only (i) in the case
of Securities (other than options on Securities, futures contracts and
options on futures contracts), against the delivery to the Custodian
(or any sub-custodian appointed pursuant to Section 3.3 above) of such
Securities registered as provided in Section 3.9 below in proper form
for transfer, or if the purchase of such Securities is effected
through a Book-Entry System or Securities Depository, in accordance
with the conditions set forth in Section 3.5 above; (ii) in the case
of options on Securities, against delivery to the Custodian (or such
sub-custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case of futures
contracts and options on futures contracts, against delivery to the
Custodian (or such sub-custodian) of evidence of title thereto in
favor of the Company or any nominee referred to in Section 3.9 below;
and (iv) in the case of repurchase or reverse repurchase agreements
entered into between the Company and a bank which is a member of the
Federal Reserve System or between the Company and a primary dealer in
U.S. Government securities, against delivery of the purchased
Securities either in certificate form or through an entry crediting
the Custodian's account at a Book-Entry System or Securities
Depository for the account of the Fund with such Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 3.7(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Company, including but not limited to the following payments for the
account of a Fund: interest; taxes; administration, investment
management, investment advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating expenses of a
Fund; in all cases, whether or not such expenses are to be in whole or
in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Company, the Custodian and a broker-dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with
rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Company;
(g) For transfer in accordance with the provisions of any agreement
among the Company, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Company;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board of
Directors, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.7 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper Instructions, the Custodian shall release and deliver Securities from a
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of a Fund but only
against receipt of payment therefor in cash, by certified or cashiers
check or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
3.5 above;
(c) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of a Fund; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name
of the Company, the Custodian or any sub-custodian appointed pursuant
to Section 3.3 above, or of any nominee or nominees of any of the
foregoing, or (ii) for exchange for a different number of certificates
or other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new Securities
are to be delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance
with the "street delivery" custom;
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of the
issuer of such Securities, or pursuant to provisions for conversion
contained in such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in connection
with the issuance or cancellation of depository receipts; provided
that, in any such case, the new Securities and cash, if any, are to be
delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by a Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new Securities
and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities of a
Fund, but only against receipt of such collateral as the Company shall
have specified to the Custodian in Proper Instructions;
(j) For delivery as security in connection with any borrowings by the
Company on behalf of a Fund requiring a pledge of assets by such Fund,
but only against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Company or a Fund;
(l) For delivery in accordance with the provisions of any agreement
among the Company, the Custodian and a broker-dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Company on behalf of a Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Company on behalf of a Fund, the Custodian, and a futures
commission merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
Commission and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Company on behalf of a Fund; or
(n) For any other proper corporate purposes, but only upon receipt,
in addition to Proper Instructions, of a copy of a resolution of the
Board of Directors, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.8 Actions Not Requiring Proper Instructions. Unless otherwise
instructed by the Company, the Custodian shall with respect to all Securities
held for a Fund;
(a) Subject to Section 7.4 below, collect on a timely basis all
income and other payments to which the Company is entitled either by
law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 7.4 below, collect on
a timely basis the amount payable upon all Securities which may mature
or be called, redeemed, or retired, or otherwise become payable;
(c) Endorse for collection, in the name of the Company, checks,
drafts and other negotiable instruments;
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates
of ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in effect,
and prepare and submit reports to the Internal Revenue Service ("IRS")
and to the Company at such time, in such manner and containing such
information as is prescribed by the IRS;
(f) Hold for a Fund, either directly or, with respect to Securities
held therein, through a Book-Entry System or Securities Depository,
all rights and similar securities issued with respect to Securities of
the Fund; and
(g) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in connection
with sale, exchange, substitution, purchase, transfer and other
dealings with Securities and assets of the Fund.
3.9 Registration and Transfer of Securities. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-Entry System for the account of the Company on behalf of a Fund, if
eligible therefor. All other Securities held for a Fund may be registered in
the name of the Company on behalf of such Fund, the Custodian, or any sub-
custodian appointed pursuant to Section 3.3 above, or in the name of any nominee
of any of them, or in the name of a Book-Entry System, Securities Depository or
any nominee of either thereof; provided, however, that such Securities are held
specifically for the account of the Company on behalf of a Fund. The Company
shall furnish to the Custodian appropriate instruments to enable the Custodian
to hold or deliver in proper form for transfer, or to register in the name of
any of the nominees hereinabove referred to or in the name of a Book-Entry
System or Securities Depository, any Securities registered in the name of a
Fund.
3.10 Records. (a) The Custodian shall maintain, by Fund, complete and
accurate records with respect to Securities, cash or other property held for the
Company, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) canceled checks and bank records related thereto. The
Custodian shall keep such other books and records of the Company as the Company
shall reasonably request, or as may be required by the 1940 Act, including, but
not limited to Section 3.1 and Rule 31a-1 and Rule 31a-2 promulgated thereunder.
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Company and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Company and at all times during the regular business hours of the Custodian
be made available upon request for inspection by duly authorized officers,
employees or agents of the Company and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
3.11 Fund Reports by Custodian. The Custodian shall furnish the Company
with a daily activity statement by Fund and a summary of all transfers to or
from the Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Company with a detailed
statement, by Fund, of the Securities and moneys held for the Company under this
Agreement.
