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As filed with the Securities and Exchange Commission on: February 25, 1999
File No: 333-57069
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
FFP NEW HORIZONS FUND, INC.
(Exact Name of Registrant as specified in charter)
15455 Conway Road, Chesterfield, Missouri, 63017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (314) 537-1040
Name and Addresses of agent for service:
Roy M. Henry
FFP Advisory Services, Inc.
15455 Conway Road
Chesterfield, Missouri, 63017
(314) 537-1040
With Copies to:
Susan E. Bryant, Esq. Robert C. Bright, Esq.
Six Forest Park Drive Two Leadership Square
Post Office Box 444 211 North Robinson, Suite 810
Farmington, CT 06034-0444 Oklahoma City, Oklahoma 73102
(860) 674-0111 (405) 236-8016
Fax: (860) 674-0011 Fax: (405) 232-1660
Approximate Date of Proposed Public Offering: As soon as practicable after
this registration statement is declared effective.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant hereby registers an indefinite number of shares of common stock,
par value $.001 per share, under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to Section 8(a) may determine.
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<TABLE>
FFP NEW HORIZONS FUND, INC.
CROSS REFERENCE SHEET
(Pursuant to Rule 495)
<CAPTION>
Form N-1A Location in Prospectus
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Item # Item
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PART A - PROSPECTUS
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1. Front and Back Cover Pages Front and back cover pages
2. Risk/Return Summary: Investments, Risks, and
Performance Summary
3. Risk/Return Summary: Fee Table N/A
4. Investment Objectives, Principal Investment
Strategies, and Related Risks Description of the Portfolios
5. Management's Discussion of Fund Performance N/A
6. Management, Organization, and Capital Structure Management of the Portfolios
7. Shareholder Information Fund Shares
8. Distribution Arrangements Distribution of Shares
9. Financial Highlights Information N/A
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PART B - STATEMENT OF ADDITIONAL INFORMATION
<C> <S> <C>
10. Cover Page and Table of Contents Cover Page and Table of Contents
11. Fund History History of the Fund
12. Description of the Fund and its Investments and
Risks Description of the Fund, its
Portfolios and their Investments and Risks
13. Management of the Fund Management of the Fund
14. Control Persons and Principal Holders of Securities Control Persons and Principal Holders of Securities
15. Investment Advisory and Other Services Investment Advisory and Other Services
16. Brokerage Allocation and Other Practices Brokerage Allocation and Other Practices
17. Capital Stock and Other Securities Capital Stock and Other Securities
18. Purchase, Redemption and Pricing of Shares Purchase, Redemption and Pricing of Shares
19. Taxation of the Fund Taxation of the Fund
20. Underwriters Underwriters
21. Calculation of Performance Data Calculation of Performance Data
22. Financial Statements Financial Statements
</TABLE>
PART C - OTHER INFORMATION
Information required to be included in Part C of this Registration Statement
is included in that Part under the applicable Item number.
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FFP NEW HORIZONS FUND, INC.
15455 CONWAY ROAD
CHESTERFIELD, MISSOURI 63017
FFP DISCOVERY MERCURY PORTFOLIO
FFP DISCOVERY VENUS PORTFOLIO
FFP ODYSSEY VENUS PORTFOLIO
FFP CENTURY VENUS PORTFOLIO
FFP MILLENNIUM MERCURY PORTFOLIO
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1999
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<TABLE>
TABLE OF CONTENTS
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SUMMARY 1
The Portfolios 1
Investment Goals 1
Principal Investment Strategies 1
Summary of Principal Risks 2
DESCRIPTION OF THE PORTFOLIOS 4
FFP Discovery Mercury Portfolio 4
FFP Discovery Venus Portfolio 5
FFP Odyssey Venus Portfolio 6
FFP Century Venus Portfolio 8
FFP Millennium Mercury Portfolio 9
Principal Strategies and Related Risks 11
MANAGEMENT OF THE PORTFOLIOS 16
Investment Adviser 16
Subadviser 16
Portfolio Management 17
Legal Proceedings 18
FUND SHARES 18
Purchase and Redemption of Shares 18
Net Asset Value 19
Dividends and Distributions 19
Tax Matters 19
DISTRIBUTION OF SHARES 19
Underwriter 19
Contract Holder Services Plan 20
Distribution Plan 20
Sales Charges 20
</TABLE>
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SUMMARY
THE PORTFOLIOS
All of the Portfolios described in this document are part of an open-end
management investment company. Open-end management investment companies are
often called mutual funds. Each Portfolio is a fund of funds, which means
that it will invest in shares of other investment companies. The Portfolios
will usually invest most of their assets in shares of other mutual funds.
Some of the Portfolios may buy shares of other types of investment companies
such as closed-end funds or unit investment trusts. We refer to all types of
investment companies as `funds' in this document. We call funds that invest at
least 65% of their assets in stock or securities that can be converted to
stock equity funds and we call funds that invest at least 65% of their assets
in debt or other fixed income obligations fixed income funds.
You may invest in these Portfolios only through a variable annuity contract
or variable life insurance policy, which you purchase from an insurance
company.
INVESTMENT GOALS
The Portfolios have the following investment goals:
* FFP Discovery Mercury Portfolio seeks capital appreciation consistent
with moderate to high risk.
* FFP Discovery Venus Portfolio seeks capital appreciation consistent
with moderate risk.
* FFP Odyssey Venus Portfolio seeks growth of capital consistent with
moderate risk.
* FFP Century Venus Portfolio seeks growth of capital consistent with low
to moderate risk.
* FFP Millennium Mercury Portfolio seeks capital appreciation consistent
with moderate to high risk.
PRINCIPAL INVESTMENT STRATEGIES
* FFP Discovery Mercury Portfolio seeks to achieve its investment goal by
investing primarily in shares of a number of passively managed funds,
each of which is designed to track a specific equity index or basket of
equity securities. The Investment Adviser uses Modern Portfolio Theory
to select asset classes for the Portfolio.
* FFP Discovery Venus Portfolio seeks to achieve its investment goal by
investing primarily in shares of a number of passively managed funds,
each of which is designed to track a different equity or fixed income
index or equity or fixed income basket of securities. The Investment
Adviser uses Modern Portfolio Theory to select asset classes for the
Portfolio.
* FFP Odyssey Venus Portfolio seeks to achieve its investment goal by
investing primarily in shares of actively managed equity funds or fixed
income funds. Those funds will include domestic equity, international
equity, corporate bond and government bond mutual funds. The Portfolio
may also purchase shares of some closed-end funds that are designed to
track
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specific domestic or non-U.S. equity indices. The Investment Adviser
uses a trend setting analysis to select assets for the Portfolio.
* FFP Century Venus Portfolio seeks to achieve its investment goal by
investing primarily in shares of a limited number (usually six to
seven) actively managed equity and fixed income funds. Those funds
will include equity growth, growth and income, equity income, small
company, specialty stock and international stock mutual funds. The
Portfolio may also purchase shares of balanced or asset allocation
mutual funds.
* FFP Millennium Mercury Portfolio seeks to achieve its investment goal
by investing primarily in shares of actively managed equity mutual
funds. The Portfolio may also purchase shares of closed-end funds and
unit investment trusts which seek to track indices of both domestic and
non-U.S. equity securities. The Investment Adviser uses Modern
Portfolio Theory to select asset classes for the Portfolio.
SUMMARY OF PRINCIPAL RISKS
* There is no assurance that the Investment Adviser will achieve the
investment goals described above for any Portfolio.
* You may lose money on amounts you invest in a Portfolio.
* The Investment Adviser of the FFP Millennium Mercury Portfolio, FFP
Discovery Venus Portfolio and FFP Discovery Mercury Portfolio uses
Modern Portfolio Theory in managing the assets of those Portfolios.
The Investment Adviser of the FFP Odyssey Venus Portfolio uses a trend
setting strategy in managing that Portfolio. There is no assurance
that these strategies will achieve the desired returns for these
Portfolios.
* FFP Discovery Venus Portfolio and FFP Discovery Mercury Portfolio
invest in funds, each of which is intended to track the performance of
a specific security index or basket of securities. Index funds will
not achieve the same return as the index since the index is not subject
to fees and other costs.
* FFP Millennium Mercury Portfolio, FFP Discovery Mercury Portfolio and
FFP Odyssey Venus Portfolio invest primarily in mutual funds that
invest in stocks. Stocks have a greater potential return than fixed
income securities such as bonds, but are more volatile and have more
risk of loss than fixed income securities.
* FFP Millennium Mercury Portfolio, FFP Odyssey Venus Portfolio and FFP
Century Venus Portfolio are managed to achieve returns that exceed the
average returns for the asset classes they hold as measured by the
applicable indexes or baskets of securities for those classes. In
seeking to exceed average returns there is a risk that the Portfolios
could achieve returns that are less than the average, particularly if
your payments are held in those Portfolios for a short period of time.
* FFP Millennium Mercury Portfolio, FFP Discovery Venus Portfolio and FFP
Discovery Mercury Portfolio may invest a substantial portion of their
assets in unit investment trusts and/or closed-end funds. It is not
always as easy to sell shares of unit investment trusts or
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closed-end funds as it is shares of mutual funds due to the different
markets in which they trade.
* The Investment Adviser manages the Portfolios as long-term investments.
If you keep your variable annuity or variable life payments in a
Portfolio for a period shorter than five to seven years, you may
receive a return on your payments that is less than what you would
receive if you kept them in the Portfolio longer.
* The Portfolios may invest a portion of their assets in funds that
invest in securities of non-U.S. companies. Securities of non-U.S.
companies have some unique risks due to the different markets in which
they trade and changes in the monetary exchange rates between those
countries and the U.S.
* Since the Portfolios purchase shares of other funds, there will be a
duplication of certain costs. In addition, there is a risk that a
Portfolio may not be able to sell the shares it holds in a fund as
quickly as it could sell the securities held by the fund the Portfolio
held those securities directly. The Investment Adviser has agreed to
take a number of precautions to limit any duplication of fees and to
protect the liquidity of the Portfolios.
* All securities fluctuate in value. The value of your investment in a
Portfolio at any given time may be less than the variable annuity or
variable life payments you originally invested in the Portfolio. If
you liquidate your investment in a Portfolio when the value is low, you
have a greater risk of receiving less than the amount you originally
invested.
* The funds in which the Portfolios invest may use strategies such as
borrowing against the assets of a Portfolio or acquire securities such
as derivatives that involve risks to the Portfolios.
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DESCRIPTION OF THE PORTFOLIOS
FFP DISCOVERY MERCURY PORTFOLIO
* PORTFOLIO MANAGERS
A committee headed by Roy M. Henry.
* INVESTMENT GOAL
FFP Discovery Mercury Portfolio seeks capital appreciation consistent
with moderate to high risk.
* IMPLEMENTATION OF GOAL
The Investment Adviser may invest the total assets of the Portfolio:
ASSET CLASSES:
* 65% to 100% in equity funds;
* up to 35% in fixed income funds, including up to 30% in high
yield (junk) bond funds;
* up to 75% in funds that invest in securities of non-U.S.
companies or that trade in in non-U.S. markets.
TYPES OF FUNDS:
* 55% to 75% in mutual funds
* 25% to 45% in unit investment trusts
* PRINCIPAL STRATEGIES
The Investment Adviser seeks to meet the investment goal of the FFP
Discovery Mercury Portfolio by investing the assets in between 15 and
60 different funds, each of which is intended to track the performance
of a specific securities index or basket of securities. The Investment
Adviser will select investments that track over 30 different indices
and baskets of securities. The indices include over 15 different
foreign country indices. They also include indices that track various
sectors such as chemicals, energy and technology, real estate, and
various types of securities, such as large cap stocks, corporate bonds
and high yield (junk) bonds. The Investment Adviser selects the
different asset classes and the amounts to invest in each using Modern
Portfolio Theory. The Investment Adviser does not seek to track a
single index, but instead, using Modern Portfolio Theory, seeks to
invest in a variety of different indices to achieve a return that is
consistent with moderate to high risk of loss.
* PORTFOLIO TURNOVER RATE:
Expected to range from 75% to 125%.
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* SPECIFIC RISKS OF INVESTING IN THE PORTFOLIO
* FFP Discovery Mercury Portfolio is intended for persons with a
moderate to high tolerance for risk.
* It is not always as easy to sell shares of unit investment trusts
or closed-end funds as it is to sell shares of mutual funds.
* Stocks tend to go up and down in value more than bonds or other
debt (fixed income) securities.
* Generally when interest rates rise the value of bonds and other
fixed income obligations will go down.
* Lower quality (junk) bonds have a greater risk of default than
higher quality bonds.
* Investments in non-U.S. securities are subject to risks in
addition to the normal risks of investments.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the
discussion below in the Section called Principal Strategies and Related
Risks. That section discusses the above risks and some additional
strategies and risks that could affect the return you receive from an
investment in the Portfolio.
FFP DISCOVERY VENUS PORTFOLIO
* PORTFOLIO MANAGERS
A committee headed by Roy M. Henry.
* INVESTMENT GOAL
FFP Discovery Venus Portfolio seeks capital consistent with moderate
risk.
* IMPLEMENTATION OF GOAL
The Investment Adviser may invest the total assets of the Portfolio:
Asset Classes
* up to 100% in equity assets and/or
* up to 40% in fixed income assets, including up to 30% in high
yield (junk) bond funds;
* up to 75% in funds that invest in securities of non-U.S.
companies or that trade in non-U.S. markets.
Types of Funds
* 50% to 85% in mutual funds
* 15% to 50% in unit investment trusts
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* PRINCIPAL STRATEGIES
The Investment Adviser seeks to meet the investment goal of the FFP
Discovery Venus Portfolio by investing the assets in between 15 and
60 different funds, each of which is intended to track the
performance of a specific securities index or basket of securities.
The Investment Adviser will select investments that track over 30
different indices and baskets of securities. These indices include
over 15 different foreign country indices. They also include the S&P
500 and the Dow Jones Industrials, various sectors such as chemicals,
energy and technology, and various types of securities or investments,
such as real estate, large cap stocks, mid cap stocks, small cap
stocks, corporate bonds and high yield (junk) bonds. The Investment
Adviser selects the different asset classes and the amounts to invest
in each using Modern Portfolio Theory. The Investment Adviser does not
seek to track a single index, but instead, using Modern Portfolio
Theory, seeks to invest in a variety of different indices to achieve a
return that is consistent with moderate risk of loss.
* PORTFOLIO TURNOVER RATE
Expected to range from 75% to 125%.
* SPECIFIC RISKS OF INVESTING IN THE PORTFOLIO
* FFP Discovery Venus Portfolio is intended for persons with a
moderate tolerance for risk.
* It is not always as easy to sell shares of unit investment trusts
or closed-end funds as it is to sell shares of mutual funds.
* Stocks tend to go up and down in value more than bonds or other
debt (fixed income) securities.
* Generally when interest rates rise the value of bonds and other
fixed income obligations will go down.
* Lower quality (junk) bonds have a greater risk of default than
higher quality bonds.
* Investments in non-U.S. securities are subject to risks in
addition to the normal risks of investments.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the
discussion below in the Section called Principal Strategies and Related
Risks. That section discusses the above risks and some additional
strategies and risks that could affect the return you receive from an
investment in the Portfolio.
FFP ODYSSEY VENUS PORTFOLIO
* PORTFOLIO MANAGER
Edward D. Foy.
* INVESTMENT GOAL
FFP Odyssey Venus Portfolio seeks growth of capital consistent with
moderate risk.
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* IMPLEMENTATION OF GOAL
The Investment Adviser may invest the total assets of the Portfolio:
* ASSET CLASSES:
* up to 100% in domestic equity funds or
* up to 100% in foreign equity funds or
* up to 100% in bond funds including up to 25% in high yield (junk)
bond funds.
TYPES OF FUNDS:
* 85% to 100% in mutual funds
* up to 15% in closed-end funds
* PRINCIPAL STRATEGIES
* The Investment Adviser selects funds for the Portfolio based on
an evaluation of current trends in the markets. The Investment
Adviser seeks to meet the investment goal of the Portfolio by
investing in funds that benefit from current trends and will show
positive growth for the Portfolio. The Investment Adviser will
divide the assets between equities and fixed income funds based on
its analysis of current market and economic conditions and will
change that division as market and economic conditions change.
The Investment Adviser expects to invest the assets of FFP Odyssey
Venus Portfolio in between seven to ten different mutual funds.
The Investment Adviser generally seeks to keep the assets of the
Portfolio balanced among different sectors, different asset
classes and different styles of funds.
* PORTFOLIO TURNOVER RATE
Expected to range from 75% to 150%.
* SPECIFIC RISKS OF INVESTING IN THE PORTFOLIO
* FFP Odyssey Venus Portfolio is intended for persons with a
moderate tolerance for risk.
* It is not always as easy to sell shares of unit investment trusts
or closed-end funds as it is to sell shares of mutual funds.
* Stocks tend to go up and down in value more than bonds or other
debt (fixed income) securities.
* Generally when interest rates rise the value of bonds and other
fixed income obligations will go down.
* Lower quality (junk) bonds have a greater risk of default than
higher quality bonds.
* Investments in non-U.S. securities are subject to risks in
addition to the normal risks of investments.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the
discussion below in the Section called Principal
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Strategies and Related Risks. That section discusses the above risks
and some additional strategies and risks that could affect the return
you receive from an investment in the Portfolio.
FFP CENTURY VENUS PORTFOLIO
* SUBADVISER
Mendel/Sowell Capital Management, Inc.
* PORTFOLIO MANAGER
Allan Mendel
* INVESTMENT GOAL
FFP Century Venus Portfolio seeks growth of capital consistent with low
to moderate risk.
* IMPLEMENTATION OF GOAL
The Subadviser may invest the total assets of the Portfolio:
ASSET CLASSES:
* up to 100% in equity funds; or
* up to 100% in balanced, asset allocation or fixed income funds.
TYPES OF FUNDS:
* 100% in mutual funds
* PRINCIPAL STRATEGIES
FFP Century Venus Portfolio seeks to achieve its investment goal by
purchasing shares of a limited number (usually six to seven) funds. The
Subadviser selects the funds based on the portfolio managers of the
funds. The Subadviser seeks funds with portfolio managers who have
been managing the funds for a long period of time and who have achieved
performance that is above average in both good and bad markets. The
Subadviser does not actively trade the funds in the Portfolio and will
keep the funds unless a fund changes its portfolio manager or a fund
performs badly over a long period of time.
The Subadviser will decide how to divide the investments of the
Portfolio between equities and other types of funds based on current
market and economic conditions. The Subadviser expects initially to
invest the assets of the Portfolio in equity funds, including growth,
growth and income, equity income, small company, specialty stock, and
international funds. However, if the equity stocks become very
volatile, the Subadviser may invest some of the assets in balanced and
asset allocation funds, which funds invest in a combination of equity
and fixed income securities.
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* PORTFOLIO TURNOVER RATE
Expected to range from 75% to 150%.
* SPECIFIC RISKS OF INVESTING IN THE PORTFOLIO
* FFP Century Venus Portfolio is intended for persons with a
moderate tolerance for risk.
* Stocks tend to go up and down in value more than bonds or other
debt (fixed income) securities.
* Generally when interest rates rise the value of bonds and other
fixed income obligations will go down.
* Investments in non-U.S. securities are subject to risks in
addition to the normal risks of investments.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the
discussion below in the Section called Principal Strategies and Related
Risks. That section discusses the above risks and some additional
strategies and risks that could affect the return you receive from an
investment in the Portfolio.
FFP MILLENNIUM MERCURY PORTFOLIO
* PORTFOLIO MANAGER
A committee headed by Roy M. Henry.
* INVESTMENT GOAL
FFP Millennium Mercury Portfolio seeks capital appreciation consistent
with moderate to high risk.
* IMPLEMENTATION OF GOAL
The Investment Adviser may invest the total assets of the Portfolio:
ASSET CLASSES:
* 65% to 100% in equity funds
* up to 35% in fixed income funds, including up to 30% in high
yield (junk) bond funds;
* up to 75% in funds that invest in securities of non-U.S.
companies or that trade in non-U.S. markets.
TYPES OF FUNDS:
* 65% to 95% in mutual funds
* up to 35% in closed-end funds
* up to 35% in unit investment trusts
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The Investment Adviser will purchase closed-end funds and unit
investment trusts only when the Investment Adviser cannot find suitable
mutual funds for the Portfolio.
* PRINCIPAL STRATEGIES
The Investment Adviser seeks to meet the investment goal of the FFP
Millennium Mercury Portfolio by using Modern Portfolio Theory. Using
this theory, the Investment Adviser will invest the assets in between
15 and 60 different funds, including
* funds that primarily emphasize investments in specific industry
sectors, such as technology, health or manufacturing;
* some funds that invest for a specific style, such as growth
funds, bond funds or large cap funds; and
* up to 35% of the total assets in funds that (i) seek to track the
return of specific foreign or domestic securities indices, such
as the S&P 500 or the Morgan Stanley Capital International
indices for various foreign countries, or (ii) seek to track the
return of specific baskets of securities such as the securities
that make up the Dow Jones Industrial Average.
The Investment Adviser selects the different asset classes and the
amounts to invest in each using Modern Portfolio Theory. The
Investment Adviser does not seek to invest for a given style such as
growth or income, or to track a single index, but instead, using Modern
Portfolio Theory, seeks to invest in a variety of different types of
funds to achieve as high a return as possible while maintaining assets
that have moderate to high risk of loss.
* PORTFOLIO TURNOVER RATE
Expected to range from 75% to 125%.
* SPECIFIC RISKS OF INVESTING IN THE PORTFOLIO
* FFP Millennium Mercury Portfolio is intended for persons with a
moderate to high tolerance for risk.
* It is not always as easy to sell shares of unit investment trusts
or closed-end funds as it is to sell shares of mutual funds.
* Stocks tend to go up and down in value more than bonds or other
debt (fixed income) securities.
* Lower quality (junk) bonds have a greater risk of default than
higher quality bonds.
* Investments in non-U.S. securities are subject to risks in
addition to the normal risks of investments.
All of the above factors can reduce the return you may receive from an
investment in the Portfolio. You should review carefully the
discussion below in the Section called Principal Strategies and Related
Risks. That section discusses the above risks and some additional
strategies and risks that could affect the return you receive from an
investment in the Portfolio.
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PRINCIPAL STRATEGIES AND RELATED RISKS
* VOLATILITY. The FFP Millennium Mercury Portfolio, FFP Discovery
Mercury Portfolio and FFP Odyssey Venus Portfolio invest primarily in
mutual funds that invest in equity securities. Equity securities such
as stocks tend to fluctuate in value more than fixed income securities,
making them more volatile. Volatile securities have a greater
potential return than do bonds or other fixed income securities, but
they have more risk than do fixed income securities. Over time,
securities that are more volatile tend to provide higher returns than
less volatile securities. However, there is no assurance that they
will do so.
* FOREIGN SECURITIES. The FFP Odyssey Venus Portfolio and FFP Century
Venus Portfolio may invest up to 100% in mutual funds that invest in
securities of non-U.S. companies and all of the other Portfolios may
invest up to 75% of their total assets in funds that invest in
investments in non-U.S. companies. Investments in non-U.S. securities
are subject to risks in addition to the normal risks of investments.
The value of non-U.S. securities will change as the exchange rate for
currency in that country changes. Some countries do not have the same
kinds of laws that protect the purchasers of securities, as do
countries with more established markets such as the United States.
Therefore, there is more risk in purchasing securities issued by
companies in those countries. Securities issued in countries that have
emerging (newer) markets may fluctuate greatly in value and may be more
difficult to sell quickly than securities issued in countries with well
established markets. In addition, there may be less information
available about non-U.S. issuers, higher transaction costs, settlement
delays, and governmental restrictions or controls that can adversely
affect the value of non-U.S. securities.
* INVESTMENT GOALS. This document lists investment goals for each of the
Portfolios described in this document. There is no assurance that the
Investment Adviser will achieve the investment goals described in this
document or any other investment goals for the Portfolios.
* FUNDAMENTAL GOALS AND POLICIES. The investment goals are fundamental.
A fundamental goal or policy can only be changed with the consent of a
majority of the shareholders of the Portfolio as provided by Rules of
the Securities and Exchange Commission.
* PERCENTAGE LIMITATIONS AND RESTRICTIONS. The Investment Adviser may
change any percentage limit described in this section at any time
without the consent of shareholders, unless the limit is described as
fundamental.
* CLASSIFICATION OF PORTFOLIOS. All of the Portfolios described in this
document are open-end management funds (mutual funds).
* PRIOR EXPERIENCE OF THE INVESTMENT ADVISER. The Investment Adviser and
the Subadviser have been managing assets for investors for a number of
years. Although they have managed assets in private funds, they have
not managed public funds such as the Portfolios in the past.
* ASSET ALLOCATION. The FFP Discovery Mercury Portfolio, FFP Discovery
Venus Portfolio and FFP Millennium Mercury Portfolio are designed to be
asset allocation funds. That means that the Investment Adviser expects
to invest the assets of each Portfolio with the goal
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of achieving targeted rates of return with different levels of risk.
There is no assurance that this goal will be met.
* INVESTMENTS THROUGH INSURANCE CONTRACTS. You may only invest in the
Portfolios through variable annuity contracts and variable life
policies that you purchase from insurance companies.
* MIXED AND SHARED FUNDING. The Portfolios will sell their shares to
insurance companies as investments under both variable annuity
contracts and variable life insurance policies. We call this mixed
funding. The Portfolios may also sell shares to more than one
insurance company. We call this shared funding. Under certain
circumstances, there could be conflicts among the interests of
different insurance companies, or conflicts between the different kinds
of insurance products using the Portfolios. If conflicts arise, the
insurance company with the conflict might be forced to redeem all of
its shares in one or more of the Portfolios. If a Portfolio is
required to sell a large percentage of its assets to pay for the
redemption, it may be forced to sell its assets at a discounted price.
The Board of Directors will monitor the interests of the insurance
company shareholders for conflicts to attempt to avoid problems.
* FUND OF FUNDS. The Portfolios will be investing in other funds,
primarily mutual funds. The number of mutual funds or other choices
available to you under variable annuity contracts and variable life
insurance policies is ordinarily limited to less than 20. The
Investment Adviser believes that by offering you five funds that invest
in between six and 60 different funds, you will have more opportunity
to spread your risks of investing over a larger number of funds than
you would investing in a fund that invests directly in securities.
There is a risk that this could result in duplication of certain fees,
such as operating costs (e.g., custodial, legal and accounting fees),
distribution fees and the brokerage costs of acquiring securities for
the funds and for the Portfolios. To limit some of the duplication,
each Portfolio will limit the total distribution fees that it charges
to 1.5% of the total sales of shares of the Portfolio.
* MODERN PORTFOLIO THEORY. The Investment Adviser of the FFP Millennium
Mercury Portfolio, FFP Discovery Venus Portfolio and FFP Discovery
Mercury Portfolio manages the Portfolios using what is called Modern
Portfolio Theory. Modern Portfolio Theory is a technical strategy that
uses asset allocation models to balance the desired amount of return
with the amount of risk an investor is willing to assume. The
Investment Adviser uses Modern Portfolio Theory to determine, based on
the desired risk level for the Portfolio, how to divide the assets of
the Portfolios among various asset classes - equities (primarily
stocks, both foreign and domestic), fixed income (primarily bonds) and
money market instruments, and 30 to 40 subclasses within those classes.
Using this strategy, the Investment Adviser determines a targeted asset
allocation for each Portfolio. This means deciding the targeted
percentage amounts of the assets of each Portfolio that the Investment
Adviser wants to invest in each of the subclasses to meet the targeted
return for the Portfolio. The targeted return is determined based on
the desired risk level for the Portfolio - the lower the risk, the
lower the targeted return. Modern Portfolio Theory is a strategy used
by the Investment Adviser to seek to achieve the investment goal of the
Portfolio. There is no assurance that this strategy will result in the
returns expected. similarly, there is no assurance that the strategy
will in fact reduce risk at the same rate that it reduces the return of
a given Portfolio.
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<PAGE> 17
* INVESTMENTS IN UNIT INVESTMENT TRUSTS AND CLOSED-END FUNDS. The FFP
Millennium Mercury Portfolio, FFP Discovery Venus Portfolio and FFP
Discovery Mercury Portfolio may invest a substantial portion of their
assets in unit investment trusts and/or closed-end funds. It is not
always as easy to sell shares of unit investment trusts or closed-end
funds back to the fund or trust (redeem shares) as it is to redeem shares
of mutual funds. The shares of closed-end funds and unit investment
trusts can usually be sold to other purchasers on the market in the same
way that stocks are sold. However, these markets are not always as
established as are the markets for stocks. The Investment Adviser will
monitor the investments in unit investment trusts and closed-end funds to
assure that they do not become illiquid, or if they do become illiquid
that the Portfolio does not hold too many illiquid securities.
* PRIOR EXPERIENCE. The Investment Adviser of the Portfolios has
significant experience managing privately-held investment companies;
however, it has not managed a public investment company such as the
Fund. The Investment Adviser has retained persons experienced in
managing publicly held funds to assist it in carrying out its duties to
the Fund.
* ACTIVE MANAGEMENT. The FFP Millennium Mercury Portfolio, FFP Odyssey
Venus Portfolio and FFP Century Venus Portfolio invest primarily in
actively managed funds. In actively managed funds, the investment
adviser of the fund selects investments that the investment adviser
believes will exceed the average return for that specific class of
investments. The goal of active management is to exceed the average
returns for the class of investment, usually measured by a securities
index or other benchmark. There is no assurance that the Portfolios
will achieve this goal. There is a risk that the actively managed
funds may achieve a return that is less than the average return for the
securities in which they invest.
* PASSIVE MANAGEMENT. The Investment Adviser of FFP Discovery Venus
Portfolio and FFP Discovery Mercury Portfolio uses a "pure" strategy to
seek to meet the investment goal of these Portfolios. A pure strategy
means that the investment adviser selects investments such as index
funds that seek to track the returns of the index or benchmark that
measures the average return for the class of investment. The index fund
is passively managed since it selects investments that make up the
index it is trying to duplicate, rather than selecting investments that
the investment adviser believes will exceed those returns. For
example, an index fund that seeks to track the S&P 500 will buy the
securities that make up the S&P 500. The Investment Adviser of the FFP
Discovery Venus Portfolio and the FFP Discovery Mercury Portfolio
actively selects the funds for the Portfolio that the Investment
Adviser believes will have returns that correspond most closely to the
indices or baskets of securities targeted for the Portfolios. There is
a risk that the investments that the Investment Adviser selects may not
have returns that correspond closely to the index or basket of
securities they seek to track. Furthermore, the indices and baskets of
securities are not subject to fees and costs. Passively managed funds
do not always achieve the same return as the more actively managed
funds, but they do not have the same risk of significantly
underperforming the average as do the actively managed funds.
* LIMITATION ON HOLDINGS. Rules of the Securities and Exchange
Commission limit the amount of shares that the Investment Adviser can
buy in a single mutual fund. Currently, all Portfolios or other
entities advised by the Investment Adviser or affiliated with the
Portfolios, together,
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<PAGE> 18
cannot hold more than 3% of the outstanding shares of any single mutual
fund. This restriction could limit the ability of the Investment Adviser
to find a sufficient number of mutual funds in a given asset subclass
that meet the selection criteria of the Investment Adviser.
* LIMITS ON LIQUIDATION. Rules of the Securities and Exchange Commission
provide that a mutual fund may refuse to liquidate more than 1% of its
assets at a given time. This rule could limit the ability of the
Investment Adviser to liquidate assets quickly if there is a downturn
in the market or a drop in the value of that mutual fund. Under
certain circumstances, when a Portfolio decides to sell (or redeem) its
shares of a mutual fund, the mutual fund may decide to pay for the
redemption by giving the Portfolio securities rather than cash. The
securities may be difficult to sell resulting in less cash immediately
available to the Portfolio.
* SELECTION OF INVESTMENTS. The Investment Adviser evaluates potential
investments for the Portfolios based on factors that the Investment
Adviser believes will help each Portfolio meet its investment goal.
These factors include past performance, investment strategies and
investment management. The Investment Adviser will review the specific
investments held by the Portfolio regularly to assure that those
investments continue to meet the criteria established by the Investment
Adviser for selecting investments.
* HOLDING PERIODS. The Portfolios are designed for long term investment.
If you hold your investments in the Portfolios for short periods of
time, you may have a loss on them when you sell them. The Investment
Adviser manages the Portfolios to achieve a targeted return over a
period of at least five to seven years. This means that you should
expect to keep your investment in the Portfolios for at least five to
seven years. If you remove your investment in a Portfolio before that
time, you may receive less than your original investment.
* CASH INVESTMENTS. In addition to the investments described above for
each Portfolio, the Investment Adviser may keep up to 5% of the total
assets of a Portfolio in cash or securities that are as liquid as cash
such as money market mutual funds. The Investment Adviser keeps the
cash available to meet unexpected expenditures such as redemptions.
Investments in cash or similar liquid securities (cash equivalents)
generally do not provide as high a return as would assets invested in
other types of funds.
* DEFENSIVE POSITIONS. The discussion above describes how the Investment
Adviser expects to invest the assets of each Portfolio under normal
market conditions. Under extraordinary market conditions, the
Investment Adviser may not follow the normal strategies for investing
the assets of a Portfolio. The Investment Adviser may take temporary
defensive actions to respond to adverse market, economic, political or
other conditions. Defensive actions may include moving all assets to
cash or cash equivalent investments or taking other extraordinary steps
to limit losses. Defensive actions may prevent a Portfolio from
achieving its investment goal.
* INVESTMENT COMPANY ASSETS. As used in this document, `equity funds'
mean investment companies that have at least 65% of their assets
invested in equities. Equities mean common stock and preferred stock.
Equities also mean securities that either the holder or the company
issuing the security can exchange for common or preferred stock.
Similarly, `fixed income funds' mean investment companies that hold at
least 65% of their assets in fixed income securities such as bonds.
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* PORTFOLIO TURNOVER. The Investment Adviser may buy and sell securities
for the Portfolio frequently, which increases its "portfolio turnover
rate." That rate is the percentage of all the assets of a Portfolio
that are bought and sold during a year. The higher the portfolio
turnover rate, the higher will be the related transaction costs, such as
brokerage costs, charged to the Portfolio. The Investment Adviser
expects that the potentially improved performance that the Investment
Adviser seeks to achieve from frequent transactions will offset the
higher costs; however, higher transaction costs can reduce the return of
the Portfolio. The anticipated portfolio turnover rate for each
Portfolio is disclosed above. The Investment Adviser does not expect that
the turnover rate for any Portfolio will exceed 150%.
* ILLIQUID AND RESTRICTED SECURITIES. Each Portfolio may invest up to
15% of its assets in securities which it cannot easily sell or which it
cannot sell quickly (within seven days) without taking a reduced price.
We call these securities "illiquid securities." In addition, a each
Portfolio may invest in securities that the Portfolio cannot sell
unless the Portfolio meets certain requirements under the law or under
the terms of the agreements that related to the initial sale of the
securities. We call these securities "restricted securities."
Restricted securities include securities purchased under Rules of the
Securities and Exchange Commission for private offerings and certain
securities sold to qualified purchasers. It may take the Investment
Adviser more time to sell illiquid or restricted securities than it
would take to sell other securities. The Portfolio might be forced to
sell the securities at a discount or be unable to sell securities at
all that are losing value.
* HIGH-RISK, HIGH-YIELD SECURITIES. The Portfolios may invest in mutual
funds which invest more than 25% of their assets in high-yield,
high-risk bonds (often called "junk bonds"). The Portfolios will
invest no more than 30% of their assets in these mutual funds. Junk
bonds are bonds that are issued by small companies or companies with
limited assets or short operating histories. These companies are more
likely than more established or larger companies to default on the
bonds and not pay back the full principal amount. Third parties may
not be willing to purchase the bonds from the mutual funds, which means
they may be difficult to sell and some may be considered illiquid.
Because of these risks, the companies issuing the junk bonds pay higher
interest rates than companies issuing higher grade bonds. The higher
interest rates can give investors a higher return on their investment.
* MARKET RISKS. The different types of securities purchased and
investment techniques used by a Portfolio involve varying amounts of
risk. For example, a drop in demand for products in certain parts of
the market, such as computers, will lower the value of the stock of
those companies. Changes in interest rates charged by the Federal
Reserve and the lending banks will affect the value of fixed income
securities or bonds. The asset allocation strategies based on Modern
Portfolio Theory used by the Investment Adviser in managing some of the
Portfolios are intended to reduce market risks by diversifying the
assets of those Portfolios.
* YEAR 2000 RISK. There is a risk that computer systems that the
Portfolios or their service providers use might not be ready for the
year 2000. In some systems, the programs use dates that only include
the last two numbers for the year. In that case, the computer program
will not be able to tell the difference between 1900 and 2000.
Reports, pricing or other information might not be available on January
1, 2000. The Portfolios and the Fund have taken actions which they
believe will make their systems compatible with the year 2000. In
addition, the Fund has obtained representations from service providers
that their systems will
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<PAGE> 20
be ready for the year 2000. Nonetheless, there is a risk that some
systems may not be ready or that unanticipated problems could arise once
the year 2000 arrives. There is also a risk that companies in which the
Portfolios invest may not be ready for the year 2000, which could affect
the value of the securities in those companies which the Portfolios hold.
MANAGEMENT OF THE PORTFOLIOS
INVESTMENT ADVISER
* BACKGROUND. FFP Advisory Services, Inc. is the Investment Adviser for
each Portfolio. The Investment Adviser has its principal office at
15455 Conway Road, Chesterfield, Missouri 63017. The Investment
Adviser has been registered as an investment adviser with the
Securities and Exchange Commission since 1985. As of June 30, 1998,
the Investment Adviser was managing over $700 million in assets for its
clients.
* ADVISORY AGREEMENT. The Investment Adviser has entered into an
Investment Advisory Agreement with the Fund on behalf of each
Portfolio. The Investment Advisory Agreement authorizes the Investment
Adviser to direct the investment of the assets of the Portfolios based
on the investment goals of each Portfolio. The Investment Adviser
selects the assets to be purchased and sold for each Portfolio, selects
the broker-dealer or broker-dealers through which the assets are
purchased and sold, and negotiates payment of commissions, if any, to
those broker-dealers. The Investment Adviser follows the policies set
by the Board of Directors for the Portfolios. This Prospectus and the
Statement of Additional Information describe these policies. (See the
back cover of this prospectus to find out how to get a free copy of the
Statement of Additional Information.) The Investment Adviser is also
responsible for the operation of each Portfolio, including the
supervision of other entities that provide services to the Portfolios
such as custodians, accountants and transfer agents.
* COMPENSATION. The Investment Adviser receives a fee, monthly, from
each Portfolio for management of the assets of the Portfolio. The
Investment Adviser calculates the fee based on the average daily net
assets of each Portfolio. The amount is equal to an annual rate of
1.5% of the average daily net assets of the Portfolio. The Investment
Adviser may pay a portion of its investment advisory fee to insurance
companies for services that the insurance company provides to
shareholders in connection with the offer of shares in the Portfolios.
These fees are not charged to the Portfolios or to you.
* EXPENSES. The Portfolios are responsible for all of their direct
expenses such as fees of custodians, accountants, lawyers, directors
and transfer agents. The Investment Adviser has entered into a
contract with the Fund, agreeing to reimburse each Portfolio for any
fees and expenses (other than brokerage commissions) that a Portfolio
incurs that exceed 2.50% of the average daily net assets of the
Portfolio. This agreement will remain in effect through May 1, 2000, at
which time it may be discontinued or renewed.
SUBADVISER
* SUBADVISORY AGREEMENT. The investment advisory agreement also allows
the Investment Adviser to appoint another firm to conduct the day to
day management of the assets of the Portfolios. The Investment Adviser
has entered into an agreement (Subadvisory Agreement)
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<PAGE> 21
with Mendel/Sowell Capital Management, Inc. for the management of the FFP
Century Venus Portfolio. Under the terms of the Subadvisory Agreement,
Mendel Sowell will be responsible for making recommendations for the
assets to be purchased and sold for the Portfolio. However, the
Investment Adviser will actually invest the assets by selecting the
broker-dealer or broker-dealers through which the assets are purchased
and sold, and negotiate the payment of commissions, if any, to those
broker-dealers. The Subadviser will follow the policies set by the
Investment Adviser and the Board of Directors for the Portfolio.
* BACKGROUND. The Subadviser was formed in 1998 between Allan B. Mendel
and William Sowell. The Subadviser has been registered as an investment
adviser with the Securities and Exchange Commission since 1998. Prior
to the formation of the Subadviser, Allan B. Mendel and William Sowell
each had been registered as investment advisers with their own firms.
As of December 31, 1998, the Subadviser was managing over $37 million
for its clients.
* COMPENSATION. FFP Advisory Services, Inc. as Investment Adviser will
be responsible for all other operations involving the Portfolio. The
Investment Adviser will pay the Subadviser for its services in managing
the Portfolio out of the investment advisory fee the Investment Adviser
receives from the Portfolio.