3.12 Other Reports by Custodian. The Custodian shall provide the Company
with such reports, as the Company may reasonably request from time to time, on
the internal accounting controls and procedures for safeguarding Securities,
which are employed by the Custodian or any sub-custodian appointed pursuant to
Section 3.3 above.
3.13 Proxies and Other Materials. The Custodian shall cause all proxies if
any, relating to Securities which are not registered in the name of a Fund, to
be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
include all other proxy materials, if any, promptly deliver to the Company such
proxies, all proxy soliciting materials, which should include all other proxy
materials, if any, and all notices to such Securities.
3.14 Information on Corporate Actions. Custodian will promptly notify the
Company of corporate actions, limited to those Securities registered in nominee
name and to those Securities held at a Depository or sub-Custodian acting as
agent for Custodian. Custodian will be responsible only if the notice of such
corporate actions is published by the Financial Daily Card Service, J.J. Kenny
Called Bond Service, DTC, or received by first class mail from the agent. For
market announcements not yet received and distributed by Custodian's services,
Company will inform its custody representative with appropriate instructions.
Custodian will, upon receipt of Company's response within the required deadline,
affect such action for receipt or payment for the Company. For those responses
received after the deadline, Custodian will affect such action for receipt or
payment, subject to the limitations of the agent(s) affecting such actions.
Custodian will promptly notify Company for put options only if the notice is
received by first class mail from the agent. The Company will provide or cause
to be provided to Custodian with all relevant information contained in the
prospectus for any security which has unique put/option provisions and provide
Custodian with specific tender instructions at least ten business days prior to
the beginning date of the tender period.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities for
the Company, Written Instructions shall be delivered to the Custodian,
specifying (a) the name of the issuer or writer of such Securities, and the
title or other description thereof, (b) the number of shares, principal amount
(and accrued interest, if any) or other units purchased, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase, and (f) the name of the person to whom such amount
is payable. The Custodian shall upon receipt of such Securities purchased by a
Fund pay out of the moneys held for the account of such Fund the total amount
specified in such Written Instructions to the person named therein. The
Custodian shall not be under any obligation to pay out moneys to cover the cost
of a purchase of Securities for a Fund, if in the relevant Custody Account there
is insufficient cash available to the Fund for which such purchase was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for the purchase of Securities for a Fund is
made by the Custodian in advance of receipt for the account of the Fund of the
Securities purchased but in the absence of specific Written or Oral Instructions
to so pay in advance, the Custodian shall be liable to the Fund for such
Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
name of the issuer or writer of such Securities, and the title or other
description thereof, (b) the number of shares, principal amount (and accrued
interest, if any), or other units sold, (c) the date of sale and settlement (d)
the sale price per unit, (e) the total amount payable upon such sale, and (f)
the person to whom such Securities are to be delivered. Upon receipt of the
total amount payable to the Company as specified in such Written Instructions,
the Custodian shall deliver such Securities to the person specified in such
Written Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver Securities
and arrange for payment in accordance with the customs prevailing among dealers
in Securities.
4.4 Delivery of Securities Sold. Notwithstanding Section 4.3 above or any
other provision of this Agreement, the Custodian, when instructed to deliver
Securities against payment, shall be entitled, if in accordance with generally
accepted market practice, to deliver such Securities prior to actual receipt of
final payment therefor. In any such case, the Company shall bear the risk that
final payment for such Securities may not be made or that such Securities may be
returned or otherwise held or disposed of by or through the person to whom they
were delivered, and the Custodian shall have no liability for any of the
foregoing.
4.5 Payment for Securities Sold, etc. In its sole discretion and from
time to time, the Custodian may credit the relevant Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Company, and
(iii) income from cash, Securities or other assets of the Company. Any such
credit shall be conditional upon actual receipt by Custodian of final payment
and may be reversed if final payment is not actually received in full. The
Custodian may, in its sole discretion and from time to time, permit the Company
to use funds so credited to its Custody Account in anticipation of actual
receipt of final payment. Any such funds shall be repayable immediately upon
demand made by the Custodian at any time prior to the actual receipt of all
final payments in anticipation of which funds were credited to the Custody
Account.
4.6 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Company to facilitate the
settlement of a Company transactions on behalf of a Fund in its Custody Account.
Any such advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF COMPANY SHARES
Transfer of Funds. From such funds as may be available for the purpose in
the relevant Custody Account, and upon receipt of Proper Instructions specifying
that the funds are required to redeem Shares of a Fund, the Custodian shall wire
each amount specified in such Proper Instructions to or through such bank as the
Company may designate with respect to such amount in such Proper Instructions.