* OFFICES. The principal office of the Subadviser is located at 18
Corporate Hill Drive, Suite 202, Little Rock, Arkansas 72205.
PORTFOLIO MANAGEMENT
* ROY M. HENRY heads the committee that is responsible for the day-to-day
management of the assets of the FFP Discovery Venus Portfolio, FFP
Millennium Mercury Portfolio and FFP Discovery Mercury Portfolio. Mr.
Henry has been in the financial services business since 1980. He has
been the principal owner and President of First Financial Planners,
Inc. since 1983. He has been the President and a financial planner for
FFP Advisory Services, Inc., a registered investment adviser, since
1985 and the President and a registered representative of FFP
Securities, Inc., a registered broker-dealer, also since 1985. Mr.
Henry currently serves as president and chief operating officer of the
International Association of Registered Financial Consultants.
* EDWARD D. FOY is responsible for the day to day management of the
assets of the FFP Odyssey Venus Portfolio. Mr. Foy has been in the
financial services business since 1980. He established his own firm,
Foy Financial Services, Inc. in 1987 where he is currently President.
He has been an investment adviser representative of FFP Advisory
Services, Inc. and a general securities principal of FFP Securities,
Inc. since 1989 and has served on the Advisory Board of First Financial
Planners, Inc. since 1991. From 1984 to 1987 he was an account
executive with E.F. Hutton & Co. and from 1980 to 1984 he was an
account executive with Dain Bosworth, Inc. Mr. Foy is a Registered
Financial Consultant with the International Association of Registered
Financial Consultants, and a member of International Association for
Financial Planning. He currently manages over $300 million in assets
of mutual funds, variable annuities and variable life insurance
policies as the Manager of the SELECTOR(R) Money Management program for
FFP Advisory Services, Inc.
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<PAGE> 22
* ALLAN MENDEL of Mendel/Sowell Capital Management, Inc. is responsible
for the day to day management of the assets of the FFP Century Venus
Portfolio. Mr. Mendel has been involved in the financial services
business since 1968. From 1990 to 1998, he was President
and owner of Mendel Investment Management Company, a registered
investment adviser. From 1998 to the present, he has been Chairman of the
Board and co-owner of Mendel/Sowell Capital Management, Inc., also a
registered investment adviser. Mr. Mendel has been a registered
representative of FFP Securities, Inc. since 1995.
LEGAL PROCEEDINGS
Neither the Fund nor any of the Portfolios is involved in any legal
proceedings. The Fund is not aware of any litigation that has been
threatened. FFP Advisory Services, Inc., the Investment Adviser, FFP
Securities, Inc., the underwriter, and First Financial Planners, Inc., their
parent, are involved in several legal matters which they consider part of the
ordinary course of business. First Financial Planners and its subsidiaries
believe that they have good defenses to the concerns stated in these matters
and do not believe that the other parties will win the full amounts they are
claiming. In the opinion of First Financial Planners and its subsidiaries,
none of these matters involve any liabilities that would affect the ability
of the Investment Adviser or the underwriter to carry out their duties for
the Fund.
FUND SHARES
PURCHASE AND REDEMPTION OF SHARES
* PRICE OF SHARES. Since the Portfolios are available only through
variable annuity contracts and variable life insurance policies, only
insurance companies may purchase and sell (redeem) shares of the
Portfolios. The insurance companies will purchase and sell shares for
you when you direct them to do so under the terms of your variable
annuity contract or variable life insurance policy. The Portfolios
will buy or sell the shares on your behalf, at the price determined at
the end of the business day during which the Portfolio receives your
order to buy or sell shares from the insurance company. The order must
be received by the Portfolio before the close of business of the New
York Stock Exchange to receive the price for that day. Orders received
after the close of the New York Stock Exchange on a given day will
receive the price calculated at the end of the next business day.
* PLACING ORDERS. The prospectus for your variable annuity contract or
variable life insurance policy describes the procedures for investing
your payments in shares of the Portfolios. You may obtain a copy of
that prospectus, free of charge, from your insurance company or from
the person who sold you the variable annuity contract or variable life
policy.
* SUSPENSION OR REJECTION OF SALES. The Portfolios reserve the right to
suspend the offer of shares or to reject any specific request to
purchase shares from a Portfolio at any time. The Portfolios may
suspend its obligation to redeem shares or postpone payment for
redemptions when the New York Stock Exchange is closed or when trading
is restricted on the Exchange for any reason, including emergency
circumstances established by the Securities and Exchange Commission.
The Portfolios reserve the right to pay for large sales of shares
(redemptions) by issuing a proportionate share of the fund shares the
Portfolios hold under Rules of the Securities and Exchange Commission.
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<PAGE> 23
NET ASSET VALUE
We will calculate the value of each share of each Portfolio (net asset value
per share) at the close of business of the New York Stock Exchange (usually
4:00 p.m.) every day that the New York Stock Exchange is open for trading.
If the New York Stock Exchange closes before 4:00 p.m., the net asset value
is calculated at the time the Exchange closes. We calculate the net asset
value by adding the value of all the investments, cash and other assets held
by the Portfolio subtracting all liabilities, and then dividing the total by
the number of shares outstanding. The Investment Adviser provides this value
to the insurance company, which uses it to calculate the value of your
interest in your variable annuity contract or variable life insurance policy.
The Investment Adviser determines the value of the net assets of the
Portfolio by obtaining market quotations, where available, usually from
pricing services. Short-term debt instruments maturing in less than 60 days
are valued at amortized cost. Securities for which market quotations are not
available are valued by such method as the Board of Directors of the Fund
shall determine, in good faith, to reflect the security's fair value. The
net assets of the Portfolios include dividends and interest that are accrued
but not collected. Liabilities include accrued liabilities.
DIVIDENDS AND DISTRIBUTIONS
The insurance companies generally direct that all dividends and distributions
of the Portfolios be reinvested in the Portfolios under the terms of the
variable annuity contract or variable life policy.
TAX MATTERS
Each Portfolio intends to qualify as a regulated investment company for
federal income tax purposes by satisfying the requirements under Subchapter M
of the Internal Revenue Code. Subchapter M requirements relate to matters
such as diversification of the assets of each Portfolio, sources of income of
each Portfolio, and distribution of Portfolio income. If a Portfolio meets
the requirements of Subchapter M, the ordinary income and net realized
capital gains of that Portfolio that are distributed generally will not be
taxed. The prospectus for your variable annuity contract or variable life
insurance policy describes the tax treatment of your investment in your
variable annuity contract or variable life policy.
DISTRIBUTION OF SHARES
UNDERWRITER
FFP Securities, Inc., an affiliate of the Investment Adviser, has been
designated the underwriter of the Portfolios' shares. The underwriter will
be responsible for the sale of the shares to the insurance companies that
offer the Portfolios in their variable annuity contracts and variable life
policies. The underwriter will also provide certain services to persons,
like you, who select the Portfolios for investment under their variable
annuity contracts and variable life policies.
The underwriter will not receive fees for the sale of the shares. The
underwriter will receive fees of up to .75% of the average daily net assets
of the Portfolios for providing services to the owners of the variable
annuity contracts or variable life insurance policies who invest money in the
Portfolios. These fees are paid out of the assets of the Portfolios under a
Distribution Plan and a
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<PAGE> 24
Contract Holder Services Plan between FFP Securities, Inc. and the Fund on
behalf of the Portfolios.
CONTRACT HOLDER SERVICES PLAN
The Fund has adopted a Contract Holder Services Plan on behalf of each
Portfolio. The Plan allows the Fund to pay fees of up to .25% of the average
daily net assets of the Portfolios to compensate FFP Securities, Inc. and its
representatives for providing services to you and other persons who have
assets invested in the Portfolios through your variable annuity contract or
variable life insurance policy. The services include providing information
about your investment in the Portfolios, answering questions about reports
you receive concerning the Portfolios, educating you about each of the
Portfolios in which you have an interest and other similar services. Under
the Plan, the Portfolios will pay fees to FFP Securities, Inc. based on the
shares of the Portfolios that are being serviced by FFP Securities, Inc.
DISTRIBUTION PLAN
The Fund has also adopted a Distribution Plan on behalf of each Portfolio.
Under the Distribution Plan, the Fund may pay fees up to an annual rate of
.75% of the average daily net assets of each Portfolio (less any amounts paid
under the Contract Holder Services Plan) to the underwriter, other
broker-dealers or insurance companies as compensation for marketing shares of
the Portfolios. The aggregate of the fees that can be paid under both the
Contract Holder Services Plan and the Distribution Plan cannot exceed .75% of
the average daily net assets of the Portfolios.
The underwriter may pay some or all of the fees it receives under the
Distribution Plan and Contract Holder Services Plan to third parties, such as
banks, broker-dealers or the insurance companies offering the variable
annuity contracts and variable life policies. It will pay the fees for
services these entities provide to the Portfolios and you. Since the
Portfolios pay the fees on an ongoing basis, over time these fees will
increase the cost of your investment and may cost you more than paying other
types of charges.
SALES CHARGES
You will not have to pay any fees or sales charges for investing in a
Portfolio or for withdrawing money from a Portfolio. You may have to pay
sales charges on payments you make to your variable annuity contract or
variable life policy or on amounts you withdraw from the contract or policy.
The prospectus for the variable annuity contracts or variable life insurance
policies you have purchased describes those charges.
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This Prospectus sets forth concisely the information about the Fund and each
Portfolio that you should know before you invest money in a Portfolio.
Please read this prospectus carefully and keep it for future reference. The
Fund has prepared and filed with the Securities and Exchange Commission
(Commission) a Statement of Additional Information that contains more
information about the Fund and the Portfolios. You may obtain a free copy of
the Statement of Additional Information from your registered representative
who offers you the variable annuity contract or variable life policy. You
may also obtain copies by calling the Fund at 1-800-925-3371 or by writing to
the Fund at the following address:
FFP NEW HORIZONS FUND, INC.
15455 CONWAY ROAD
CHESTERFIELD, MISSOURI 63017
The Commission maintains a Web site (http://www.sec.gov) on the Internet that
contains the Statement of Additional Information, which is incorporated into
this Prospectus by reference, and other information about the Fund and this
offering. You can also review and copy those materials at the Public
Reference Room of the Securities and Exchange Commission in Washington, D.C.
You may obtain information on the operation of the public reference room by
calling the Commission at 1-800-SEC-0330 (1-800-732-0330).
Information about the purchase and sale of the Portfolio shares and the
related costs is included in the prospectus for the variable annuity
contracts or variable life policies, which offer the Portfolios as
investments.
SEC File No. 333-57069
<PAGE> 26
STATEMENT OF ADDITIONAL INFORMATION
FOR
FFP NEW HORIZONS FUND, INC.
AND ITS PORTFOLIOS:
FFP ODYSSEY VENUS PORTFOLIO
FFP CENTURY VENUS PORTFOLIO
FFP DISCOVERY VENUS PORTFOLIO
FFP MILLENNIUM MERCURY PORTFOLIO
FFP DISCOVERY MERCURY PORTFOLIO
The date of this Statement of Additional Information is
- ------------------, 1999.
This Statement of Additional Information is not a prospectus. It contains
information that supplements the information in the prospectus dated
- ----------, 1999, for the Fund and its Portfolios. It also contains
additional information that may be of interest to you. The prospectus
incorporates this Statement of Additional Information by reference. You may
obtain a free copy of the prospectus from your registered representative who
offered or sold you your variable annuity contract or variable life insurance
policy that uses the Portfolios for investment. You may also obtain copies
by calling 1-800-925-3371 or by writing to:
FFP NEW HORIZONS FUND, INC.
15455 CONWAY ROAD
CHESTERFIELD, MISSOURI 63017
<PAGE> 27
<TABLE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
<S> <C>
HISTORY OF THE FUND 1
DESCRIPTION OF THE FUND, ITS PORTFOLIOS
AND THEIR INVESTMENTS AND RISKS 1
The Fund and its Portfolios 1
Principal Investment Strategies and Risks 1
Other Strategies and Related Risks 6
Less Significant Strategies and Risks 7
Fundamental Policies 8
Nonfundamental Policies 9
Defensive Strategies 10
Portfolio Turnover 10
MANAGEMENT OF THE FUND 10
Responsibilities of Directors 10
Management Information 11
Committees 12
Compensation of Management 13
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 13
Control Persons and Principal Holders 13
Management Ownership 14
INVESTMENT ADVISORY AND OTHER SERVICES 14
Investment Adviser 14
Subadviser 15
Principal Underwriter 15
Contract Holder Services Plan 15
Rule 12b-1 Plan 16
Administrative Services 16
Custody and Investment Accounting 17
Transfer Agent 17
Accountants 17
BROKERAGE ALLOCATION AND OTHER PRACTICES 17
Brokerage Transactions 17
Transactions with Affiliates 18
Brokerage Selection 18
Research Services 18
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<PAGE> 28
Bunching and Allocation of Trades 19
CAPITAL STOCK AND OTHER SECURITIES 19
Series and Classes of Shares 19
Restrictions on Purchase and Sale 20
Dividend Rights 20
Voting Rights 20
Liquidation Rights 22
Preemptive and Conversion Rights 22
Redemption 22
Liabilities and Assessments 22
Authority of Board of Directors 22
PURCHASE, REDEMPTION AND PRICING OF SHARES 22
Purchase of Shares 22
Offering Price 23
Redemption in Kind 23
TAXATION OF THE FUND 24
UNDERWRITERS 24
Distribution of Securities 24
Compensation 24
CALCULATION OF PERFORMANCE DATA 24
FINANCIAL STATEMENTS 26
</TABLE>
ii
<PAGE> 29
HISTORY OF THE FUND
The Fund was formed as a corporation under Maryland Law on May 21, 1998. It
has no prior operations or investment history.
DESCRIPTION OF THE FUND, ITS PORTFOLIOS
AND THEIR INVESTMENTS AND RISKS
THE FUND AND ITS PORTFOLIOS
The Fund is an open-end, management investment company. It is divided into
different series or portfolios, each of which has its own assets, investment
objectives and policies. Each is managed separately, using distinct
strategies appropriate to its objectives and policies. The Fund currently is
authorized to offer shares in six Portfolios. It is offering shares in five
of those Portfolios with these documents. The Fund may offer additional
Portfolios in the future. The Portfolios are all diversified, which means
that for 75% of the assets of each Portfolio, no more than 5% are invested in
any one issuer and no Portfolio will own more than 10% of any single issuer.
This restriction does not apply to investments in other investment companies
and therefore, since the Portfolios will generally hold only other investment
companies, they will be diversified. The Fund cannot change its
classification as an open-end, management investment company without the
consent of a majority of its shareholders. A Portfolio cannot change to
nondiversified without the approval of a majority of the shareholders of that
Portfolio.
PRINCIPAL INVESTMENT STRATEGIES AND RISKS
GENERAL. The prospectus for the Fund describes the principal strategies the
Investment Adviser will use in managing the Portfolios and the risks of those
strategies. This Section provides more detail about some of those strategies
and about strategies that the Investment Adviser does not consider principal
strategies.
DETERMINATION OF LIMITS. The Prospectus and this Statement of Additional
Information describe a number of limits and restrictions on the amount of
certain assets that the Investment Adviser is allowed to acquire for each
Portfolio. The Investment Adviser determines whether a Portfolio complies
with a limit or restriction at the time of purchasing the limited or
restricted asset or security. If the percentage changes after the initial
purchase due to changes in the relative value of securities in the Portfolio
or a drop in the net asset value of the entire Portfolio, the Portfolio will
not be in violation of the limit or restriction, except for the restriction
on illiquid securities. The Investment Adviser will seek to make subsequent
purchases or sales of assets so that the limits will be met, as long as the
purchases or sales do not compromise the best interests of the Portfolio. The
Investment Adviser must monitor the limitation on illiquid securities at all
times and at no time may the Portfolio exceed those limits. If the limit is
exceeded, the Investment Adviser must immediately take whatever steps it can
to reduce the amount of illiquid securities to the appropriate limit.
ASSET ALLOCATION. The Portfolios are designed to be asset allocation funds.
This means that the Investment Adviser expects to invest the net assets of
each Portfolio with the goal of achieving
1
<PAGE> 30
targeted rates of return with different levels of risk. Each of the
Portfolios uses different methods to seek to achieve its targeted return. The
Investment Adviser of the FFP Discovery Venus, FFP Millennium Mercury and FFP
Discovery Mercury Portfolios uses an investment strategy known as Modern
Portfolio Theory. The Investment Adviser of the FFP Odyssey Venus Portfolio
uses a trend setting analysis to decide how to invest the assets of the
Portfolio. The Subadviser of the FFP Century Venus Portfolio uses more
traditional methods to analyze prospective investments for the Portfolio.
There is no assurance that these methods will result in the anticipated
returns.
MODERN PORTFOLIO THEORY. For the FFP Discovery Venus, FFP Millennium Mercury
and FFP Discovery Mercury Portfolios, the Investment Adviser uses an
investment strategy known as Modern Portfolio Theory to determine how to
divide the net assets of these Portfolios among various asset classes and
subclasses. Modern Portfolio Theory is a technical strategy that selects
asset classes with the goal of maximizing return and minimizing risk, based
on current economic and market conditions. It does not attempt to predict
the future of, or time, markets, but recommends a percentage of different
asset classes, such as equities, fixed income, and money market instruments
that should be held to achieve specified returns over time. The investment
philosophy underlying Modern Portfolio Theory is that while it is difficult
to predict future movements in market prices, historically the highest
investment returns have been achieved over the long term by investing in
assets divided among different classes in a balanced manner. The focus is
away from individual securities to a consideration of all the assets held.
The goal is to reduce risk by investing in a broadly diversified portfolio of
investments. However, Modern Portfolio Theory goes beyond just selecting a
number of different types of securities to finding types of securities that
are distinctly different and that offset each other. Each asset class is
considered for a Portfolio based on the impact the asset class will have on
both the volatility and return characteristics of the overall assets of the
Portfolio.
ASSET CLASSES. As described above, the Investment Adviser of the FFP
Discovery Venus, FFP Millennium Mercury and FFP Discovery Mercury Portfolios
uses Modern Portfolio Theory to select asset classes for the Portfolios.
Asset classes include equities (primarily stocks, both foreign and domestic),
fixed income (primarily bonds) and money market instruments, and 30 to 40
subclasses within those classes. The subclasses are based on sectors such as
technology and manufacturing, and not on style, such as growth or value. The
subclasses can also include other categories such as large cap stocks, real
estate, junk bonds and foreign countries. The specific asset allocation for
each Portfolio among the asset classes is based on the risk level and related
return desired for that Portfolio. The following are the asset classes in
which the Investment Adviser currently anticipates investing for these
Portfolios; these asset classes may change as the economy and the markets
change:
EQUITY:
Domestic Large Caps
Domestic Mid Caps
Domestic Small Caps
2
<PAGE> 31
FIXED INCOME:
Corporate Bonds
High Yield Bonds
FOREIGN COUNTRY:
Australia
Austria
Belgium
Canada
France
Germany
Hong Kong
Italy
Japan
Mexico
Netherlands
Singapore
Spain
Sweden
Switzerland
United Kingdom
SECTOR:
Basic Materials
Chemicals
Consumer Cyclicals
Consumer Staples
Energy
Financials
Gold/Precious Metals
Health Care
Technology
Telephone
Transportation
Utilities
Real Estate
REVIEW. The Investment Adviser reviews the targeted asset allocations of FFP
Millennium Mercury, FFP Discovery Venus, and FFP Discovery Mercury Portfolios
at least quarterly using Modern Portfolio Theory to determine if they need to
be adjusted based on then current market and economic conditions. The
Investment Adviser also reviews the assets actually held by each Portfolio at
least monthly to determine if they match the desired percentages in each
class. Finally, the Investment Adviser reviews the specific investments held
by each Portfolio to determine whether they still meet the Investment
Adviser's standards. The Investment Adviser reviews all aspects if there is
any significant change in the markets or in the economy. There is no
assurance that this procedure will result in the Portfolios meeting their
investment objectives.
3
<PAGE> 32
PASSIVE MANAGEMENT. The Investment Adviser applies an actively-managed
strategy to the FFP Odyssey Venus, FFP Century Venus, and FFP Millennium
Mercury Portfolios and a passively-managed strategy to the FFP Discovery
Venus and FFP Discovery Mercury Portfolios in selecting specific investments
for the Portfolios.
PORTFOLIO INVESTMENTS. Under normal market conditions, the Investment
Adviser expects that it will invest 100% of the net assets of each in a
combination of shares of open-end management investment companies
(mutual funds), closed-end management investment companies (closed-end
funds) and/or unit investment trusts. The following table provides an estimate
of the amount of securities of each Portfolio that will be held in each of the
different types of investment companies.
<TABLE>
<CAPTION>
ODYSSEY CENTURY DISCOVERY MILLENNIUM DISCOVERY
TYPE OF SECURITY VENUS VENUS VENUS MERCURY MERCURY
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Open End Mutual Funds 85-100% 95-100% 50-85% 65-95% 55-75%
- -----------------------------------------------------------------------------------------------------------
Closed End Funds 0-15% 0% 0% 0-35% 0%
- -----------------------------------------------------------------------------------------------------------
Unit Investment Trusts 0% 0% 15-50% 0-35% 24-45%
- -----------------------------------------------------------------------------------------------------------
Cash/Cash Equivalents 0-5% 0-5% 0-5% 0-5% 0-5%
</TABLE>
The actual allocation will depend on the securities available from time to
time in the various asset classes and the performance of the securities
acquired.
SELECTION OF INVESTMENTS. To meet the targeted asset allocations for each
Portfolio, the investment adviser will select funds that invest at least 65%
of their assets in the desired asset class, or the investment adviser will
select funds that track an index or basket of securities that measures the
asset class. The Investment Adviser of the FFP Discovery Venus, FFP Millennium
Mercury and FFP Discovery Mercury Portfolios uses quantitative techniques to
analyze and rank the funds it considers for investment by a Portfolio. The
Investment Adviser analyses the mutual funds by reviewing their historic total
return, volatility and operating expenses over various times and under
different market conditions. Among other factors, the Investment Adviser
considers the amount and kind of assets held by the fund, the experience of
persons responsible for management of the assets, and the fund's investment
strategies and policies. The Investment Adviser of the FFP Century Venus
Portfolio and the Subadviser of the FFP Odyssey Venus Portfolio may use
quantitative techniques as well as more traditional analyses of the historical
performance of the funds, the type of investments that the funds seek and the
manner in which the Investment Adviser or Subadviser believes the funds will
perform under current market conditions. The Subadviser of the FFP Century
Venus Portfolio focuses on the management of the fund and the performance of
the portfolio manager over long periods of time. The Investment Adviser of the
FFP Odyssey Venus Portfolio looks at trends in the market and tries to select
funds that the Investment Adviser believes will perform well under those market
conditions.
STANDARD & POOR'S DEPOSITARY RECEIPTS. The FFP Discovery Venus and the FFP
Discovery Mercury Portfolios may invest in Standard & Poor's Depositary
Receipts, sometimes called SPDR's. Standard & Poor's Depositary Receipts are
interests in a unit investment trust that acquires securities and cash. The
trust selects the securities with the goal of duplicating the performance of
the Standard & Poor's 500 stock index. These Portfolios may purchase
Standard & Poor's Depositary Receipts directly from the unit investment
trust, which offers them in larger units called Creation Units, or in the
secondary market. To redeem the interests, a Portfolio must accumulate enough
Standard & Poor's Depositary Receipts to equal a Creation Unit. On
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<PAGE> 33
redemption of a Creation Unit, a Portfolio will receive securities and cash
equal in value to the purchase price of a Creation Unit that day. The holder
of the Standard & Poor's Depositary Receipts cannot redeem them individually,
except at the termination of the unit investment trust. Currently, there is
a secondary market for the Depositary Receipts. They are listed and traded
on the American Stock Exchange in the same manner as other listed securities.
There is no assurance that the secondary market will always be available.
There is also no assurance that the Standard & Poor's Depositary Receipts
will track the stock index they are designed to track.
INDEX-RELATED INVESTMENTS. The FFP Discovery Venus and the FFP Discovery
Mercury Portfolios may invest in other instruments that are similar to the
Standard & Poor's Depositary Receipts, but that are designed to duplicate
other stock indices. These other instruments include units of beneficial
interest in the Diamonds Fund, a closed-end fund which invests in securities
designed to track the Dow Jones Industrial Average. The Portfolios
participate in foreign markets primarily through the purchase of World Equity
Benchmark Shares, which are shares of closed end funds that invest in foreign
markets. Each of these funds invests in securities listed on a single stock
exchange of a foreign country with the goal of duplicating the return of an
index that represents that exchange. The Investment Adviser uses these
instruments to participate in up to 17 different foreign stock markets. The
Investment Adviser also invests in indices designed to track certain sectors
such as technology, health care and utilities and certain equity and fixed
income classes.
The table below shows the various asset classes in which the Investment
Adviser currently anticipates investing and the indices, which the FFP
Discovery Venus and the FFP Discovery Mercury Portfolios will seek to
duplicate to track those asset classes. The Investment Adviser may not
invest in all of the following asset classes or may add additional classes
and indices as the market and the economy change.
<TABLE>
<CAPTION>
ASSET CLASS BENCHMARK INDEX
<C> <S>
Australia MSCI Australia Total Return US dollar denominated
Austria MSCI Austria Total Return US dollar denominated
Belgium MSCI Belgium Total Return US dollar denominated
Canada MSCI Canada Total Return US dollar denominated
France MSCI France Total Return US dollar denominated
Germany MSCI Germany Total Return US dollar denominated
Hong Kong MSCI Hong Kong Total Return US dollar denominated
Italy MSCI Italy Total Return US dollar denominated
Japan MSCI Japan Total Return US dollar denominated
Mexico FT/S&P Mexico Total Return US dollar denominated
Netherlands MSCI Netherlands Total Return US dollar denominated
Singapore MSCI Singapore Total Return US dollar denominated
Spain MSCI Spain Total Return US dollar denominated
Sweden MSCI Sweden Total Return US dollar denominated
Switzerland MSCI Switzerland Total Return US dollar denominated
United Kingdom MSCI UK Total Return US dollar denominated
Basic Materials S&P Basic Materials Total Return
Chemicals S&P Chemicals Total Return
Consumer Cyclicals S&P Consumer Cyclicals Total Return
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<PAGE> 34
Consumer Staples S&P Consumer Staples Total Return
Energy S&P Energy Total Return
Financials S&P Financials Total Return
Gold/Precious Metals S&P Gold & Precious Metals Mining Total Return
Health Care S&P Health Care Total Return
Technology S&P Technology Total Return
Telephone S&P Telephone Total Return
Transportation S&P Transportation Total Return
Utilities S&P Utilities Total Return
Real Estate Wilshire Real Estate Securities Total Return
Domestic Large Caps S&P 500 Total Return
Domestic Mid Caps S&P Midcap 400 Total Return
Domestic Small Caps S&P Smallcap 600 Total Return
Corporate Bonds LB Corporate Total Return
High Yield Bonds CS First Boston High Yield Corporate Total Return
<C> <S>
MSCI means Morgan Stanley Capital International
S&P means Standard & Poors
FT/S&P means Financial Times Limited, Goldman Sachs & Co.,
Standard & Poors in conjunction with the
Institute of Actuaries and the Faculty of Actuaries
</TABLE>
OTHER STRATEGIES AND RELATED RISKS
GENERAL. In addition to the principal strategies described above and in the
prospectus, the Investment Adviser may use other strategies and investment
techniques to increase the return or to provide additional protection to the
Portfolios. The mutual funds in which the Portfolios invest may also use these
strategies.
BORROWING. The Portfolios may borrow money for temporary or emergency
purposes, such as when necessary to cover unanticipated redemptions from the
Portfolios. In addition, the Portfolios may borrow money from banks for
leveraging, subject to certain restrictions described under Fundamental
Policies in this Section, although they currently do not anticipate doing so.
Borrowing money increases the assets that a Portfolio has available to
invest. If the investments are profitable, the return for the Portfolio is
enhanced. However, if the investments lose value, the losses are
exaggerated. While borrowing can increase potential returns of a Portfolio,
it also exaggerates the amount of losses of a Portfolio if there is a
downturn in the market.
SECURITIES LENDING. Each Portfolio may lend its securities or other assets
to increase its income, subject to the restrictions described under
Fundamental Policies, below. Lending securities means that the Portfolio
enters into a transaction with a third party in which the Portfolio lends
securities that the Portfolio owns to the third party for a fee. The
Portfolio holds other assets of the borrower as collateral to insure the
repayment of the securities loaned. Lending Portfolio securities may result
in losses to the Portfolio if the borrower does not repay the securities
loaned and the Portfolio is unable to sell the collateral for an amount equal
to the value of the loaned securities.
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<PAGE> 35
LESS SIGNIFICANT STRATEGIES AND RISKS
The Investment Adviser does not anticipate using the strategies listed below
for the Portfolios unless the Investment Adviser decides to purchase
securities other than management investment companies. If the Investment
Adviser decides to do so, the prospectus and the Statement of Additional
Information will be appropriately amended. The funds in which the Portfolios
invest may use these strategies without limitation.
DERIVATIVES. A derivative is a financial instrument, the value of which is
"derived" from or based on some other asset, such as another security or an
index of securities. Derivatives include futures, options, forward
contracts, swaps, structured notes, and collateralized mortgage obligations.
The Portfolios do not expect to use derivatives, including futures or
options, in managing the assets of the Portfolios. The funds in which the
Portfolios invest may use derivatives for hedging purposes as well as for
increasing income. Derivatives include the following:
Options. Options give the purchaser the right to buy or sell a security at a
specified price for a specified period of time. Puts give the holder the
right to force a party to buy a security at a specified price. Call options
are the obligation to sell securities at a specified price when a third party
demands. If the party who is subject to a call owns the security, the call
is referred to as "covered." If the person will have to buy the security to
meet the call, the call is uncovered. Options to purchase securities, put
options and covered call options are generally not subject to high risk, but
do have the risk that the security will not be worth the stated price or the
option will expire without having any value. Under these circumstances, the
purchaser of the option would lose the fee paid for the option. Uncovered
call options can be highly risky.
Futures. Funds may enter into futures contracts for commodities, securities
or securities indices. Futures contracts are two-party agreements that
require both parties to perform: one must purchase and one must sell the
commodity, security or index position at a specified price and specified time
in the future. At the time the futures contract is executed, the parties
generally pay only a portion of the full amount that will be due on the
settlement date, which is called margin. Futures are subject to higher risks
than options, however, since the parties must complete the transaction at
settlement. The security, commodity or index may have dropped significantly
in value by the settlement date. Furthermore, since futures require only a
small payment of margin to enter into the transaction, the risks are similar
to those in borrowing, discussed above. The funds may also purchase options
on futures and futures on currency or foreign securities. These have all the
risks of foreign transactions, futures, and options.
WHEN ISSUED AND DELAYED DELIVERY SECURITIES. Persons may enter into
transactions where they agree to buy or sell, at some time in the future,
specific equity securities at a stated price or debt securities at a stated
yield. These are called delayed-delivery securities. A person may also
agree to purchase a security that has not yet been issued but that will be
issued some time in the future. These securities are called when-issued
securities. Delayed delivery and when issued securities can provide benefits
where the value increases before the date of delivery or issuance. The
purchaser may also receive fees or premiums for entering into these
transactions. The risks involved in these transactions, however, include the
risk that the assets set aside to meet the commitment lose value and there
are insufficient assets to meet the commitment to purchase. A
7
<PAGE> 36
purchaser might be forced to liquidate assets prematurely or at a loss to meet
its obligations. There is also a risk that the security may lose value before
it is delivered or issued, resulting in a loss to the purchaser.
REPURCHASE AGREEMENTS. The funds may enter into repurchase agreements with
domestic banks and broker-dealers. Under a repurchase agreement, the
purchaser acquires a debt instrument for a relatively short time. The seller
of the debt instrument agrees to repurchase the instrument and the purchaser
agrees to resell the instrument at a fixed price and time. The purchaser
receives collateral from the seller to back up the seller's agreement to
repurchase. There is a risk that the seller may refuse to repurchase the
instrument. Although the purchaser holds collateral, the collateral may not
be worth the amount paid by the purchaser for the instrument or the purchaser
may have difficulty selling the collateral.
ASSET-BACKED SECURITIES. The funds may purchase securities which consist of
a share of a specified pool of assets. The assets usually consist of
consumer loans, such as credit card debt, automobile loans, home equity loans
or recreational vehicle loans. Under these arrangements, the purchaser
acquires a share of the loans and receives a share of the principal and
interest payments that the consumers pay on the loans. The value of these
kinds of securities are reduced if the consumers default on the loans or if
the consumers repay the loans earlier than predicted, which reduces the
interest earned on the loans.
ZERO COUPON AND PAY-IN-KIND BONDS. The funds may invest in zero coupon bonds
and pay-in-kind bonds. Zero coupon bonds are debt securities that pay no
cash interest but are sold at substantial discounts from their face value.
The price of the bonds increases as they approach maturity. At maturity, the
bonds pay the full face value. Pay-in-kind bonds pay all or a portion of
their interest in additional debt or equity securities. Zero coupon bonds
and pay-in-kind bonds fluctuate more in value when interest rates change than
do bonds, which pay a fixed rate of interest in cash until maturity. The
value of zero coupon bonds and pay-in-kind bonds appreciates more during
periods of declining interest rates and depreciates more during periods of
rising interest rates than they do during times of steady interest rates.
FUNDAMENTAL POLICIES
The Portfolios have adopted the following policies. They are fundamental,
which means that they cannot be changed without the consent of a majority of
the shareholders of the Portfolio (see the discussion under Voting Rights in
the Section on Capital Stock and other Securities to see how a majority vote
is determined under Rules of the Securities and Exchange Commission):
SENIOR SECURITIES. The Portfolios may not sell securities that the
Securities and Exchange Commission considers "senior securities" under its
statutes and rules. Senior securities are generally stock, warrants or debt
instruments that give the holders a priority over holders of the shares of
the Portfolio in the distribution of the assets of the Portfolio or the
payment of dividends by the Portfolio. The Portfolios may undertake
activities that the Securities and Exchange Commission, by interpretation or
by rule, has determined do not involve issuing senior securities. These
activities include borrowing money, subject to the restrictions described
below, or paying for shares that are redeemed by distributing a share of
assets as described in the Section on Purchase, Redemption and Pricing of
Shares.
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<PAGE> 37
BORROWING MONEY. A Portfolio may borrow money for leveraging purposes, that
is, for the purpose of increasing the amount of money the Portfolio has to
invest. A Portfolio may also use derivatives to increase the amount it has
to invest. If a Portfolio money, it must be sure the value of the net assets
of the Portfolio at the time of the borrowing (including the amounts
borrowed), equal at least three times the amount (300%) of all outstanding
borrowings. In addition, a Portfolio may borrow money for temporary periods
of time or for emergencies. The amount a Portfolio may borrow for temporary
periods or emergency purposes cannot exceed 5% of the value of the assets of
the Portfolio at the time the Portfolio borrows the money.
UNDERWRITING SECURITIES OF OTHER ISSUERS. The Portfolios will not underwrite
securities issued by third parties. The Securities Act of 1933 and rules
issued under that Act treat the Portfolios as underwriters of restricted
securities that the Portfolios purchase and then sell. The restriction on
underwriting by the Portfolios will not prevent the Portfolios from
purchasing and selling restricted securities under those provisions of the
Securities Act of 1933.
CONCENTRATING INVESTMENTS. The Portfolios will not invest more than 25% in
value of their respective net assets in any single industry or group of
industries. For purposes of this restriction, the Investment Adviser will
not consider mutual funds, closed end funds or unit investment trusts as a
single industry based simply on the fact that they are the same kind of
investment vehicle. The Investment Adviser will include a Portfolio's
investment in a fund as investment in an industry only if more than 25% of
the assets of the fund are concentrated in that industry. The Investment
Adviser does not include in this restriction securities issued by the U.S.
government or any of its agencies or issued by an entity that is considered
an instrumentality of the U.S. government.
REAL ESTATE AND COMMODITIES. The Portfolios will not invest directly in real
estate or commodities. Although the Portfolios do not currently anticipate
doing so, the Portfolios may acquire securities or other financial
instruments that are backed by real estate or commodities, such as futures on
commodities. The Portfolios may also purchase securities of companies that
engage in the real estate business, such as real estate investment trusts, or
in the commodities business. It is possible that the Portfolios could
acquire an interest in real estate or commodities through a default by the
issuer of securities backed by real estate or commodities or by a default of
the issuer of a bond secured by real estate or commodities. If that should
occur, the Portfolio would attempt to sell the real estate or the commodities
as soon as practicable without materially affecting the value of the asset.
MAKING LOANS. The Portfolios may not lend cash held by them; however, they
may purchase bonds or other debt instruments. The Portfolios may lend
securities held by them as described above under Securities Lending. The
Portfolios must limit the value of loaned securities plus all other assets
that are loaned, plus any assets subject to repurchase agreements, to one
third of the total net assets of the Portfolio.
NONFUNDAMENTAL POLICIES
The Portfolios have adopted other restrictions and limitations described
above or in the prospectus. Unless stated otherwise, the Board of Directors
of the Fund may change any of those restrictions and limitations without
shareholder approval. Generally, you will receive notice of
9
<PAGE> 38
any change by the delivery of an updated prospectus or by notice from the
insurance company issuing your variable annuity contract or variable life
insurance policy.
DEFENSIVE STRATEGIES
Under extraordinary market conditions, the Investment Adviser may not follow
the normal strategies for investing the assets of a Portfolio. The
Investment Adviser may take temporary defensive actions to respond to adverse
market, economic, political or other conditions, such as putting up to 100%
of the net assets in cash or money market instruments. Money market
instruments include U.S. Government obligations, repurchase agreements,
certificates of deposit, banker's acceptances, bank deposits, other financial
institution obligations, commercial paper and other short-term commercial
obligations. Defensive strategies may prevent a Portfolio from meeting its
objectives, but the strategies may limit the losses of a Portfolio in times
of severe economic or market downturns.
PORTFOLIO TURNOVER
As described in the prospectus, the Investment Adviser may buy and sell
securities for the Portfolios frequently if the Investment Adviser believes
the transactions are necessary to meet the objectives of the Portfolios.
This increases the Portfolio turnover rate for the Portfolio, which can
increase costs. The Portfolios have only recently been formed and have no
prior operating history; therefore, they have no prior Portfolio turnover
rates to report. The Investment Adviser does not expect that the turnover
rate for any Portfolio will exceed 150%.
MANAGEMENT OF THE FUND
RESPONSIBILITIES OF DIRECTORS
The Board of Directors of the Fund provides broad supervision over the
affairs of the Fund and the Portfolios as provided by the Investment Company
Act of 1940, the General Laws of the State of Maryland governing
corporations, the Articles of Incorporation of the Fund and its Bylaws. The
directors approve contracts with the Investment Adviser, underwriter,
custodians and other service providers on behalf of the Portfolios. The
directors also set broad policies for the management of the Portfolios.
10
<PAGE> 39
MANAGEMENT INFORMATION
The directors and officers of the Fund and their respective backgrounds are
as follows:
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION CURRENT POSITIONS
NAME AND ADDRESS<F**> AGE FUND PAST 5 YEARS WITH AFFILIATES
<S> <C> <C> <C> <C>
Roy M. Henry<F*> 59 Director Employed in the financial Chairman of the Board of Directors
President services and financial and President, FFP Advisory
planning fields for more Services and First Financial
than the past 5 years as Planners, Inc.; Chairman of the
chief executive officer Board, President and Treasurer,
of First Financial Planners, FFP Securities, Inc.
Inc. and all subsidiaries,
registered principal of FFP
Securities, Inc., and registered
investment adviser representative
of FFP Advisory Services, Inc.
Robin H. Rodermund 33 Secretary Since 1988, Senior Vice Senior Vice President,
President of First Financial FFP Advisory Services, Inc.
Planners, Inc. and a registered
representative of FFP
Securities, Inc.
Christopher V. Meitz 27 Vice President Compliance officer of First Sr. Vice President -
Assistant Financial Planners, Inc., Compliance of First Financial
Secretary registered representative Planners, Inc.; compliance
Assistant of FFP Securities, Inc., and officer, FFP Advisory
Treasurer registered investment adviser Services, Inc.
representative of FFP Advisory
Services, Inc. (4/95 to
present); assistant manager,
Camelot Music, Florissant,
MO (8/92 - 5/95); student
(8/90 - 6/95).
Bryan P. Davis 27 Vice President, Compliance Director, Director and Sr. Vice
Treasurer and First Financial Planners, President, First Financial
Assistant Inc. since 1/95; registered Planners, Inc.; Chief
Secretary representative of FFP financial officer, FFP
Securities, Inc., since 1/94; Advisory Services, Inc.;
registered principal of FFP Chief financial officer
Securities, Inc. since 2/94 and Secretary, FFP
and registered financial Securities, Inc.
principal of FFP Securities,
Inc. since 5/95; Student
3/92 -6/93.