Upon effecting payment or distribution in accordance with proper Instruction,
the Custodian shall not be under any obligation or have any responsibility
thereafter with respect to any such paying bank.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the
Company, the Custodian and a broker-dealer registered under the 1934
Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures
Trading commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Company,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by a Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by a Fund,
(c) which constitute collateral for loans of Securities made by a
Fund,
(d) for purposes of compliance by the Company with requirements under
the 1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements
and when-issued, delayed delivery and firm commitment transactions,
and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors, certified by an Officer, setting forth the
purpose or purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Company for any loss, damage, cost, expense
(including attorneys' fees and disbursements), liability or claim unless such
loss, damages, cost, expense, liability or claim arises from negligence, bad
faith or willful misconduct on its part or on the part of any sub-custodian
appointed pursuant to Section 3.3 above. The Custodian's cumulative liability
within a calendar year shall be limited with respect to the Company or any party
claiming by, through or on behalf of the Company for the initial and all
subsequent renewal terms of this Agreement, to the lessor amount of (a) the
actual damages sustained by the Company, (actual damages for uninvested funds
shall be the overnight Feds fund rate), or (b) to an amount not to exceed one-
half of the net fees paid to the Custodian within the prior three calendar
months. The Custodian shall be entitled to rely on and may act upon advice of
counsel on all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. The Custodian shall promptly notify
the Company of any action taken or omitted by the Custodian pursuant to advice
of counsel. The Custodian shall not be under any obligation at any time to
ascertain whether the Company is in compliance with the 1940 Act, the
regulations thereunder, the provisions of the Company's charter documents or by-
laws, or its investment objectives and policies as then in effect.
7.2 Actual Collection Required. The Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Company or any
money represented by a check, draft or other instrument for the payment of
money, until the Custodian or its agents actually receive such cash or collect
on such instrument.
7.3 No Responsibility for title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
7.4 Limitation on Duty to Collect. Custodian shall not be required to
enforce collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for the Company if such Securities
are in default or payment is not made after due demand or presentation.
7.5 Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Oral Instructions and/or any Written Instructions
actually received by it pursuant to this Agreement.
7.6 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are specifically
set forth in this Agreement, and no covenant or obligation shall be implied in
this Agreement against the Custodian.
7.7 Cooperation. The Custodian shall cooperate with and supply necessary
information, by the Company, to the entity or entities appointed by the Company
to keep the books of account of the Company and/or compute the value of the
assets of the Company. The Custodian shall take all such reasonable actions as
the Company may from time to time request to enable the Company to obtain, from
year to year, favorable opinions from the Company's independent accountants with
respect to the Custodian's activities hereunder in connection with (a) the
preparation of the Company's report on Form N-1A and Form N-SAR and any other
reports required by the Securities and Exchange Commission, and (b) the
fulfillment by the Company of any other requirements of the Securities and
Exchange Commission.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Company shall indemnify and hold harmless the
Custodian and any sub-custodian appointed pursuant to Section 3.3 above, and any
nominee of the Custodian or of such sub-custodian from and against any loss,
damage, cost, expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the Securities Act of
1933, the 1934 Act, the 1940 Act, and any state or foreign securities and/or
banking laws) or claim arising directly or indirectly (a) from the fact that
Securities are registered in the name of any such nominee, or (b) from any
action or inaction by the Custodian or such sub-custodian (i) at the request or
direction of or in reliance on the advice of the Company, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its obligations under
this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such custody agreement, provided that
neither the Custodian nor any such sub-custodian shall be indemnified and held
harmless from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's negligence, bad faith
or willful misconduct.
8.2 Indemnity to be Provided. If the Company requests the Custodian to
take any action with respect to Securities, which may, in the opinion of the
custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Company shall have provided
indemnity therefor to the Custodian in an amount and form satisfactory to the
Custodian.
ARTICLE IX
FORCE MAJEURE
Neither the Custodian nor the Company shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes, acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay shall use its best efforts to ameliorate the effects of any such
failure or delay. Notwithstanding the foregoing, the Custodian shall maintain
sufficient disaster recovery procedures to minimize interruptions.
ARTICLE X
EFFECTIVE PERIOD; TERMINATION
10.1 Effective Period. This Agreement shall become effective as of the
date first set forth above and shall continue in full force and effect until
terminated as hereinafter provided.
10.2 Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than ninety (90) days after the date of the
giving of such notice. If a successor custodian shall have been appointed by
the Board of Directors, the Custodian shall, upon receipt of a notice of
acceptance by the successor custodian, on such specified date of termination (a)
deliver directly to the successor custodian all Securities (other than
Securities held in a Book-Entry System or Securities Depository) and cash then
owned by the Company and held by the Custodian as custodian, and (b) transfer
any Securities held in a Book-Entry System or Securities Depository to an
account of or for the benefit of the Company at the successor custodian,
provided that the Company shall have paid to the Custodian all fees, expenses
and other amounts to the payment or reimbursement of which it shall then be
entitled. Upon such delivery and transfer, the Custodian shall be relieved of
all obligations under this Agreement. The Company may at any time immediately
terminate this Agreement in the event of the appointment of a conservator or
receiver for the Custodian by regulatory authorities in the State of Ohio or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
10.3 Failure to Appoint Successor Custodian. If a successor custodian is
not designated by the Company on or before the date of termination specified
pursuant to Section 10.1 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the Company at such bank or trust company all Securities of
the Company held in a Book-Entry System or Securities Depository. Upon such
delivery and transfer, such bank or trust company shall be the successor
custodian under this Agreement and the Custodian shall be relieved of all
obligations under this Agreement. If, after reasonable inquiry, Custodian
cannot find a successor custodian as contemplated in this Section 10.3, then
Custodian shall have the right to deliver to the Company all Securities and cash
then owned by the Company and to transfer any Securities held in a Book-Entry
System or Securities Depository to an account of or for the Company.