Dennis W. Sheehan 65 Director Director and Chairman of the None
Box 2032 Board of Allied Healthcare
Tappahannock, VA (manufacturer and distributor
22560-2032 of medical gas delivery and
associated medical products)
since 1992; director, AXIA
Incorporated (manufacturer and
distributor of industrial
products) since 1984; director,
CST Incorporated (processor and
distributor of office paper
products) since 1996.
11
<PAGE> 40
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION CURRENT POSITIONS
NAME AND ADDRESS<F**> AGE FUND PAST 5 YEARS WITH AFFILIATES
<S> <C> <C> <C> <C>
Joseph Pulitzer IV 49 Director Columnist; Consultant for None
23 East Brundage #17 business management and
Sheridan, WY 82801 marketing (7/15/93 to present);
Vice President, Administration
of Pulitzer Publishing Company
(4/15/86-4/8/95)
S. Wesley Fordyce 42 Director Vice President, Riparian None
2701 Shackelford Rd. Research Fund (communications
Florissant, MO 63031 satellites) since 1993; Owner,
Weezer's Produce (farming) since
1988
John M. Soukup<F*> 44 Director President, First Variable Life None
First Variable Life Insurance Company (6/97 to
2122 York Road, Suite 300 present); President, First
Oak Brook, IL 60523 Variable Advisory Services
Corp.; President/Chairman,
First Variable Capital Services,
Inc.; President, Variable
Investors Series Trust;
Marketing and development
officer, Fortis Benefits
Insurance Company (7/87-6/97)
<FN>
<F*>Designates persons who are interested persons as defined by the Rules of
the Securities and Exchange Commission.
<F**> The address for Roy M. Henry, Robin H. Rodermund, Bryan P. Davis and
Christopher V. Meitz is FFP Advisory Services, Inc., 15455 Conway Road,
Chesterfield, Missouri, 63017.
</TABLE>
COMMITTEES
The Board has established several committees. The committees, their members
and the responsibilities of the committees are as follows:
EXECUTIVE COMMITTEE. The Executive Committee may exercise all powers of the
Board of Directors when the Board is not in session in the management of the
business and affairs of the Fund except the powers to (i) declare a dividend;
(ii) authorize the issuance of shares; (iii) recommend to shareholders any
matter requiring shareholder approval; (iv) amend the Bylaws; or (v) approve
any merger or share exchange which does not require shareholder approval.
The members are as follows:
Roy M. Henry (Chair)
S. Wesley Fordyce
Dennis W. Sheehan
NOMINATING COMMITTEE. The Nominating Committee has the responsibility of
presenting to the Board of Directors of the Fund names of persons to be
nominated to fill vacancies on the Board, which persons are not interested
persons of the Fund (Independent Directors) as defined in Section 2(a)(19) of
the 1940 Act. The members are as follows:
12
<PAGE> 41
Dennis W. Sheehan (Chair)
S. Wesley Fordyce
Joseph Pulitzer IV
AUDIT COMMITTEE. The audit committee has the responsibility of (i) reviewing
the financial statements for the Fund at least quarterly; (ii) making
recommendations regarding the hiring and fees to be paid to the Fund's
independent certified public accountants; (iii) meeting with the Fund's
independent accountants prior to the Board's annual meetings to review the
operations of the Fund; (iv) working with the Fund's independent accountants
regarding any issues related to the operations of the Fund; and (v) otherwise
being available as contacts for the independent accountants for the Fund.
The members are as follows:
S. Wesley Fordyce (Chair)
Joseph Pulitzer IV
Dennis W. Sheehan
VALUATION/PRICING COMMITTEE. The valuation committee has the responsibility
of overseeing the determination of the net asset value of the Fund's
Portfolios and the calculation of the value of any debt instrument, share of
stock, or other Portfolio security or asset, in cooperation with the Fund's
Pricing Agent (if any) and the Investment Adviser's pricing committee. The
members are as follows:
Roy M. Henry (Chair)
S. Wesley Fordyce
COMPENSATION OF MANAGEMENT
The table below describes the compensation estimated to be paid by the Fund
during the current fiscal year to each of the directors who is not an
interested person of the Fund. None of the officers or directors who is an
interested person receives compensation from the Fund.
<TABLE>
<CAPTION>
TOTAL
AGGREGATE PENSION OR ESTIMATED COMPENSATION
COMPENSATION RETIREMENT ANNUAL BENEFITS FROM FUND AND
NAME FROM FUND<F*> BENEFITS ACCRUED UPON RETIREMENT FUND COMPLEX<F*>
<S> <C> <C> <C> <C>
Dennis W. Sheehan $7,000 N/A N/A $7,000
Joseph Pulitzer IV $7,000 N/A N/A $7,000
S. Wesley Fordyce $7,000 N/A N/A $7,000
John M. Soukup $7,000 N/A N/A $7,000
<FN>
<F*>These amounts are estimated.
</TABLE>
13
<PAGE> 42
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
CONTROL PERSONS AND PRINCIPAL HOLDERS
As of the date of this prospectus, First Financial Planners, Inc., a Missouri
corporation, owns all of the outstanding shares of the Fund. First Financial
Planners, Inc. owns all of the outstanding stock of FFP Advisory Services,
Inc. and FFP Securities, Inc., the Investment Adviser and underwriter,
respectively, of the Portfolios. Roy M. Henry and his wife, Meredith,
jointly own 69.26% of the outstanding shares of Class A Common stock of First
Financial Planners, Inc. through a trust and therefore indirectly control the
Fund. First Financial Planners, Inc. has agreed to vote any shares it owns
in the Fund in the same proportion as the shares owned by unaffiliated
shareholders after the effective date of registration of the Fund.
The following persons own 5% or more of the outstanding Class A shares of
First Financial Planners, Inc., and therefore indirectly own shares of the
Fund:
Wesley Krebill
Joyce Krebill
Dominic Pisciotta
Barbara Pisciotta
MANAGEMENT OWNERSHIP
All outstanding shares of the Fund and its Portfolios are currently held by
First Financial Planners, Inc.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER
FFP ADVISORY SERVICES, INC. The Fund and FFP Advisory Services, Inc., a
Missouri corporation, have entered into an Investment Advisory Agreement
appointing FFP Advisory Services, Inc., the Investment Adviser for each
Portfolio. The Investment Adviser is responsible for the management of the
assets of each Portfolio based on the investment objectives and policies of
each Portfolio.
First Financial Planners, Inc. owns all of the outstanding stock of the
Investment Adviser and of FFP Securities, Inc., the underwriter for the Fund.
First Financial Planners, Inc. was incorporated in 1983 and is a holding
company. See the discussion under Control Persons and Principal Holders of
Securities for information on the ownership and control of First Financial
Planners, Inc. See also the table under Management of the Fund for
information about the officers and directors of the Fund who hold positions
as officers or directors with the Investment Adviser, the underwriter and
their parent, First Financial Planners, Inc.
COMPENSATION. The Investment Adviser receives a fee equal to an annual rate
of 1.5% of the average daily net assets of each Portfolio. The Investment
Adviser calculates the fee each day that the New York Stock Exchange is open
for business based on the net asset value determined
14
<PAGE> 43
for that day. The fee accrues daily and is paid monthly. The Fund has only
recently been formed and no fees have been paid to the Investment Adviser under
the Investment Advisory Agreement as of the date of this Statement of
Additional Information.
OPERATING EXPENSES AGREEMENT. Overhead and other costs and expenses that
the Investment Adviser incurs on behalf of all the Portfolios are paid by the
Investment Adviser and are not charged to the individual Portfolios. Costs
that a Portfolio incurs directly are charged to that Portfolio. The
Investment Adviser has entered into an agreement to reimburse each Portfolio
for any fees and expenses (other than brokerage commissions) of a Portfolio
that exceed an annual rate of 2.50% of the average daily net assets of the
Portfolio. This agreement will remain in effect through May 1, 2000, at
which time it may be discontinued or renewed.
SUBADVISER
FFP Advisory Services, Inc. has entered into an agreement appointing
Mendel/Sowell Capital Management, Inc., an Arkansas corporation, the
Subadviser of the FFP Century Venus Portfolio. The Subadviser is responsible
for the management of the assets of the Portfolio based on the investment
objectives and policies of the Portfolio and for deciding which securities to
purchase and sell for the Portfolio. Allan Mendel and William Sowell own all
the outstanding shares of the Subadviser. The Subadviser is not controlled
by or under common control with FFP Advisory Services, Inc.; however, Allan
Mendel is a registered representative of FFP Securities, Inc. The Subadviser
is entitled to receive a fee at an annual rate of .25% of the average daily
net assets of the Portfolio. The fee is payable by FFP Advisory Services,
Inc. and will not be charged to the Fund or the Portfolio.
PRINCIPAL UNDERWRITER
FFP Securities, Inc. has entered into an agreement with the Fund to serve as
the underwriter for shares of the Fund. The underwriter is not entitled to
compensation for its underwriting services under the Underwriting Agreement.
It will receive compensation for providing services to owners of the variable
annuity contracts and variable life insurance policies who have investments
in the Portfolios under the Contract Holder Services Plan and the
Distribution Plans described below. FFP Securities, Inc. maintains its
principal office at 15455 Conway Road, 2nd Floor, Chesterfield, Missouri
63017. See the discussion under Control Persons and Principal Holders of
Securities for information on the relationships among the underwriter, the
Investment Adviser and their affiliates and shareholders. See also the table
under Management of the Fund for information on the officers and directors of
the Fund who hold positions as officers or directors with the underwriter and
its affiliates.
CONTRACT HOLDER SERVICES PLAN
The Fund has adopted a Contract Holder Services Plan on behalf of each
Portfolio. Under the Contract Holder Services Plan, the Fund may pay fees up
to an annual rate of .25% of the average daily net assets of each Portfolio
for providing services to owners of the variable annuity contracts and
variable life insurance policies who have investments in the Portfolios.
These services include ongoing education about the Portfolios, information
about the interest of the holders in the Portfolios, discussion of the return
of each Portfolio, and assistance in asset
15
<PAGE> 44
allocation among the Portfolios. The Fund currently anticipates paying the full
amount of .25% of the assets to FFP Securities, Inc. for shareholder servicing.
All or a portion of the fee may be paid by FFP Securities, Inc. to its
registered representatives who provide the educational and other services to
the contract or policy holders.
RULE 12b-1 PLAN
As described in the prospectus, the Fund has adopted a Distribution Plan on
behalf of each Portfolio under the provisions of Rule 12b-1 of the Securities
and Exchange Commission. Under the Distribution Plan, the Fund may pay fees
up to an annual rate of .75% of the average daily net assets of each
Portfolio (less any amounts paid under the Contract Holder Services Plan
described above) to FFP Securities, Inc. and other broker-dealers or
insurance companies as compensation for marketing shares of the Portfolios.
The Fund may also use the fees under the Distribution Plan to reimburse
certain service costs paid by insurance companies who offer the shares under
their variable annuity contracts or variable life insurance policies.
The aggregate of the fees that can be paid under both the Contract Holder
Services Plan and the Distribution Plan cannot exceed .75% of the average
daily net assets of the Portfolios.
In adopting the Distribution Plan, the Board of Directors of the Fund decided
that the plan would benefit the Fund and the holders of the variable annuity
contracts or variable life insurance policies who have invested assets in the
Portfolios through those contracts and policies. The directors considered
various factors, including the nature of the services provided by the
broker-dealers, the likelihood that the services would increase the amount of
assets held by the Fund, the total fees to be charged to contract and policy
holders by the Fund, and the types and costs of similar services provided by
other funds similarly situated. The Fund intends that the broker-dealers and
their agents who receive these fees will use them to educate potential and
existing variable annuity contract or variable life insurance policy holders
about the Portfolios, assist the holders of the variable annuity contracts or
variable life insurance policies in asset allocation concepts with respect to
their interests in the Portfolios, and provide an ongoing source of
information about the Fund and the Portfolios. The Board of Directors
determined that such services would encourage persons to invest in the
Portfolios and would encourage those with assets in the Portfolios to keep
those assets to the extent they remain suitable for the holder.
To the extent FFP Securities, Inc. receives fees from the Portfolios, the
Investment Adviser and its officers may have an indirect benefit.
ADMINISTRATIVE SERVICES
The Fund and Investment Company Administration L.L.C., a Delaware
corporation, have entered into an Administration Agreement appointing
Investment Company Administration L.L.C. the administrator for the Portfolios
to provide certain administrative services in connection with the management
of the operations of the Portfolios, including the preparation and filing of
the Fund's regulatory reports and securities filings under state and federal
law, the filing of tax returns, and the coordination and payment of Fund and
Portfolio related expenses. The Fund is required to pay Investment Company
Administration L.L.C. the following annual
16
<PAGE> 45
percentages of the average daily net assets of all the Portfolios it
administers on behalf of the Fund for its services under the Agreement:
.10% of the first $200 million
.05% of the next $300 million
.03% of any excess
CUSTODY AND INVESTMENT ACCOUNTING
The Fund has entered into an agreement with Investors Fiduciary Trust Company
to act as custodian of the Portfolio securities and to provide accounting
services for the Fund. The Custodian is a trust company chartered under the
laws of the state of Missouri. Its principal office is located at
801 Pennsylvania Avenue, Kansas City, Missouri 64105.
TRANSFER AGENT
The Fund has entered into an agreement with Investment Company Administration
Corporation, an affiliate of Investment Company Administration L.L.C., the
Fund Administrator, to act as transfer agent for the Fund shares. The
Transfer Agent is a Delaware corporation. Its principal office is located at
4455 East Camelback Road, Phoenix, Arizona 85018.
ACCOUNTANTS
The Fund has appointed Ernst & Young LLP, Sears Tower, 233 South Wacker
Drive, Chicago, Illinois 60606-6301 as the public accountants for the Fund
and its Portfolios. Ernst & Young LLP will be auditing the financial
statements of the Fund and providing related advice to the Fund and the
Directors.
BROKERAGE ALLOCATION AND OTHER PRACTICES
BROKERAGE TRANSACTIONS
GENERAL. The Investment Adviser purchases securities for each Portfolio in
different ways depending on the type of security and the market for it. The
following describes the way in which different kinds of securities would be
purchased by the Portfolios. At the present time, however, the Investment
Adviser expects that the Portfolios will only be purchasing investment
company securities including mutual funds, closed end funds and unit
investment trusts.
MUTUAL FUND SHARES. The Investment Adviser will purchase Shares of mutual
funds directly from the mutual fund distributor or through FFP Securities,
Inc. The Investment Adviser does not expect that the Portfolios will pay any
sales commissions on the purchase of shares of mutual funds for the
Portfolios. The Portfolios may be charged costs for transactions effected
through FFP Securities, Inc. The Investment Adviser has agreed that the
total of all sales loads paid by the Portfolio will not exceed an amount
equal to an annual rate of 1.5% of the average daily net assets of the
Portfolio. For purposes of this limitation, the Investment Adviser will
include all fees paid by the Portfolio under the Distribution Plan the Fund
has adopted under Rule 12b-1.
17
<PAGE> 46
UNIT INVESTMENT TRUSTS AND CLOSED END FUNDS. Shares of unit investment
trusts and closed end funds may be purchased directly from the issuer at the
time of the initial offering. Otherwise, shares are purchased in the
secondary market. Some of these securities are listed on exchanges and they
would be purchased in the same manner as equity securities listed on those
exchanges (see Equities below).
TRANSACTIONS WITH AFFILIATES
The Portfolios will use FFP Securities, Inc. to purchase and sell securities
for them on an agency basis. FFP Securities, Inc. does not act as a market
maker for securities and will not be acting as principal in most transactions
made on behalf of the Portfolios. FFP Securities, Inc. will generally be
reimbursed for its costs in effecting transactions for the Portfolios, but
will not receive commissions on the transactions. In any event, FFP
Securities, Inc. may not receive commissions that would exceed the usual and
customary broker's commission that would be charged if the transaction were
done on an exchange, or 2 percent of the sales price if the sale is part of
a secondary distribution of the security, or 1 percent of the sales price if
it is done otherwise.
BROKERAGE SELECTION
The Investment Adviser is responsible for selecting the broker dealers
through which Portfolio securities are purchased. The Investment Adviser
uses its judgment to decide which broker dealer firm, commodity broker or
other firm will provide the best service to the Portfolio for each security a
Portfolio wants to buy or sell. In deciding which firms provide the best
service or 'best execution', the Investment Adviser considers a number of
factors, including the cost of the service, the price of the security through
that firm, the overall financial quality of the firm, the firm's capacity for
handling the transaction, the speed with which the transaction will be
completed, research provided by the firm on behalf of the Portfolios, the
quality of the reporting for the transaction, and any other services the firm
may provide. Best execution does not mean the lowest price available or
lowest commission, but means the combination of the factors discussed above,
which is appropriate for the specific transaction. The Board of Directors
has overall responsibility for assuring that the Investment Adviser obtains
best execution for Portfolio transactions and for monitoring commissions paid
to broker-dealers by the Portfolios. The Investment Adviser may use its
affiliate, FFP Securities, Inc., for some of the transactions in the
securities purchased or sold by the Portfolios.
RESEARCH SERVICES
The Investment Adviser may select broker-dealers to execute trades for the
Portfolios that provide research and other services to the Investment
Adviser. These services may include research information, analyses and
reports about securities, statistical data, advice on the value of
securities, as well as equipment or services that provide access directly to
such data through third parties. Agreements with these broker-dealers may
provide that the broker-dealer may use a portion of the commissions paid by
the Portfolios to offset the costs of these services. The Investment Adviser
will use research services in managing the assets of the Portfolios. The
Investment Adviser may also use the research services in managing accounts of
clients other than
18
<PAGE> 47
the Portfolios. The Investment Adviser must at all times assure that the
brokerage services of these broker-dealers meet the standards for best
execution discussed above. The Board of Directors of the Fund must also
oversee these arrangements to assure that they meet the standards imposed by
the Securities and Exchange Commission for best execution and that the research
services conform to the guidelines established by the Securities and Exchange
Commission for such services.
BUNCHING AND ALLOCATION OF TRADES
Although the Investment Adviser will make investment decisions independently
for each Portfolio, there will be occasions when more than one client of the
Investment Adviser, including other Portfolios, will be purchasing or selling
the same security. There are occasions when the price for purchasing the
security, or the commissions the Portfolios would pay on the transaction,
would be lower if all the trades were combined (bunched or aggregated) in one
order. The Investment Adviser will bunch trades of different Portfolios when
placing an order with a broker-dealer where the Investment Adviser believes
such aggregation is in the best interests of each Portfolio or client.
There may be other occasions where the Investment Adviser is unable to
purchase all the securities required to fill all the orders of the Portfolios
and other clients. The Investment Adviser must allocate the securities among
the Portfolios and clients in a manner that is fair to all parties. The
Investment Adviser has adopted procedures for bunching and allocating
securities of its clients. These procedures are intended to treat each
client equitably and to assure that the best interests of the Portfolios are
protected. There may be situations where one Portfolio may be disadvantaged
in an isolated case; however, the Investment Adviser believes that all
Portfolios will benefit from the procedures over time.
CAPITAL STOCK AND OTHER SECURITIES
SERIES AND CLASSES OF SHARES
The Fund has the authority to issue an aggregate of 1,000,000,000 shares of
Capital Stock, par value $.001 per share. The 1,000,000,000 shares are
classified in the following series, called Portfolios:
100,000,000 in the FFP Millennium Jupiter Portfolio
100,000,000 in the FFP Millennium Venus Portfolio
100,000,000 in the FFP Millennium Mercury Portfolio
100,000,000 in the FFP Discovery Jupiter Portfolio
100,000,000 in the FFP Discovery Venus Portfolio
100,000,000 in the FFP Discovery Mercury Portfolio
100,000,000 in the FFP Odyssey Jupiter Portfolio
100,000,000 in the FFP Odyssey Venus Portfolio
100,000,000 in the FFP Century Jupiter Portfolio
100,000,000 in the FFP Century Venus Portfolio
100,000,000 in the FFP Conquest Venus Portfolio
100,000,000 in the FFP Conquest Mercury Portfolio
19
<PAGE> 48
The remaining 300,000,000 shares may be classified in one or more additional
Portfolios as the Board of Directors may determine, in its sole discretion.
The shares are not divided into classes; however, the Board of Directors may
classify or reclassify any unissued shares of the Portfolios into separate
classes by the adoption of a resolution designating the relative rights and
preferences of the shares of each such class.