Thereafter, the Company shall be deemed to be its own custodian with respect to
the Company and the Custodian shall be relieved of all obligations under this
Agreement.
ARTICLE XI
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Company and the Custodian. The fees and other charges in effect on
the date hereof and applicable to the Funds are set forth in Exhibit B attached
hereto.
ARTICLE XII
LIMITATION OF LIABILITY
The Company is a corporation organized under the laws of the State of
Maryland. The obligations of the Company entered into in the name of the
Company or on behalf thereof by any of the directors, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the directors, officers, employees, agents or shareholders of the
Company or the Funds personally, but bind only the assets of the Company, and
all persons dealing with any of the Funds of the Company must look solely to the
assets of the Company belonging to such Fund for the enforcement of any claims
against the Company.
ARTICLE XIII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to The receipt at the address set forth after its name herein
below:
To the Company:
Hughes Value Fund, Inc.
741 Cox Road
Moorestown NJ 08057
Attn: Charles J Hughes
Telephone: (609)234-3903
To the Custodian:
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
Attn: Area Manager - Company Operations
Telephone: (513) 579-5300
Facsimile: (513) 579-4312
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIV
MISCELLANEOUS
14.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
14.2 References to Custodian. The Company shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information or its registration statement for the
Company and such other printed matter as merely identifies Custodian as
custodian for the Company. The Company shall submit printed matter requiring
approval to Custodian in draft form, allowing sufficient time for review by
Custodian and its counsel prior to any deadline for printing.
14.3 No Waiver. No failure by either party hereto to exercise and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
14.4 Amendments. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
14.5 Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
14.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
14.7 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
14.8 Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed and delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
ATTEST: HUGHES VALUE FUND, INC.
____________________________________ By: Charles J Hughes
Its: President
THE FIFTH THIRD BANK
ATTEST:
Christine Ok By: Elizabeth Goldthwait
Its: Trust Officer
Dated: June 24, 1998
EXHIBIT A
TO THE CUSTODY AGREEMENT BETWEEN
HUGHES VALUE FUND, INC. AND THE FIFTH THIRD BANK
June 24, 1998
Name of Fund Date
Hughes Value Fund June 24, 1998
HUGHES VALUE FUND, INC.
By: Charles J Hughes
Its: President
THE FIFTH THIRD BANK
By: Elisabeth Goldthwait
Its: Trust Officer
Dated: June 24, 1998
EXHIBIT B
TO THE CUSTODY AGREEMENT BETWEEN
HUGHES VALUE FUND, INC. AND THE FIFTH THIRD BANK
June 24, 1998
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by the Company to Administer each Custody Account.
Name Signature
Charles J Hughes /s/ Charles J Hughes
SIGNATURE RESOLUTION
RESOLVED, That all of the following officers of HUGHES VALUE FUND, INC. and any
of them, namely the Chairman, President, Vice President, Secretary and
Treasurer, are hereby authorized as signers for the conduct of business for an
on behalf of the Funds with THE FIFTH THIRD BANK:
_____________________________ CHAIRMAN _____________________________
____________ ____________
Charles J Hughes PRESIDENT Charles J Hughes
____________ ____________
_____________________________ VICE _____________________________
____________ PRESIDENT ____________
_____________________________ VICE _____________________________
____________ PRESIDENT ____________
_____________________________ VICE _____________________________
____________ PRESIDENT ____________
_____________________________ VICE _____________________________
____________ PRESIDENT ____________
_____________________________ TREASURER _____________________________
____________ ____________
_____________________________ SECRETARY _____________________________
____________ ____________
_____________________________
____________
In addition, the following Assistant Treasurer is authorized to sign on behalf
of the Company for the purpose of effecting securities transactions:
ASSISTANT TREASURER
____________________________________
The undersigned officers of HUGHES VALUE FUND, INC. hereby certify that the
foregoing is within the parameters of a Resolution adopted by Directors of the
Company in a meeting held , 19 , directing and
authorizing preparation of documents and to do everything necessary to effect
the Custody Agreement between HUGHES VALUE FUND, INC. and THE FIFTH THIRD BANK.
By: Charles J Hughes
Its: President
EXHIBIT C
TO THE CUSTODY AGREEMENT BETWEEN
HUGHES VALUE FUND, INC. AND THE FIFTH THIRD BANK
June , 1998
MUTUAL FUND CUSTODY FEE SCHEDULE
BASIC ACCOUNT CHARGE
FUND SIZE:
Less than 100MM .75 bp
$100MM - $200MM .5 bp
Over $200MM .25 bp
Minimum $2400
TRANSACTION FEES
DTC/FED Eligible Trades $ 7.00
Amortized Security Trades $25.00
Physical Commercial Paper Trades $25.00
Options, each transaction $25.00
Amortized Security Receipts $25.00
A transaction is a purchase, sale, maturity, redemption, tender, exchange,
dividend reinvestment, deposit or withdrawal of a security (with the exception
of Fifth Third Certificates of Deposit, Commercial Paper & Repo's).
MISCELLANEOUS FEES
Wire Transfers & Check $ 7.00
_______________________________
THIS AGREEMENT IS USED FOR MUTUAL FUNDS
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made and entered into this 29th day of July, 1998, by
and between Hughes Value Fund a registered management investment
company (the "Fund"), and Maxus Information Systems, Inc. DBA Mutual Shareholder
Services, an Ohio corporation ("MSS").
RECITALS:
A. The Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
B. The Fund desires to appoint MSS as its transfer agent and dividend
disbursing and redemption agent, and MSS desires to accept such appointment.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
1. DUTIES OF MSS.
1.01 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints MSS to act, and MSS agrees to act, as transfer
agent for the Funds authorized and issued shares of beneficial interest of each
class of each portfolio of the Fund (the "Shares"), and as dividend disbursing
and redemption agent for the Fund.
1.02 MSS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and MSS, MSS shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation therefore
to the Custodian of the Fund authorized by the Board of Directors of
the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and hold such Shares in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefore to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(viii) Record the issuance of shares of the Fund and maintain
pursuant to SEC Rule 17Ad-10(e) a record of the total number of shares
of the Fund which are authorized, based upon data provided to it by
the Fund, and issued and outstanding. MSS shall also provide the Fund
on a regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no obligation,
when recording the issuance of shares, to monitor the issuance of such
shares or to take cognizance of any laws relating to the issue or sale
of such shares, which functions shall be the sole responsibility of
the Fund.
(b) In addition, MSS shall perform all of the customary services of a
transfer agent, dividend disbursing and redemption agent, including but not
limited to: maintaining all Shareholder accounts, preparing Shareholder
meeting lists, mailing proxies, receiving and tabulating proxies, mailing
Shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing U.S. Treasury Department Forms 1099 and other appropriate forms
required with respect to dividends and distributions by federal authorities
for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and redemptions of
Shares and other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders, and providing
Shareholder account information and provide a system and reports which will
enable the Fund to monitor the total number of Shares sold in each State.
Procedures applicable to certain of these services may be established from
time to time by agreement between the Fund and MSS.
2. FEES AND EXPENSES
2.01 In consideration of the services to be performed by MSS pursuant to
this Agreement, the Fund agrees to pay MSS the fees set forth in the fee
schedule attached hereto as Exhibit "A".
2.02 In addition to the fee paid under Section 2.01 above, the Fund agrees
to reimburse MSS for out-of-pocket expenses or advances incurred by MSS in
connection with the performance of its obligations under this Agreement. In
addition, any other expenses incurred by MSS at the request or with the consent
of the Fund will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within five
days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to MSS by the Fund at least seven days
prior to the mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF MSS
MSS represents and warrants to the Fund that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of the State of Ohio.
3.02 It is duly qualified to carry on its business in the State of Ohio.
3.03 It is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
3.06 MSS is duly registered as a transfer agent under the Securities Act of
1934 and shall continue to be registered throughout the remainder of this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MSS that:
4.01 It is a Corporation duly organized and existing and in good standing
under the laws of Maryland.
4.02 It is empowered under applicable laws and by its charter and By-Laws
to enter into and perform this Agreement.
4.03 All corporate proceedings required by said charter and By-Laws have
been taken to authorize it to enter into and perform this Agreement.
4.04 It is an open-end and diversified management investment company
registered under the 1940 Act.
4.05 A registration statement under the Securities Act of 1933 is currently
or will become effective and will remain effective, and appropriate state
securities law filings as required, have been or will be made and will continue
to be made, with respect to all Shares of the Fund being offered for sale.
5. INDEMNIFICATION
5.01 MSS shall not be responsible for, and the Fund shall indemnify and
hold MSS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of MSS or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without gross negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack good faith, gross
negligence or willful misconduct or which arise out of the breach of any
representation or warranty of the Fund hereunder.
(c) The reliance on or use by MSS or its agents or subcontractors of
information, records and documents which (i) are received by MSS or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSS or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such state or in
violation of any stop order or other determination or ruling by any federal
agency or any state with respect to the offer or sale of such Shares in
such state.
5.02 MSS shall indemnify and hold the Fund harmless from and against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by MSS as a result of MSS's lack of good faith, gross or ordinary negligence
or willful misconduct.
5.03 At any time MSS may apply to any officer of the Fund
for instructions, and may consult with legal counsel with respect
to any matter arising in connection with the services to be
performed by MSS under this Agreement, and MSS and its agents or
subcontractors shall not be liable and shall be indemnified by
the Fund for any action taken or omitted by it in reliance upon
such instructions or upon the opinion of such counsel. MSS, its
agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction,
information, data, records or documents provided MSS or its
agents or subcontractors by machine readable input, telex, CRT
data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the
Fund. MSS, its agents and subcontractors shall also be protected
and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of
a co-transfer agent or co-registrar.
5.04 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of
God, strikes, equipment or transmission failure or damage
reasonably beyond its control, or other causes reasonably beyond
its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or
otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this
Agreement or for any act or failure to act hereunder.
5.06 Upon the assertion of a claim for which either party
may be required to indemnify the other, the party of seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to
all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with
the party seeking indemnification the defense of such claim. The
party seeking indemnification shall in no case confess any claim
or make any compromise in any case in which the other party may
be required to indemnify it except with the other party's prior
written consent.