RESTRICTIONS ON PURCHASE AND SALE
You may only purchase shares as investments under variable annuity contracts
or variable life insurance policies. Only insurance companies offering the
variable annuity contracts or variable life insurance policies that use the
Portfolios as investments may purchase shares of the Portfolios. The
insurance companies purchase shares at the direction of the owners of the
variable annuity contract or variable life insurance policy. The insurance
companies sell shares back to the Fund at the direction of the owners of the
variable annuity contracts or variable life insurance policies. The
shareholders cannot transfer the shares to third parties. The Fund does not
issue certificates for shares of the Portfolios.
DIVIDEND RIGHTS
The Board of Directors may, from time to time, declare and pay dividends and
distributions on the shares of each Portfolio, in such form and in such
amount as the Board of Directors, in its sole discretion, may determine. The
Board of Directors may declare dividends monthly, annually, or at other
times. The Board of Directors will attempt to declare dividends so that the
Portfolios comply with the requirements of the Internal Revenue Code for
qualifying as regulated investment companies, but they are not required to do
so and will not be held liable if they do not meet those requirements. The
Portfolios will generally pay all dividends and distributions in cash, though
under extraordinary circumstances they may pay in additional shares. The
Portfolios will value dividends or distributions that it pays in securities
at the current net asset value of the securities determined on the day of
payment.
A Portfolio pays dividends and distributions only to shareholders of that
Portfolio. The Board of Directors establishes a date and a time for
determining the shareholders to whom payment of the dividend or distribution
are made (record date). Dividends and distributions are allocated among the
shareholders of a Portfolio in proportion to the number of shares of the
Portfolio held by each shareholder on the record date; provided, however,
that if there are separate classes of shares that bear different expenses,
the dividend or distribution is adjusted for those charges and allocated
among shareholders of each specific class of shares of the Portfolio. The
Portfolios will not pay dividends or distributions on shares for which the
Portfolio has not received payment or a completed purchase order as of the
record date.
VOTING RIGHTS
Each shareholder is entitled to one vote for each full share and a fractional
vote for each fractional share held in the name of the shareholder on the
books of the Fund. The shareholders of the Portfolios are the insurance
companies issuing the respective variable annuity contracts or variable life
insurance policies that offer the Portfolios as investments. Under Rules of
the Securities and Exchange Commission, the insurance companies, under most
circumstances, must
20
<PAGE> 49
pass the voting rights through to the owners of the variable annuity contracts
or variable life insurance policies. The prospectus for the variable annuity
contracts or variable life insurance policies describes if and how voting
rights are passed to you.
On matters affecting the Fund, all shareholders of all Portfolios vote and
matters generally require approval of a majority of the shareholders of all
of the Portfolios to pass. Certain matters, such as fee issues, that are
different for each Portfolio may require a separate vote by each Portfolio or
class of a Portfolio. In addition, the Board of Directors may decide, on any
matter put to a vote of shareholders, that the issue affects only a single
Portfolio or class of a Portfolio. Under those circumstances, the Board of
Directors may require that the shareholders of the Portfolio or class vote
separately on the matter.
Shareholders ordinarily do not vote to fill vacancies on the Board of
Directors. The remaining directors of the Fund may fill vacancies on the
Board of Directors. However, if at any time less than a majority of the
directors were elected by shareholders, the Fund must call a meeting of
shareholders within 60 days to elect directors. All of the current directors
of the Fund were elected by shareholders.
Most issues will pass if they are approved by a majority of the shareholders
present at a meeting that is properly called and at which a quorum is
present. Rules of the Securities and Exchange Commission state that the Fund
or a Portfolio may do the following only if approved by a 'majority of
shareholders' as defined by Rules of the Securities and Exchange
Commission:
* execute an investment advisory or subadvisory contract or any
amendment to it;
* adopt or amend a service or distribution plan under Rule 12b-1 of
the Securities and Exchange Commission;
* amend any policy that the Portfolio has stated is fundamental;
* change a Portfolio to nondiversified; or
* change the fees charged by the Portfolio.
The Investment Company Act of 1940, which is the law governing mutual funds,
defines a majority vote of shareholders for the purpose of voting on these
matters to mean the vote in person or by proxy of shareholders holding 67% or
more of the shares of the Portfolio present in person or by proxy at a
meeting of shareholders, if the holders of more than 50% of the outstanding
shares are represented in person or by proxy at the meeting. In the
alternative, the vote of a majority of shareholders means the vote in person
or by proxy of shareholders holding more than 50% of all the outstanding
shares. The Portfolio can use whichever method is less to determine if the
matter has passed.
The presence in person or by proxy of the holders of one-third of the shares
entitled to vote at a meeting of shareholders of the Fund, or if the meeting
is of a Portfolio or class, the presence of holders of one-third of the
shares of the Portfolio or class, constitutes a quorum. Once a quorum is met
at a properly called meeting of shareholders, all business may be addressed.
21
<PAGE> 50
LIQUIDATION RIGHTS
Each share of a Portfolio represents an equal proportionate interest in the
assets of the Portfolio, subject to the liabilities of the particular
Portfolio. If the Board of Directors establishes classes of shares in a
Portfolio, each class would be charged with its respective expenses. Shares
of one Portfolio do not have any rights with respect to the assets of any
other Portfolio. In the event any Portfolio is liquidated, the shareholders
of the Portfolio will receive a proportionate share of the assets of the
Portfolio reduced by the liabilities of the Portfolio. If the Portfolio has
been divided into classes, the amount available for liquidation is determined
by class. Shareholders of any class of a Portfolio will receive their
proportionate share of the net assets of the class. If the Fund is
liquidated, all Portfolios and classes of Portfolios will be liquidated in
the same manner. In no event will the fact that a shareholder owns shares in
one Portfolio entitle that shareholder to participate in a distribution of
the assets of any other Portfolio.
PREEMPTIVE AND CONVERSION RIGHTS
Shares have no preemptive or conversion rights.
REDEMPTION
The Fund does not have the right to redeem shares from shareholders except at
the request of shareholders.
LIABILITIES AND ASSESSMENTS
The Fund will not issue shares unless it has received full payment for those
shares. The shares are not subject to assessments for any additional costs
of the Fund or the Portfolios.
AUTHORITY OF BOARD OF DIRECTORS
Under the Articles of Incorporation of the Fund, the Board of Directors has
full power and authority to establish and amend the preferences, rights,
voting powers, restrictions, limitations on dividends, qualifications, terms
and conditions of redemption of the shares of the Portfolios, as the Board of
Directors, in its sole discretion, determines from time to time. Certain
provisions of the laws and rules governing mutual funds limit this authority.
Therefore, under most circumstances, changes that would materially, adversely
affect shareholders require the approval of shareholders or would only apply
to shares issued after the change has been adopted by the directors and the
shareholders have been notified.
PURCHASE, REDEMPTION AND PRICING OF SHARES
PURCHASE OF SHARES
As discussed above, shares may only be purchased as investments under
variable annuity contracts or variable life insurance policies. Only
insurance companies offering the variable annuity contracts or variable life
insurance policies that use the Portfolios for investments may purchase
shares of the Portfolios. The insurance companies purchase shares at the
direction of the owners of the variable annuity contract or variable life
insurance policy as described in the
22
<PAGE> 51
prospectus for the applicable variable annuity contract or variable life
insurance policy. There are no sales charges for the purchase of shares and
there are no special plans for the purchase of shares. Purchase orders from
the insurance companies generally must be received by 4:00 p.m. Eastern time or
the close of business of the New York Stock Exchange, if earlier, to be
purchased at the net asset value determined for the Portfolio for that day.
Under certain circumstances, a Portfolio may accept purchase orders at the net
asset value determined for that day if the order is received from the insurance
company after the deadline, but before the opening of the New York Stock
Exchange on the next business day. The insurance company must have received
the order directing the investment in the Portfolio from the annuity or life
insurance policy owner before the close of the New York Stock Exchange.
OFFERING PRICE
As described in the prospectus, the Investment Adviser calculates the value
of each share of each Portfolio (net asset value per share) at 4:00 p.m.
every day that the New York Stock Exchange is open for business. If the New
York Stock Exchange closes before 4:00 p.m., the net asset value is
calculated when the Exchange closes. The Investment Adviser takes the value
of all investments, cash and other assets held by the Portfolio at the end of
the day, subtracts all liabilities, and divides the total by the total number
of shares outstanding.
The Investment Adviser determines the value of the assets of the Portfolio by
obtaining current market prices for each security for that day from
independent sources. The Board of Directors has adopted a valuation schedule
for each of the securities included in the Portfolios, indicating how the
price should be determined. In general, prices for mutual fund shares will
be obtained from NASDAQ for listed open-end funds and from the individual
fund's transfer or pricing agent for funds that are not listed on NASDAQ.
Prices for other securities that are listed on the stock exchanges or are
otherwise actively traded will be obtained from independent pricing services.
Short-term debt instruments maturing in less than 60 days are valued at
amortized cost. Securities for which market quotations are not available are
valued at their fair value. Where possible, the Investment Adviser will
obtain two or more independent market quotations for each illiquid or other
security that does not have a readily determined market value. The
Investment Adviser may use other reasonable methods to determine the value of
securities for which there is no ready market. The value of the assets of
the Portfolio so determined is then increased by any accrued but uncollected
dividends or interest earned on the securities it holds. The total value is
then reduced by all liabilities including accrued, but unpaid liabilities
such as the investment advisory fee.
REDEMPTION IN KIND
Each Portfolio has the right under the Fund's Articles of Incorporation to
issue securities owned by the Portfolio as payment for shares tendered for
redemption. The Fund intends to file a notice on behalf of the Portfolios
under Rule 18f-1 of the Securities and Exchange Commission. Under that
notice, the Fund will agree that, irrespective of its ability to redeem
shares by issuing securities, each Portfolio will pay any shareholder cash
for redemptions during any ninety-day period up to the lesser of $250,000 or
1% of the net asset value of the Portfolio at the beginning of the ninety day
period.
23
<PAGE> 52
TAXATION OF THE FUND
Each Portfolio intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986. If a Portfolio fails to
qualify as a regulated investment company under Subchapter M, the Portfolio
would be taxed on its net investment income and net capital gains without
being able to deduct dividends and distributions paid to shareholders. The
tax liability would reduce amounts available for distribution under your
variable annuity contract or variable life insurance policy and would reduce
the total return of the Portfolio. The Portfolios make every effort to meet
the requirements of Subchapter M, which include earning 90% of their income
from dividends, interest, and gains from the sale of securities; distributing
at least 90% of their net income during each year; and meeting diversification
tests.
The variable annuity contract or variable life insurance policy you have
purchased must also meet certain requirements to allow the deferral of income
tax on earnings of the Portfolio through the annuity contract or life
insurance policy. One of those requirements is that the assets of the
annuity contract or life insurance policy be adequately diversified as
defined by the Internal Revenue Code and interpretations and regulations
under the Code. This diversification requirement is different from the
diversification requirement under Subchapter M.
UNDERWRITERS
DISTRIBUTION OF SECURITIES
The only purchasers of the shares of the Portfolios are insurance companies
who issue the variable annuity contracts or variable life insurance policies
that include the Portfolios as investments. The insurance companies purchase
shares on your behalf when you direct the insurance company to invest your
money in a Portfolio under your variable annuity contract or variable life
insurance policy. Rules of the Securities and Exchange Commission require
all sales of the shares of the Portfolios to be made through an underwriter.
Therefore, the Fund, on behalf of the Portfolios, has entered into an
underwriting agreement with FFP Securities, Inc., an affiliate of the
Investment Adviser, appointing FFP Securities to serve as the underwriter for
the sale of shares to the insurance companies. The underwriter has agreed to
use its best efforts to sell the shares of the Portfolios on a continuous
basis, without compensation.
COMPENSATION
The underwriter is not entitled to and has not received any commissions or
other compensation under the terms of the underwriting agreement for selling
the shares of the Portfolios. However, the Fund will pay the underwriter and
its registered representatives fees at an annual rate of up to .75% of the
average daily net assets of the Portfolios under the Distribution Plan and
Contract Holder Services Plan described above in the Section Investment
Advisory and Other Services.
CALCULATION OF PERFORMANCE DATA
The Portfolios have only recently been formed and do not have a sufficient
operating history to advertise performance. The performance of the
Portfolios depends on a number of factors, including the success of the
Investment Adviser in selecting securities that meet the objectives of
24
<PAGE> 53
the Portfolios. The performance of the Portfolios varies daily as net earnings
and the value of the assets in the Portfolio vary. The performance of a
mutual fund is commonly measured as total return. The Portfolios will use
the following formula to calculate performance when applicable:
The average annual compounded rate of return (denoted by T below) is the rate
that would equate the initial amount invested to the ending redeemable value
according to the formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1000 payment made at the
beginning of the 1, 5, or 10 year periods at the end of the 1, 5, or 10 year
periods (or fractional portion thereof)
You may compare the performance of the Portfolios to that of other funds that
are comparable to the Portfolios or to indices which represent the asset
classes in which the assets of the Portfolios are invested. You may also use
financial publications and other sources to obtain a complete view of the
performance of the Portfolios. When comparing performance, you should
consider all factors that are relevant to performance, such as the securities
that make up the index used or that are held by funds to which the Portfolios
are compared, the actual type of assets held by other funds to which the
Portfolios are compared, and the methods used to value the assets of other
funds. You should also remember that indices do not incur any costs and
therefore the performance reported for an index may be higher than that of a
Portfolio which has management, service and other costs and expenses.
The Portfolio may use information provided by financial services and/or
indices in advertising or sales materials. The financial services include:
* Lipper Analytical Services, Inc.
* Standard & Poor's Daily Stock Price Index of 500 Common stocks
* Morningstar, Inc.
Advertisements and other sales literature for the Portfolios may quote total
returns which are calculated for periods other than 1-, 5- and 10-year
periods required by the Rules of the Securities and Exchange Commission or
may quote returns that do not reflect the deduction of all expenses incurred
by a Portfolio. The Investment Adviser may use these returns in advertising
if the Investment Adviser believes the nonstandard returns are useful.
Nonstandard returns are always accompanied by total returns calculated as
required by Rules of the Securities and Exchange Commission, which require
performance to be calculated for 1-, 5- and 10-year periods with the
deduction of all expenses and the assumption that all dividends and
distributions are reinvested.
25
<PAGE> 54
You should distinguish the performance of the Portfolios from the return of
the Portfolio you receive through your variable annuity contract or variable
life insurance policy. The fees and charges of your contract or policy
reduce those rates of return. Total returns for each Portfolio through the
variable annuity contract or variable life insurance policy are available
from the insurance companies from which you purchased your contract or
policy.
FINANCIAL STATEMENTS
[To be provided by amendment]
26
<PAGE> 55
PART C: OTHER INFORMATION
<TABLE>
ITEM 23. EXHIBITS
<C> <S>
99.a Amended and Restated Articles of Incorporation of FFP New Horizons
Fund, Inc.
99.b Bylaws of FFP New Horizons Fund, Inc.
99.c Included in 99.a and 99.b, above.
99.d Investment Advisory Agreements
99.d(1) Investment Advisory Agreement of FFP New Horizons Fund, Inc.
99.d(2) Form of Subadvisory Agreement between FFP Advisory Services, Inc. and
Mendel/Sowell Capital Management, Inc.
99.e Underwriting and Service Agreement of FFP New Horizons Fund, Inc.
99.f None
99.g Custody and Investment Accounting Agreement between Investors
Fiduciary Trust Company and FFP New Horizons Fund, Inc.
99.h Material Contracts
99.h(1) Form of Administration Agreement between FFP New Horizons Fund, Inc.
and Investment Company Administration LLC
99.h(2) Form of Transfer Agent Agreement between FFP New Horizons Fund, Inc.
and Investment Company Administration Corporation.
99.h(3) Form of Operating Expenses Agreement of FFP New Horizons Fund, Inc.
99.h(4) Form of Participation Agreement between FFP New Horizons Fund, Inc.
and First Variable Life Insurance Company
99.h(5) Form of Service Agreement between FFP New Horizons Fund, Inc. and
First Variable Life Insurance Company
99.h(6) Form of Contract Holder Services Plan of FFP New Horizons Fund, Inc.
99.h(7) Code of Ethics and Insider Trading Policy of FFP New Horizons Fund,
Inc.
99.h(8) Year 2000 Project Plan
99.i Opinion and consent of Law Offices of Robert C. Bright, A Professional
Corporation<F*>
99.j None
99.k None
99.l Subscription of First Financial Planners, Inc.<F*>
99.m Distribution Plan of FFP New Horizons Fund, Inc.
99.n Financial Data Schedules
99.n(1) FFP Discovery Mercury Portfolio
99.n(2) FFP Discovery Venus Portfolio
99.n(3) FFP Odyssey Venus Portfolio
99.n(4) FFP Century Venus Portfolio
99.n(5) FFP Millennium Mercury Portfolio
99.o Not applicable.
<FN>
<F*>To be furnished by amendment.
</TABLE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Roy M. Henry, President and a director of the Fund, and Meredith E. Henry own
100% of the Roy M. Henry and Meredith E. Henry Living Trust, a Missouri
trust, which owns 69.44% of the Class A (voting) common stock of First
Financial Planners, Inc., a Missouri corporation which
<PAGE> 56
owns 100% of the outstanding voting common stock of the following Missouri
corporations which are included in the consolidated financial statements of
First Financial Planners, Inc.:
FFP New Horizons Fund, Inc.
FFP Advisory Services, Inc.
FFP Securities, Inc.
FFP Tax & Accounting, Inc.
FFP Insurance Services, Inc.
FFP Estate Plans, Inc.
FFP Travel Services, Inc.
FFP Real Estate Services, Inc.
FFP Energy Services, Inc.
US Discount, Inc.
FFP Financial Planning Development, Inc.
InvestWatch, Inc.
FFP Securities of Alabama, Inc., an Alabama corporation
FFP Securities of Massachusetts, Inc. a Massachusetts
corporation
FFP Securities of Mississippi, Inc., a Mississippi corporation
FFP Securities of Nevada, Inc., a Nevada corporation
FFP Securities of New Mexico, Inc., a New Mexico corporation
FFP Securities of Ohio, Inc., an Ohio corporation
FFP Securities of Texas, Inc., a Texas corporation
First Financial Planners, Inc. and Roy M. Henry are general partners of the
following Missouri limited partnerships and the percentage ownership of First
Financial Planners, Inc. as a limited partner is indicated in brackets where
that interest is 5% or greater:
Occasion Unique [7.67%]
Occasion Unique - deux [7.43%]
Occasion Unique - trois [8.58%]
Occasion Unique - quatre [9.41%]
Occasion Unique - cinq [11.62%]
Occasion Unique - six [6.81%]
Occasion Unique - sept [7.26%]
Occasion Unique - huit
Credit d'Impots
Credit d'Impots - deux
First Financial Planners, Inc. Subordinate Note Offering A
First Financial Planners, Inc. Subordinate Note Offering B
First Financial Planners, Inc. Subordinate Note Offering C
First Financial Planners, Inc. Subordinate Note Offering D
First Financial Planners, Inc. Subordinate Note Offering E
First Financial Planners, Inc. Subordinate Investment Note
Offering
Government Backed Note Investment Note Offering
FFP Real Estate Services, Inc. Government Collateralized
Investment Note Offering
FFP Energy Services, Inc. Government Collateralized Investment
Note Offering
Stock de Premier Order-cinq (Blue Chip Stock-Five)
2
<PAGE> 57
Stock de Premier Order-dix (Blue Chip Stock-Ten)
Stock de Premier Order-Five/Ten (Blue Chip Stock - Five/Ten)
3D Seismic Energy Partners 1996A, L.P. [12%]
3D Seismic Energy Partners 1997A, L.P. [12%]
High Tech Energy Partners 1997 II [12%]
High Tech Energy Partners 1997 III [12%]
High Tech Energy Partners 1998 I [12%]
High Tech Energy Partners 1998 II [12%]
First Financial Planners, Inc. is a general partner of the following Missouri
Limited Partnerships and owns 80% of the outstanding limited partnership
interests:
The Select S&P Industrial 15 [80%]
The Value Line Growth 25 [80%]
FFP Advisory Services, Inc. is a general partner of Municipal Growth Shares,
L.P., a Missouri Limited Partnership and owns 80% of the outstanding limited
partnership interests.
FFP Securities, Inc. is a general partner of New Realty Shares, a Missouri
Limited Partnership, and owns 80% of the outstanding limited partnership
interests.
Roy M. Henry owns 85% of Venture Capital Marketing Associates, Inc., a
Missouri corporation; Roy M. Henry owns 100% of R&M Planning, Inc., a Missouri
corporation.