6. COVENANTS OF THE FUND AND MSS
6.01 The Fund shall promptly furnish to MSS a certified copy
of the resolution of the Board of Directors of the Fund
authorizing the appointment of MSS and the execution and delivery
of this Agreement.
6.02 MSS hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to the 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.
6.03 MSS shall keep records relating to the services to be
performed hereunder, in the form and manner as it may deem
advisable. To the extent required by Section 31 of the 1940 Act,
as amended, and the Rules thereunder, MSS agrees that all such
records prepared or maintained by MSS relating to the services to
be performed by MSS hereunder are the property of the Fund and
will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to
the Fund on and in accordance with its request.
6.04 MSS and the Fund agree that all books, records,
information and data pertaining to the business of the other
party which are exchanged or received pursuant to the negotiation
or the carrying out of this Agreement shall remain confidential,
and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection
of the Shareholder records of the Fund, MSS will endeavor to
notify the Fund and to secure instructions from an authorized
officer of the Fund as to such inspection. MSS reserves the
right, however, to exhibit the Shareholder records to any person
whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such
person, and shall promptly notify the Fund of any unusual request
to inspect or copy the shareholder records of the Fund or the
receipt of any other unusual request to inspect, copy or produce
the records of the Fund.
7. TERM OF AGREEMENT
7.01 This Agreement shall become effective as of the date
hereof and shall remain in force for a period of three years;
provided, however, that each party to this Agreement have the
option to terminate the Agreement without penalty, upon 90 days
prior written notice.
7.02 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records
and material will be borne by the Fund. Additionally, MSS
reserves the right to charge for any other reasonable expenses
associated with such termination.
8. MISCELLANEOUS
8.01 Neither this Agreement nor any rights or obligations
hereunder may be assigned by either party without the written
consent of the other party. This Agreement shall inure to the
benefit of and be binding upon the parties and their respective
permitted successors and assigns.
8.02 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by
a resolution of the Board of Directors of the Fund.
8.03 The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of Ohio as
at the time in effect and the applicable provisions of the 1940
Act. To the extent that the applicable law of the State of Ohio,
or any of the provisions here in, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
8.04 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with
respect to the subject matter hereof whether oral or written.
8.05 All notices and other communications hereunder shall be
in writing, shall be deemed to have been given when received or
when sent by telex or facsimile, and shall be given to the
following addresses (or such other addresses as to which notice
is given):
To the Fund: To MSS:
Hughes Value Fund, Inc. Maxus Information Systems,
741 Cox Road DBA Mutual Shareholder Services
Moorestown, NJ 08057 1301 East Ninth Street,36th Floor
Cleveland, OH 44114
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
Fund: Hughes Value Fund, Inc. MAXUS INFORMATION SYSTEMS,
(Name of Fund)
By: Charles J Hughes By: Gregory Getts
Its: President Its: President
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made and entered into this 29th day of July,
1998,by and between Hughes Value Fund, a registered management
investment company (the "Fund"), and Maxus Information Systems, Inc., an Ohio
corporation doing business as Mutual Shareholder Services ("MSS").
RECITALS:
A. The Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
B. MSS is a corporation experienced in providing accounting services to
mutual funds and possesses facilities sufficient to provide such services; and
C. The Fund desires to avail itself of the experience, assistance and
facilities of MSS and to have MSS perform the Fund certain services appropriate
to the operations of the Fund, and MSS is willing to furnish such services in
accordance with the terms hereinafter set forth.
AGREEMENTS:
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
1. DUTIES OF MSS.
MSS will provide the Fund with the necessary office space, communication
facilities and personnel to perform the following services for the Fund:
(a) Timely calculate and transmit to NASDAQ the daily net asset value
of each class of shares of each portfolio of the Fund, and communicate such
value to the Fund and its transfer agent;
(b) Maintain and keep current all books and records of the Fund as
required by Rule 31a-1 under the 1940 Act, as such rule or any successor
rule may be amended from time to time ("Rule 31a-1"), that are applicable
to the fulfillment of MSS's duties hereunder, as well as any other
documents necessary or advisable for compliance with applicable regulations
as may be mutually agreed to between the Fund and MSS. Without limiting
the generality of the foregoing, MSS will prepare and maintain the
following records upon receipt of information in proper form from the Fund
or its authorized agents:
Cash receipts journal
Cash disbursements journal
Dividend record
Purchase and sales - portfolio securities journals
Subscription and redemption journals
Security ledgers
Broker ledger
General ledger
Daily expense accruals
Daily income accruals
Securities and monies borrowed or loaned and collateral therefore
Foreign currency journals
Trial balances
(c) Provide the Fund and its investment adviser with daily portfolio
valuation, net asset value calculation and other standard operational
reports as requested from time to time.
(d) Provide all raw data available from its fund accounting system
for the preparation by the Fund or its investment advisor of the following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1A;
5. Annual proxy statement.
(e) Provide facilities to accommodate annual audit and any audits or
examinations conducted by the Securities and Exchange Commission or any
other governmental or quasi-governmental entities with jurisdiction.
MSS shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. FEES AND EXPENSES.
(a) In consideration of the services to be performed by MSS pursuant
to this Agreement, the Fund agrees to pay MSS the fees set forth in the fee
schedule attached hereto as Exhibit A.