ITEM 25. INDEMNIFICATION
The officers and directors of the Fund may be indemnified under the
provisions of the Articles of Incorporation of the Fund and under the
corporate laws of the State of Maryland. Those provisions generally
indemnify the officers and directors for any liabilities or claims made by
any parties against them other than acts constituting willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of their office. The Fund is authorized to advance reasonable
costs to the officers and directors in any matter involving a claim against
such officer or director, if it is determined that the party is reasonably
likely to be entitled to indemnification. The Underwriting and Service
Agreement and the Investment Advisory Agreement entered into by the Fund on
behalf of the Portfolios with FFP Securities, Inc. and FFP Advisory Services,
Inc., respectively, provide for indemnification of the underwriter and
investment adviser, their officers, directors and controlling persons for
liabilities incurred in connection with performing their duties under those
agreements except for acts resulting from the willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of their obligations under those agreements. The directors have adopted a
policy that indemnification must be in compliance with the provisions of the
Investment Company Act of 1940.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of FFP
New Horizons Fund, Inc. pursuant to the foregoing provisions, or otherwise,
FFP New Horizons Fund, Inc. has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event
3
<PAGE> 58
that a claim for indemnification against such liabilities (other than the
payment by the Fund of expenses incurred or paid by a director, officer or
controlling person of the Fund in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Fund will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by the Fund is against public policy as expressed in the
Securities Act of 1933 and the Fund will be governed by the court's final
adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
<TABLE>
<CAPTION>
OTHER BUSINESS, PROFESSION, OTHER POSITIONS AS DIRECTOR,
NAME AND POSITION WITH VOCATION OR EMPLOYMENT OFFICER, EMPLOYEE, PARTNER OR
INVESTMENT ADVISER SINCE JANUARY 1, 1996 TRUSTEE
<S> <C> <C>
Roy M. Henry,<F*> President and President and Director of FFP
Chief Executive Officer Securities, Inc., First Financial
Planners, Inc., FFP Estate Plans,
Inc., FFP New Horizons Fund, Inc.
Robert H. Rodermund, Jr.,<F*> Senior Vice President and Senior/
Senior Vice President and Secretary Secretary of FFP Securities,
Inc.; Vice Chairman and
Secretary, First Financial
Planners, Inc.
Robin H. Rodermund,<F*> Senior Secretary, FFP New Horizons Fund,
Vice President Inc.
Christopher V. Meitz, Director FFP New Horizons Vice President, Assistant
compliance officer Fund, Inc. (6/98-12/98) Secretary and Assistant Treasurer
of FFP New Horizons Fund, Inc.
Bryan P. Davis, chief financial Director, FFP New Horizons Chief Financial Officer and
officer Fund, Inc. (6/98-12/98) Secretary, FFP Securities, Inc.;
Vice President, Treasurer and
Assistant Secretary of FFP New
Horizons Fund, Inc.
<FN>
<F*> Robin H. Rodermund is the daughter of Roy Henry; Robin and Robert
Rodermund are husband and wife.
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) None.
4
<PAGE> 59
(b)
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES WITH POSITIONS AND OFFICES WITH
BUSINESS ADDRESS<F*> UNDERWRITER FUND
<S> <C> <C>
Roy M. Henry Director, President, Chief Director and President
Executive Officer and
Treasurer
Robert H. Rodermund, Jr. Vice Chairman, Sr. Vice None
President
Bryan P. Davis Chief financial officer and Vice President, Treasurer and
Secretary Assistant Secretary
<FN>
<F*> The principal business address of all of the officers listed is FFP
Securities, Inc., 15455 Conway Road, Chesterfield, Missouri 63017.
</TABLE>
(c) None
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts and records of the Fund required under Section 31(a) will be
kept as follows:
(1) The records required under Rule 270.31a-1(b)(1) are kept by
Investment Company Administration Corporation, 4455 East
Camelback Road, Suite E261 Phoenix, Arizona 85018 or by Robin
H. Rodermund, FFP Advisory Services, Inc., 15455 Conway Road,
Chesterfield, Missouri, 63017.
(2) The records required under Rule 270.31a-1(b)(2), (3), (5),
(6), (7) (8), (9), (10) are kept by Investors Fiduciary Trust
Company, 801 Pennsylvania Avenue, Kansas City, Missouri 64105
or by Robin H. Rodermund, FFP Advisory Services, Inc., 15455
Conway Road, Chesterfield, Missouri, 63017.
(3) The records required under Rule 270.31a-1(b)(4), (11) and (12)
are maintained by Robin H. Rodermund, FFP Advisory Services,
Inc., 15455 Conway Road, Chesterfield, Missouri, 63017.
ITEM 29. MANAGEMENT SERVICES
None
ITEM 30. UNDERTAKINGS
Not applicable.
5
<PAGE> 60
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Fund has duly caused this registration statement to
be signed on its behalf by the undersigned, duly authorized, in the City of
Chesterfield, and State of Missouri on the 22nd day of February, 1999.
Fund: FFP NEW HORIZONS FUND, INC.
By: /s/ ROY M. HENRY
------------------------------------
Roy M. Henry, President and Director
Pursuant to the requirements of the Securities Act of 1933 this registration
statement has been signed below by the following persons in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ DENNIS W. SHEEHAN
- -------------------------
Dennis W. Sheehan Director February 22, 1999
/s/ JOSEPH PULITZER IV
- -------------------------
Joseph Pulitzer IV Director February 22, 1999
/s/ S. WESLEY FORDYCE
- -------------------------
S. Wesley Fordyce Director February 22, 1999
/s/ JOHN M. SOUKUP
- -------------------------
John M. Soukup Director February 22, 1999
</TABLE>
6
<PAGE> 61
<TABLE>
EXHIBIT INDEX
<C> <S> <C>
99.a Amended and Restated Articles of Incorporation of FFP New Horizons
Fund, Inc.
99.b Bylaws of FFP New Horizons Fund, Inc.
99.c Included in 99.a and 99.b, above.
99.d Investment Advisory Agreements
99.d(1) Investment Advisory Agreement of FFP New Horizons Fund, Inc.
99.d(2) Form of Subadvisory Agreement between FFP Advisory Services, Inc. and
Mendel/Sowell Capital Management, Inc..
99.e Underwriting and Service Agreement of FFP New Horizons Fund, Inc
99.f None
99.g Custody and Investment Accounting Agreement between Investors
Fiduciary Trust Company and FFP New Horizons Fund, Inc.
99.h Material Contracts
99.h(1) Form of Administration Agreement between FFP New Horizons Fund, Inc.
and Investment Company Administration LLC.
99.h(2) Form of Transfer Agent Agreement between FFP New Horizons Fund, Inc.
and Investment Company Administration Corporation.
99.h(3) Form of Operating Expenses Agreement of FFP New Horizons Fund, Inc.
99.h(4) Form of Participation Agreement between FFP New Horizons Fund, Inc.
and First Variable Life Insurance Company
99.h(5) Form of Service Agreement between FFP New Horizons Fund, Inc. and
First Variable Life Insurance Company.
99.h(6) Form of Contract Holder Services Plan of FFP New Horizons Fund, Inc.
99.h(7) Code of Ethics and Insider Trading Policy of FFP New Horizons Fund,
Inc.
99.h(8) Year 2000 Project Plan
99.i Opinion and Consent of Law Offices of Robert C. Bright, a
Professional Corporation. <F*>
99.j None
99.k None
99.l Subscription of First Financial Planners, Inc. <F*>
99.m Distribution Plan of FFP New Horizons Fund, Inc.
99.n Financial Data Schedules
99.n(1) FFP Discovery Mercury Portfolio
99.n(2) FFP Discovery Venus Portfolio
99.n(3) FFP Odyssey Venus Portfolio
99.n(4) FFP Century Venus Portfolio
99.n(5) FFP Millennium Mercury Portfolio
<FN>
<F*>To be furnished by amendment.
</TABLE>
<PAGE> 1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
FFP NEW HORIZONS FUND, INC.
The undersigned, Robert C. Bright, hereby adopts the following Amended and
Restated Articles of Incorporation on behalf of FFP New Horizons Fund, Inc.
under the provisions of SEC.2-603 of the Corporations and Associations
Article of the General Laws of the State of Maryland, since no shares have
been issued or subscribed for and no organizational meeting of the Board of
Directors has been held:
1. INCORPORATOR. Robert C. Bright, whose address is 211 North Robinson,
Suite 810, Oklahoma City, Oklahoma 73102, states that he is the sole
Incorporator of this Corporation; and
(I) he is over eighteen years of age;
(II) he is forming this Corporation under the General Laws of the State
of Maryland.
2. NAME. The name of the Corporation is FFP NEW HORIZONS FUND, INC.
3. PURPOSE. The Corporation is formed for the purpose of acting as an
open-end, management investment company as defined by the Investment
Company Act of 1940, as amended, and to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations
of a similar character by the General Laws of the State of Maryland now
or hereafter in force.
4. ADDRESS. The address of the principal office of the Corporation in the
State of Maryland is 300 East Lombard Street, Suite 1400, Baltimore,
Maryland 21202.
5. RESIDENT AGENT. The name and address of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust
Incorporated, 300 East Lombard Street, Suite 1400, Baltimore, Maryland
21202.
6. AUTHORIZED CAPITAL.
(I) The Corporation has the authority to issue an aggregate of
1,500,000,000 shares of Capital Stock (Shares).
(II) The 1,500,000,000 Shares are classified in the following series
(Portfolios):
100,000,000 in the FFP Millennium Jupiter Portfolio
100,000,000 in the FFP Millennium Venus Portfolio
100,000,000 in the FFP Millennium Mercury Portfolio
100,000,000 in the FFP Discovery Jupiter Portfolio
100,000,000 in the FFP Discovery Venus Portfolio
<PAGE> 2
100,000,000 in the FFP Discovery Mercury Portfolio
100,000,000 in the FFP Odyssey Jupiter Portfolio
100,000,000 in the FFP Odyssey Venus Portfolio
100,000,000 in the FFP Century Jupiter Portfolio
100,000,000 in the FFP Century Venus Portfolio
100,000,000 in the FFP Conquest Venus Portfolio
100,000,000 in the FFP Conquest Mercury Portfolio
300,000,000 Shares may be classified in one or more additional
Portfolios as the Board of Directors may determine, in its sole
discretion, as evidenced by resolution adopted by the Board of
Directors. The Board of Directors may classify or reclassify any
unissued Shares of the Portfolios into separate classes by the
adoption of a resolution of the Board designating the relative
rights and preferences of the Shares of each such Class.
(III) The par value of each Share of each Portfolio is $0.001.
(IV) The aggregate value of all Shares is $1,500,000.
7. PREFERENCES, RIGHTS, POWERS, RESTRICTIONS OF SHARES. The Board
of Directors has full power and authority to establish and amend the
preferences, rights, voting powers, restrictions, limitations as to
dividends, qualifications, terms and conditions of redemption of the
Shares of the Portfolios as the Board of Directors, in its sole
discretion, determines from time to time by resolution adopted by it.
Until any change is made by the Board of Directors, each Share of each
Portfolio of the Corporation has the following preferences, rights,
powers, restrictions, limitations, qualifications and terms and
conditions of redemption:
(I) Dividends and Distributions.
(a) Authority to Declare. The Board of Directors may, from time
to time, declare and pay dividends and distributions on the
Shares of each Portfolio, in such form and in such amount, as
the Board of Directors, in its sole discretion determines.
The Board of Directors may declare dividends daily or less
frequently. It may declare dividends by adopting a standing
resolution once or more often, as it decides in its
discretion.
(b) Source of Dividends. All dividends on Shares of a Portfolio
shall be paid only out of the income of that Portfolio;
capital gains distributions on Shares of a Portfolio shall be
paid only out of the capital gains of that Portfolio; in each
case, after providing for actual and accrued liabilities of
the Portfolio. Dividends and distributions may be paid in
cash, property, additional Shares or any combination of cash,
property and Shares, as the Board of Directors determines.
Dividends or distributions paid in Shares will be paid at the
current net asset value of the Shares as defined in these
Articles.
(c) Allocation Among Shareholders. Dividends and distributions on
Shares of a
2
<PAGE> 3
Portfolio may be paid only to the Shareholders of that
Portfolio. The Board of Directors will establish a date and a
time for determining the Shareholders to whom payment of the
dividend or distribution will be made (record date). Dividends
and distributions will be allocated among the Shareholders of a
Portfolio in proportion to the number of Shares of the
Portfolio held by each Shareholder on the record date; except,
however, if there are separate Classes of Shares that bear
different expenses, the dividend or distribution will be
adjusted for those charges and allocated among Shareholders of
each specific Class of Shares of the Portfolio. The Board of
Directors may declare that no dividend or distribution will be
paid on Shares for which payment or a completed purchase order
has not been received by the Corporation as of the record date.
(d) Tax Qualification. In addition to the above, the Board of
Directors has the power and authority to declare and pay any
dividends or distributions that it believes, in its sole
discretion, to be necessary or prudent to enable the
Corporation and each Portfolio to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as
amended (Code) or under any successor statute or any
comparable state or federal statute, and the regulations
promulgated under any such statutes. The Board of Directors
also has the power and authority to take any action it
reasonably believes necessary to avoid incurring any liability
on behalf of the Corporation or any Portfolio for federal
income tax for any tax year. Nothing in this Article requires
the Board of Directors to declare and pay dividends or
distributions to avoid the payment of federal income tax or to
qualify the Corporation as a regulated investment company
under the Code.
(II) REDEMPTION BY THE CORPORATION. The Corporation may redeem
all the Shares of any Shareholder who holds less than a certain,
specified minimum amount of Shares in the Corporation or a
Portfolio, if authorized by resolution of the Board of Directors.
The Corporation may also redeem any Shares if the Board of
Directors, in its discretion, decides that the redemption is
necessary to prevent the Corporation from being classified as a
personal holding company as defined in the Code. A Shareholder
must be given reasonable notice of the Corporation's intention to
redeem and, if applicable, be given the right to purchase
additional Shares to meet the specified minimum. Any redemption
of Shares must be at the net asset value of the Shares determined
for the date of redemption.
(III) REDEMPTION BY SHAREHOLDERS. Any Shareholder has the right to
redeem some or all of his, her or its Shares by tendering those
Shares to the Corporation at such times and places, and subject to
such conditions, as the Board of Directors specifies in a
resolution adopted by it. Shares generally will be redeemed at
the net asset value of the Shares determined on the date of
redemption, subject to any charges the Board of Directors might
impose on redemption. The Board of Directors may redeem Shares by
a distribution of the Corporation's or a Portfolio's assets in
kind, if a redemption in cash would adversely affect the
Corporation. Any distribution of assets in kind must meet any
applicable regulatory requirements, A Shareholder's
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right to redeem Shares may be suspended or delayed in the event the
Corporation is required to do so by any regulatory authority having
jurisdiction over the Corporation. A Shareholder's right to
redemption may also be suspended or delayed if the Corporation does
not have funds or property legally available to make the
redemption.
(IV) VOTING RIGHTS. Each Shareholder is entitled to one vote for
each full Share and a fractional vote for each fractional Share
held in the name of the Shareholder on the books of the
Corporation. The presence in person or by proxy of the holders of
one-third of the Shares entitled to vote at a meeting of
Shareholders of the Corporation, or if the meeting is of a
Portfolio or Class, the presence of holders of one-third of the
Shares of the Portfolio or Class, will constitute a quorum, unless
applicable law or the Bylaws requires a greater percentage. Once
a quorum is met at a properly called meeting of Shareholders,
matters may be approved as follows:
(a) Corporate Matters. On matters requiring approval of all
Shareholders of the Corporation, each Portfolio will vote
separately and matters will require approval of all of the
Portfolios to be approved. Each Portfolio will vote based on
the vote of a majority of its Shareholders casting votes,
unless a larger percentage is required under applicable laws
or rules, or under the Bylaws of the Corporation or by
resolution of the Board of Directors.
(b) Portfolio or Class Matters. On certain matters, applicable
laws or rules, or the Bylaws of the Corporation, may require
that a separate vote be taken by a Portfolio or a Class of a
Portfolio. In addition, the Board of Directors may decide, on
any matter put to a vote of Shareholders, that it affects only
a single Portfolio or Class of a Portfolio. In any of those
circumstances, the matter will be submitted separately to the
Portfolio or Class. The matter will be approved by the
Portfolio or Class if it is approved by a majority of the
Shareholders of the affected Portfolio or Class casting votes,
unless a larger percentage is required under applicable laws
or rules, or under the Bylaws of the Corporation or by
resolution of the Board of Directors.
(V) NET ASSET VALUE. The net asset value per Share of a Portfolio
or Class of a Portfolio will be determined, from time to time, by
the Board of Directors as required by the Investment Company Act
of 1940 (1940 Act). Generally, the net asset value will be
determined by taking the value of the assets of the Portfolio or
Class, deducting the liabilities of the Portfolio or Class
(accrued and actual, but exclusive of capital stock and surplus).
The net asset value per Share is then calculated by taking the net
asset value of the Portfolio or Class and dividing that amount by
the number of Shares outstanding in the Portfolio or Class. The
assets and liabilities of a Portfolio or Class are determined as
set forth in subsections VI And VII, below.
(VI) ASSETS. All consideration received by the Corporation for the
sale and/or issuance of Shares of a particular Portfolio, and all
assets in which the consideration is invested or reinvested, all
income, earnings, profits, and proceeds from the consideration and
assets, including any proceeds from the sale, exchange or
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liquidation of the assets, and any amounts earned on, or payments
from, any reinvestment of those proceeds, in whatever form,
irrevocably belong to that Portfolio. In addition, any assets,
earnings, payments, income, profits or other amounts received by
the Corporation, which are not readily identifiable as belonging
to a particular Portfolio, will be allocated by the Board of
Directors among the Portfolios in any manner that the Board of
Directors, in its sole discretion, deems fair and equitable. Any
such allocation by the Board of Directors will be conclusive and
binding on the Shareholders of all Portfolios, for all purposes,
and all items so allocated irrevocably belong to the Portfolio to
which they are allocated.
(VII) LIABILITIES. All expenses, costs, charges and reserves
attributable to a particular Portfolio will be charged to and
borne by that Portfolio. In addition, any general liabilities,
expenses, costs, charges or reserves of the Corporation, which are
not readily identifiable as belonging to a particular Portfolio,
will be allocated by the Board of Directors among the Portfolios
in any manner that the Board of Directors, in its sole discretion,
deems fair and equitable. Any such allocation by the Board of
Directors will be conclusive and binding on the Shareholders of
all Portfolios, for all purposes, and all items so allocated
irrevocably belong to the Portfolio to which they are allocated.
(VIII) INCOME. The Board of Directors has full power and discretion, to
the extent not inconsistent with the laws of the State of
Maryland, to determine which amounts received by a Portfolio will
be treated as income and which will be treated as capital. Any
such allocation by the Board of Directors will be conclusive and
binding for all purposes.
(IX) LIQUIDATION. In the event any Portfolio is liquidated, the
Shareholders of the Portfolio will receive a proportionate share
of the assets of the Portfolio reduced by the liabilities of the
Portfolio. If the Portfolio has been divided into Classes, the
amount available for liquidation will be determined by Class.
Shareholders of any Class of a Portfolio will receive their
proportionate share of the net assets of the Class. If the
Corporation is liquidated, all Portfolios and Classes of
Portfolios will be liquidated in the same manner. In no event
will the fact that a Shareholder owns Shares in one Portfolio
entitle that Shareholder to participate in a distribution of the
assets of any other Portfolio.
8. DIRECTORS. The number of directors shall be as set forth in the Bylaws
of the Corporation, but shall not be less than three (3). The following
persons shall serve as Directors of the Corporation until the first
annual meeting of shareholders and until their successors are duly
elected and qualify:
Roy M. Henry
Christopher V. Meitz
Bryan P. Davis
9. ADDITIONAL POWERS.
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(I) POWERS OF DIRECTORS. In addition to the specific powers and
authority granted to the Board of Directors by these Articles, the
Board of Directors may exercise all powers and authority and do
all acts that may be done by Directors of a Corporation under the
laws of the State of Maryland. These powers will only be limited
by the specific provisions of these Articles, the Bylaws of the
Corporation, the laws of the State of Maryland, the 1940 Act or
any other statute or rule to which the Corporation is subject.