(b) In addition to the fees paid under paragraph (a) above, the Fund
agrees to reimburse MSS for out-of-pocket expenses or advances incurred by
MSS in connection with the performance of its obligations under this
Agreement. In addition, any other expenses incurred by MSS at the request
or with the consent of the Fund will be reimbursed by the Fund.
(c) The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice.
3. LIMITATION OF LIABILITY OF MSS.
(a) MSS shall be held to the exercise of reasonable care in carrying
out the provisions of the Agreement, but shall not be liable to the Fund for any
action taken or omitted by it in good faith without gross negligence, bad
faith, willful misconduct or reckless disregard of its duties hereunder. It
shall be entitled to rely upon and may act upon the accounting records and
reports generated by the Fund, advice of the Fund, or of counsel for the Fund
and upon statements of the Fund's independent accountants, and shall not be
liable for any action reasonably taken or omitted pursuant to such records and
reports or advice, provided that such action is not, to the knowledge of MSS, in
violation of applicable federal or state laws or regulations, and provided
further that such action is taken without gross negligence, bad faith, willful
misconduct or reckless disregard of its duties.
(b) Nothing herein contained shall be construed to protect MSS
against any liability to the Fund to which MSS shall otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence in the
performance of its duties to the Fund, reckless disregard of its
obligations and duties under this Agreement or the willful violation of any
applicable law.
(c) Except as may otherwise be provided by applicable law, neither
MSS nor its stockholders, officers, directors, employees or agents shall be
subject to, and the Fund shall indemnify and hold such persons harmless
from and against, any liability for and any damages, expenses or losses
incurred by reason of the inaccuracy of information furnished to MSS by the
Fund or its authorized agents.
4. REPORTS.
(a) The Fund shall provide to MSS on a quarterly basis a report of a
duly authorized officer of the Fund representing that all information
furnished to MSS during the preceding quarter was true, complete and
correct in all material respects. MSS shall not be responsible for the
accuracy of any information furnished to it by the Fund or its authorized
agents, and the Fund shall hold MSS harmless in regard to any liability
incurred by reason of the inaccuracy of such information.
(b) Whenever, in the course of performing its duties under this
Agreement, MSS determines, on the basis of information supplied to MSS by
the Fund or its authorized agents, that a violation of applicable law has
occurred or that, to its knowledge, a possible violation of applicable law
may have occurred or, with the passage of time, would occur, MSS shall
promptly notify the Fund and its counsel of such violation.
5. ACTIVITIES OF MSS.
The services of MSS under this Agreement are not to be deemed exclusive,
and MSS shall be free to render similar services to others so long as its
services hereunder are not impaired thereby.
6. ACCOUNTS AND RECORDS.
The accounts and records maintained by MSS shall be the property of the
Fund, and shall be surrendered to the Fund promptly upon request by the Fund in
the form in which such accounts and records have been maintained or preserved.
MSS agrees to maintain a back-up set of accounts and records of the Fund (which
back-up set shall be updated on at least a weekly basis) at a location other
than that where the original accounts and records are stored. MSS shall assist
the Fund's independent auditors, or, upon approval of the Fund, any regulatory
body, in any requested review of the Fund's accounts and records. MSS shall
preserve the accounts and records as they are required to be maintained and
preserved by Rule 31a-1.
7. CONFIDENTIALITY.
MSS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all other
information germane thereto, as confidential and not to be disclosed to any
person except as may be authorized by the Fund.
8. TERM OF AGREEMENT.
(a) This Agreement shall become effective as of the date hereof and shall
remain in force for a period of three years; provided, however, that each party
to this Agreement have the option to terminate the Agreement, without penalty,
upon 90 days prior written notice.
(b) Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movements of records and material will be borne by
the Fund. Additionally, MSS reserves the right to charge for any other
reasonable expenses associated with such termination.
9. MISCELLANEOUS.
(a) Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party. This
Agreement shall inure to the benefit of and be binding upon the parties and
their respective permitted successors and assigns.
(b) The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Ohio as at the time in effect and the
applicable provisions of the 1940 Act. To the extent that the applicable law of
the State of Ohio, or any of the provisions herein, conflict with the applicable
provisions of the 1940 Act, the latter shall control.
(c) This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
(d) This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
(e) All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To MSS:
Hughes Value Fund, Inc Maxus Information Systems,
741 Cox Road DBA Mutual Shareholder Services
Moorestown, NJ 08057 1301 East Ninth Street, 36th Floor
Cleveland, OH 44114
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
HUGHES VALUE FUND MAXUS INFORMATION SYSTEMS, INC.
By: Charles J Hughes By: Gregory Getts
Its: President Its: President
EXHIBIT A
Current Maxus Information Systems billing system:
Accounting Fees
If average value of fund is
between the following Yearly Fee
- 25,000,000 21,000
25,000,000 50,000,000 30,500
50,000,000 75,000,000 36,250
75,000,000 100,000,000 42,000
100,000,000 125,000,000 47,750
125,000,000 150,000,000 53,500
150,000,000 - 59,250
Sharelolder Servicing Fees
9.25 annual fee per shareholder with a min of $775.00 charge per month
Blue Sky Servicing Fees
12.00 per state per month
Calculated monthly charges for Hughes Value Fund
Value Monthly Fee
Approximate Fund Size: 200,000 1,750
No. of shareholders: 5 775
Blue Sky States 0 0
Total 2,525
Less 80% discount 2,020
New Fund discount 50
Discounted fee 455
Annual Fee 5,460
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
Adopted March 31, 1999
RECITALS
1. HUGHES FUNDS, INC, a corporation organized under the laws of the State
of Maryland (the "Company") is engaged in business as an open-end management
investment company and is registered as such under the Investment Company
Act of 1940, as amended (the "Act").
2. The Company operates as a "series company" within the meaning of Rule
18f2 under the Act and is authorized to issue shares of beneficial interest
in various series (collectively the "Funds").
3. Funds of the Company may utilize Fund assets to pay for sales or
promotional services or activities that have been or will be provided in
connection with distribution of shares of the Funds if such payments are
made pursuant to a Plan adopted and continued in accordance with Rule 12b-1
under the Act.
4. The Hughes Value Fund, a series of the Company (the "Fund") by virtue of
such arrangement may be deemed to act as a distributor of its shares as
provided in Rule 12b-1 under the Act and desires to adopt a Plan pursuant to
such Rule (the "Plan").
5. The Directors as a whole, and the Directors who are not interested
persons of the Company (as defined in the Act) and who have no direct or
indirect financial interest in the operation of this Plan and any agreements
relating to it (the "Qualified Directors"), having determined, in the
exercise of reasonable business judgement and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the Act, that
there is a reasonable likelihood that this Plan will benefit the Fund and
its shareholders, and have approved the Plan by votes cast in person at a
meeting called for the purpose of voting on this Plan and agreements related
thereto.
6. The shareholder(s) of the Fund have approved the Plan.
PLAN PROVISIONS
SECTION 1. EXPENDITURES
(a) Purposes. Fund assets may be utilized to pay for promotional
services related to the distribution of Fund shares, including personal
services provided to prospective and existing Fund shareholders, which
include the costs of: printing and distribution of prospectuses and promotional
materials; making slides and charts for presentations; assisting shareholders
and prospective investors in understanding and dealing with the Fund; and travel
and out-ofpocket expenses (e.g. copy and long distance telephone charges)
related thereto.
(b) Amounts. The Fund will pay to Hughes Investment Advisers, LLC, Inc.
(the "Adviser") a monthly distribution fee at an annual rate of 0.25% of the
Fund's net assets, on Class A. Class C, and No-Load Classes of shares, and a
monthly servicing fee of 0.75% on Class C shares such fees to be computed
daily based on the daily average net assets of the Fund. The Adviser shall
utilize such fees to pay for sales and promotional services related to the
distribution of Fund shares, including personal services provided to
prospective and existing Fund shareholders.
SECTION 2. TERM AND TERMINATION
(a) Initial Term. This Plan shall become effective on March 31, 1999
and shall continue in effect for a period of one year thereafter unless
terminated or otherwise continued or discontinued as provided in this Plan.
(b) Continuation of the Plan. The Plan and any related agreements shall
continue in effect for periods of one year thereafter for so long as such
continuance is specifically approved at least annually by votes of a
majority of both (a) the Directors of the Company and (b) the Qualified
Directors, cast in person at a meeting called for the purpose of voting on
this Plan and such related agreements.
(c) Termination of the Plan. This Plan may be terminated at any time by
vote of a majority of the Qualified Directors, or by vote of a majority of
the outstanding voting securities of the Fund.
SECTION 3. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 1 hereof unless such
amendment is approved by a vote of the majority of the outstanding voting
securities of the Fund, and no material amendment to the Plan shall be made
unless approved in the manner provided for annual renewal in Section 2(b)
hereof.
SECTION 4. INDEPENDENT DIRECTORS
While this Plan is in effect with respect to the Fund, the selection and
nomination of Directors who are not interested persons of the Company (as
defined in the Act) shall be committed to the discretion of the Directors
who are not interested persons.
SECTION 5. QUARTERLY REPORTS
The Treasurer of the Company shall provide to the Directors and the
Directors shall review, at least quarterly, a written report of the amounts
accrued and the amounts expended under this Plan for distribution, along
with the purposes for which such expenditures were made.
SECTION 6. RECORDKEEPING
The Company shall preserve copies of this Plan and any related
agreements and all reports made pursuant to Section 5 hereof, for a period
of not less than six years from the date of this Plan, the agreements or
such report, as the case may be, the first two years in an easily accessible
place.
SECTION 7. AGREEMENTS RELATED TO THIS PLAN
Agreements with persons providing distribution services to be paid for or
reimbursed under this Plan shall provide that:
(a) the agreement will continue in effect for a period of one year and
will continue thereafter only if specifically approved by vote of a
majority of the Directors of the Company;
(b) the agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of (i) the Qualified Directors or (ii) the
outstanding voting securities of the Fund, on not more than sixty (60)
days' written notice to any other party to the agreement;
(c) the agreement will terminate automatically in the event of an
assignment; and
(d) in the event the agreement is terminated or otherwise discontinued,
no further payments will be made by the Fund after the effective date of
such action