(II) ISSUANCE OF SECURITIES. The Board of Directors has full
authority to authorize the issuance of additional Shares in a
Portfolio from time to time, provided, however, that if Shares are
issued in a Portfolio which has Shares outstanding, the Shares are
issued at the net asset value per Share. The Board of Directors
is authorized to establish new Portfolios and Classes of
Portfolios with such rights and preferences as it determines in
its discretion. The Board of Directors may authorize the issuance
of Shares in those Portfolios or Classes upon such terms and
conditions and with such rights as the Board of Directors
determines, provided they are consistent with the provisions of
any applicable statutes and regulations, these Articles and the
Bylaws of the Corporation. The Board of Directors may authorize
the issuance of convertible securities in any Portfolio or Class
and may authorize the granting of rights of conversion into
another Portfolio or Class to any Shareholder, subject to such
terms and conditions as the Board of Directors determines, and
subject to the requirements of applicable law.
(III) BYLAWS. The Board of Directors has full authority to adopt,
amend and rescind any and all Bylaws of the Corporation without
the consent of the Shareholders of the Corporation, unless the
authority is restricted in the Bylaws. The Shareholders, by the
vote of Shareholders holding a majority of the outstanding Shares
of the Corporation, have the right to repeal or amend any Bylaw
that has been adopted by the Board of Directors.
(IV) CONTRACTS WITH AFFILIATES. The Corporation or any Portfolio
may enter into any contract for any purpose with any entity having
common directors or officers with the Corporation or otherwise
affiliated with the Corporation (Affiliates), including, but not
limited to, contracts for services as administrator, custodian,
transfer agent, disbursing agent, investment adviser, manager,
underwriter, distribution or similar services. The terms and
conditions, methods of authorization, renewal, amendment and
termination of contracts with Affiliates will be determined at the
discretion of the Board of Directors, except where applicable
statutes or rules, or these Articles or the Bylaws of the
Corporation provide otherwise. No such contract will be voidable
or be invalidated as a result of the existence of the affiliation,
nor will any person holding common positions be liable merely
because of the relationship between the entities for any loss or
expense to the Corporation under or by reason of the contract.
Nothing in this section, however, will protect any person from any
liability to the Corporation or its Portfolios or any of their
Shareholders for which the person would otherwise be liable due to
willful misfeasance, bad faith, gross negligence or reckless
disregard of duties imposed by the contract.
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(V) INDEMNIFICATION. The Corporation and its Portfolios is
authorized to indemnify the directors, officers, employees, agents
and other persons who serve in similar capacities of the
Corporation, and any persons who have served in those positions in
the past to the full extent allowed by applicable law. The
Corporation and its Portfolios is also authorized to advance costs
and expenses to those persons in connection with any threatened
liability to the full extent allowed by law.
(VI) BOOKS AND RECORDS. The books and records of the Corporation
may be kept at any location within or without the State of
Maryland as the Board of Directors decides.
(VII) ANNUAL MEETINGS OF SHAREHOLDERS. The Corporation is not
required to hold annual meetings of Shareholders in any year in
which the Corporation is not required to elect directors under the
1940 Act.
(VIII) AMENDMENTS. The Corporation may amend these Articles as allowed
by the General Laws of the State of Maryland. The Corporation is
expressly authorized to amend the contract rights of any
outstanding Shares, subject to obtaining any approval of the
Shareholders holding those Shares required by applicable law.
(IX) DURATION. The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, the undersigned has signed these Amended and Restated
Articles of Incorporation on this 1st day of September, 1998 and by his
signature hereby acknowledges
(I) that these Articles and the execution of them are his act;
(II) that to the best of his knowledge, information, and belief, the
matters and facts set forth herein are true in all material
respects; and
(III) he makes these statements under the penalties of perjury.
By: /s/ ROBERT C. BRIGHT
--------------------
Robert C. Bright
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<PAGE> 1
BYLAWS OF
FFP NEW HORIZONS FUND, INC.
ARTICLE I
NAME, PRINCIPAL OFFICES, ETC.
SECTION 1.1. NAME. The name of the Corporation is FFP New Horizons Fund,
Inc. (the Fund).
SECTION 1.2. PRINCIPAL OFFICES. The principal office of the Fund in the
State of Maryland is c/o The Corporation Trust Company. The Fund may
establish and maintain other offices and places of business within or outside
the State of Maryland as the Board of Directors may decide.
SECTION 1.3. BOOKS AND RECORDS. The Board of Directors will designate where
to keep the books and records of the Fund, which may be at any office of the
Fund or at any other place that the Board decides is reasonable. However,
the location of the records must comply with the laws and regulations to
which the fund is subject including the provisions of the Securities Act of
1940 as amended (1940 Act) and the laws of the State of Maryland.
SECTION 1.4. SEAL. If the Fund is required to place its corporate seal to a
document, it is sufficient to place the word "seal" next to the signature of
the person authorized to sign the document on behalf of the Fund. The Board
of Directors may also authorize a corporate seal for the Fund in whatever
shape or form they may determine. Any officer or director of the Fund shall
have authority to apply the corporate seal of the Fund to any instrument or
document that is required to be sealed by the Fund.
ARTICLE II
SHAREHOLDERS
SECTION 2.1. ANNUAL MEETINGS. There shall be no regular shareholders'
meetings for the election of directors or other routine business. The Board
of Directors shall call meetings of shareholders whenever required under the
Articles of Incorporation, the Investment Company Act of 1940 (the 1940 Act),
the rules of the Securities and Exchange Commission, or the laws of the State
of Maryland. If the Fund is required by applicable law to hold a
shareholders' meeting to elect directors, that meeting shall be designated as
the annual meeting of shareholders for that year.
SECTION 2.2. SPECIAL MEETINGS. The Chairman of the Board, the President, or
a majority of the directors may call a special meeting of the shareholders at
any time. Shareholders who hold 25% or more of the outstanding shares
entitled to vote may request that the Secretary call a shareholders' meeting.
The request must be in writing, signed by those shareholders, and must state
the purpose of the meeting and the matter(s) proposed to be acted on. The
Secretary will send the requesting shareholders a notice estimating the costs
of preparing and mailing a notice and proxy statement for the meeting. The
Secretary will call the meeting once the shareholders requesting the meeting
have paid the estimated costs to the Fund. The Secretary is not required to
call a meeting if the matter(s) proposed for consideration at the meeting are
substantially the
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same as a matter voted on at any special meeting of the shareholders held
during the preceding 12 months.
SECTION 2.3. PLACE OF MEETINGS. All shareholders' meetings shall be held at
the location and time designated by the Board of Directors. Meetings may be
held at any location, in the State of Maryland or in any other state, and at
any time that the Board of Directors designates; provided the time and place
would allow shareholders reasonably to attend the meeting.
SECTION 2.4. NOTICE AND WAIVER OF NOTICE. If a meeting of shareholders is
to be held, the Secretary of the Fund must send each shareholder entitled to
vote at the meeting a written notice stating (i) the place where the meeting
will be held; (ii) the date and time of the meeting; and (iii) the purpose or
purposes for which the meeting is being called. The notice must be sent at
least ten (10) days before the meeting and may not be sent more than sixty
(60) days before the meeting. Notice of any shareholders' meeting need not
be given to any shareholder who has signed a written waiver of notice,
whether before or after the time of the meeting. The waiver must be filed
with the records of the meeting. Any shareholder who attends a meeting in
person or by proxy has no right of action against the Fund based on the
failure to receive notice. Notice of adjournment of a shareholders' meeting
to another time or place need not be given, if such time and place are
announced at the meeting.
SECTION 2.5. SHAREHOLDERS ENTITLED TO VOTE. Each shareholder of the Fund is
entitled to vote, in person or by proxy, each share of stock and fraction of
a share of stock held in the shareholder's name on the books of the Fund at
the close of business on the record date (determined in accordance with
Section 2.7 below); provided such share or fraction of a share are
outstanding at the time of the meeting. The Fund may not vote any shares
held by it.
SECTION 2.6. VOTING. Except as otherwise provided in the Articles of
Incorporation, these Bylaws, or the 1940 Act, a majority of all votes cast at
a meeting at which a quorum is present is sufficient to approve any matter
which properly comes before the meeting. Voting may be conducted in any way
approved by a majority of the shareholders present at the meeting; provided,
that any shareholder entitled to vote at a meeting has the right to require
that all votes be taken by ballot.
SECTION 2.7 RECORD DATE
(A) The Board of Directors may fix in advance a date as a record date for the
determination of shareholders entitled to notice of and to vote at any
shareholders' meeting. The Board may also set a record date for
determining the shareholders whose express consent is required to approve
corporate action without a meeting under Section 2.13, or to receive
payment of any dividend or distribution, or for any other lawful action.
The Board may not set a record date that is more than 90 nor less than 10
days before the date on which the particular action will be taken, unless
otherwise provided by law.
(B) If no record date has been fixed, (i) the record date for determining
shareholders entitled to notice of or to vote at a shareholders' meeting
shall be the later of (1) the close of business on the day on which
notice of the meeting is mailed; or (2) the thirtieth day before the
meeting; and (ii) the record date for determining shareholders entitled
to receive payment
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of a dividend or an allotment of any rights is the close of business on the
day on which the resolution of the Board of Directors declaring the
dividend or allotment is adopted. However, the payment or allotment may
not be made more than 60 days after the date on which the resolution is
adopted. If notice is waived by all shareholders, the record date shall be
the day ten days before the day on which the meeting is held.
SECTION 2.8. PROXIES. A shareholder may vote the shares he owns on the
record date by signing a written proxy. A proxy shall be valid for eleven
months from the date of its signing unless it provides for a longer period.
The shareholder may revoke the proxy at any time by notifying the Fund in
writing. The shareholder may also revoke the proxy by appearing personally
at the meeting for which the proxy was given and requesting that he or she be
allowed to vote in person. A proxy must be dated but need not be sealed,
witnessed or acknowledged. Proxies shall be delivered to an inspector of
election or, if no inspector has been appointed, to the Secretary of the
Fund, or the person acting as secretary of the meeting, before being voted.
A proxy with respect to shares held in the name of more than one person shall
be valid if signed by one of them unless at or prior to the use of the proxy,
the Fund receives from either shareholder written notice to the contrary. A
proxy purporting to be signed by or on behalf of a shareholder shall be
deemed valid unless challenged at or prior to its exercise.
SECTION 2.9. INSPECTORS. At any meeting at which there is an election of
directors, the chairman of the meeting may and, upon the request of the
holders of 10% of the shares entitled to vote at such election shall, appoint
two inspectors of election. The inspectors shall first subscribe an oath or
affirmation to execute faithfully the duties of inspectors at such election,
with strict impartiality and according to the best of their ability. In
addition, after the election the inspectors shall make a certificate of the
result of the vote taken. No candidate for the office of director shall be
appointed as an inspector.
SECTION 2.10. QUORUM. Except as otherwise provided by law, the presence at
any shareholders' meeting, in person or by proxy, of the holders of at least
one-third of the shares entitled to vote shall constitute a quorum for the
transaction of business. On certain matters (e.g., fundamental changes in
investment policy, approval of investment advisory and underwriting
contracts), the 1940 Act requires that shareholders holding at least a
majority of the shares entitled to vote be present, in person or by proxy.
SECTION 2.11. ABSENCE OF QUORUM. In the absence of a quorum, (i) the
holders of a majority of the shares present at the meeting, in person or by
proxy, and entitled to vote, or (ii) if no shareholder entitled to vote is
present, in person or by proxy, any officer entitled to preside over or act
as secretary of the meeting, may adjourn the meeting. The adjournment may be
without determining the date of the new meeting or, without further notice,
to a new date which must be within 120 days of the original record date.
Any business that might have been transacted at the meeting originally called
may be transacted at any such adjourned meeting at which a quorum is present.
SECTION 2.12. SHARE LEDGER; RIGHT OF INSPECTION.
(A) The Secretary or an assistant secretary of the Fund must assure that an
original or duplicate share ledger is maintained at the office of the
Fund's transfer agent. The ledger shall
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indicate the name and address of each shareholder and the number of shares
of stock of each portfolio of the Fund held by the shareholder. The ledger
may be in written or any other form which can be converted within a
reasonable time into written form for visual inspection.
(B) Any one or more persons who together are, and for at least six months
have been, shareholders of record of at least 5% of the outstanding stock
to the Fund's transfer agent, a written request for a list of the Fund's
shareholders. Within 20 days after receipt of such request, the Fund
shall prepare and have available at its principal office in Maryland a
list, verified under oath by one of its officers or its transfer agent or
registrar, with the name and address of each shareholder and the number
of shares of each portfolio which the shareholder owns.
SECTION 2.13. ACTION WITHOUT MEETING. Any action to be taken by shareholders
may be taken without a meeting if all shareholders entitled to vote on the
matter consent to the action in writing and the written consent is filed with
the records of the meetings of shareholders. Such consent shall be treated
for all purposes as a vote at a meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. NUMBER OF DIRECTORS; TERM OF OFFICE. The Board of Directors
shall consist of three directors. The number may be increased or decreased
at any time by a resolution adopted by a majority of the entire board;
provided, that the number of directors may not be less than three nor more
than fifteen. Any change in the size of the board will not affect the tenure
of any director then in office. If there is no stock outstanding, the
number of directors may be less than three but not less than one. If there
is stock outstanding but fewer than three shareholders, the number of
directors may be less than three but not less than the number of
shareholders. A director, once elected, shall hold office until his
successor is elected and qualified or until his earlier death, resignation or
removal.
SECTION 3.2. QUALIFICATIONS OF DIRECTORS. Once the Fund is registered as an
investment company under the 1940 Act, (i) each director must meet the
qualifications provided in such Act; and (ii) a majority of the Board of
Directors shall be persons who are not "interested" persons of the Fund, as
defined by such Act.
SECTION 3.3. ELECTION OF DIRECTORS. The initial director(s) of the Fund
shall be those person(s) named as such in the Articles of Incorporation.
Thereafter, except as otherwise provided in Sections 3.4 and 3.5 below, the
directors shall be elected by the shareholders on a date fixed by the Board
of Directors. At any shareholders' meeting duly called at which a quorum is
present, a majority of all the votes validly cast, in person or by proxy, is
sufficient to elect a director.
SECTION 3.4. REMOVAL OF DIRECTORS. Any director may be removed (with or
without cause) by the affirmative vote of a majority of all the votes
entitled to be cast for the election of directors at any shareholders'
meeting duly called at which a quorum is present. At the same meeting, a
duly qualified person may be elected to take the place of the removed
director by a majority of the votes validly cast at the meeting.
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SECTION 3.5. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. If for any reason a
vacancy occurs in the Board of Directors, including a vacancy resulting from
an increase in the size of the board, the directors then in office may
continue to act even if the total number of directors is less than a quorum.
The vacancy may be filled by a majority of the directors then in office,
unless (i) it has already been filled by the shareholders; or (ii) the
vacancy is the result of an increase in the size of the board. The latter
may only be filled by a majority vote of the entire board. In any case, a
vacancy may only be filled if immediately after filling the vacancy, at least
two-thirds of the directors then holding office have been elected to such
office by the shareholders. Once the Fund is registered as an investment
company under the 1940 Act, rules of the Securities and Exchange Commission
require that a majority of the directors of the Fund holding office must have
been elected by the shareholders. If less than a majority were elected by
the shareholders, the Secretary must call a meeting within 60 days for the
purpose of electing directors, or within such longer period as may be
authorized the Securities and Exchange Commission.
SECTION 3.6. GENERAL POWERS.
(A) The property, affairs and business of the Fund shall be managed by or
under the direction of the Board of Directors. The Board may exercise
all the powers of the Fund except those powers vested solely in the
shareholders of the Fund by statute, by the Articles of Incorporation, by
these Bylaws, or by rules of the Securities and Exchange Commission that
apply to the Fund.
(B) All actions taken by the directors at any meeting of the directors, or by
any person acting as a director, so long as his successor shall not have
been duly elected or appointed, shall be valid, notwithstanding the
subsequent discovery of a defect in the election of the directors or the
disqualification of any person acting as a director.
SECTION 3.7. POWER TO ISSUE AND SELL SHARES. The Board of Directors may
from time to time issue and sell, or cause to be issued and sold, any of the
Fund's authorized shares to such persons, and for such consideration, as the
Board of Directors shall deem advisable, subject to the provisions of Article
Seven of the Articles of Incorporation.
SECTION 3.8. POWER TO DECLARE DIVIDENDS.
(A) The Board of Directors may, from time to time as they deem advisable,
declare and pay dividends in shares, cash or other property of the Fund,
out of any source available for payment of dividends, to the shareholders
according to their respective rights and interests and in accordance with
the provisions of the Articles of Incorporation.
(B) If any dividend payment is made in whole or in part from any source other
than (i) the Fund's accumulated undistributed net income (determined in
accordance with good accounting practice and the rules and regulations of
the Securities and Exchange Commission then in effect), and not including
profits or losses realized upon the sale of securities or other
properties; or (ii) the Fund's net income so determined for the current
or preceding fiscal year, then the Board of Directors shall cause to be
included with such dividend payment a written statement, disclosing the
source or sources of such payment and the basis of calculation. The
written statement shall be in such form as the Securities
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and Exchange Commission may prescribe.
SECTION 3.9. ANNUAL AND REGULAR MEETINGS.
(A) The annual meeting of the Board of Directors for choosing officers and
transacting other proper business shall be held at such time and place as
the Board may determine. The Board may from time to time provide by
resolution for the holding of regular meetings and fix their time and
place, which need not be in the State of Maryland. Except as otherwise
provided under the 1940 Act, notice of annual and regular meetings need
not be given; provided that notice of any change in the time or place of
such meetings shall be sent promptly, in the manner provided in Section
3.11 below, to each director not present at the meeting at which the
change was made.
(B) Except as otherwise provided under the 1940 Act, members of the Board of
Directors, or any committee of the Board, may participate in a meeting of
the Board or the committee by means of a conference telephone or similar
communications equipment through which all persons participating in the
meeting can hear each other at the same time. Participation through use
of such equipment shall constitute presence in person at a meeting.
SECTION 3.10. SPECIAL MEETINGS. Special meetings of the Board of Directors
shall be held whenever called by the Chairman of the Board, the President
(or, in the absence or disability of the President, by any vice president),
the Treasurer, or two or more directors, at the time and place (which need
not be in the State of Maryland) specified in the notice or waiver of notice
of such meetings.
SECTION 3.11. NOTICE. Except as otherwise provided, written or printed
notice of any special meeting shall be given by the Secretary to each
director at his address as registered on the books of the Fund or, if not so
registered, at his last known address, by any of the following means: (i) by
mail, postage prepaid, at least three days before the meeting; or (ii) by
delivery at least two days before the meeting; or (iii) by prepaid telegram
at least 24 hours before the meeting.
SECTION 3.12. WAIVER OF NOTICE. No notice of any meeting need be given (i)
to any director who attends the meeting in person; or (ii) to any director
who waives notice of the meeting in writing, whether before or after the time
of the meeting. The waiver shall be filed with the records of the meeting.
SECTION 3.13. QUORUM AND VOTING. At all meetings of the Board of Directors,
the presence of one-half or more of the number of directors then in office
shall constitute a quorum for the transaction of business; provided that
there shall be present no fewer than two directors (unless the Fund, at the
time, has only one director). In the absence of a quorum, a majority of the
directors present may adjourn the meeting, from time to time, until a quorum
shall be present. The action of a majority of the directors present at a
meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by law, by the Articles of Incorporation or by these Bylaws.
SECTION 3.14. COMPENSATION. Each director may receive remuneration for his
services as may be fixed from time to time by resolution of the Board of
Directors.
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SECTION 3.15. ACTION WITHOUT A MEETING. Except as otherwise provided by
law, any action required or permitted to be taken at any meeting of the Board
of Directors may be taken without a meeting if consented to in writing by all
members of the Board. The written consent(s) must be filed with the records
of the meetings of the Board.
SECTION 3.16. CHAIRMAN OF THE BOARD. The Board of Directors, at its first
meeting and thereafter at its annual meeting, shall elect from among the
directors a Chairman of the Board, who shall serve at the pleasure of the
Board. If the Board does not elect a chairman at any annual meeting, it may
do so at any subsequent regular or special meeting. The Chairman of the
Board shall hold office until the next annual meeting of the Board of
Directors and until his successor shall have been chosen and qualified. If
the office of Chairman of the Board shall become vacant for any reason, the
Board of Directors may fill such vacancy at any regular or special meeting.
The Chairman of the Board shall preside at all shareholders' meetings and at
all meetings of the Board of Directors and shall have such powers and perform
such duties as may be assigned to him from time to time by the Board of
Directors. The Chairman of the Board shall not be considered an officer of
the Fund by reason of holding said position.
ARTICLE IV
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 4.1. HOW CONSTITUTED. The Board of Directors may designate an
executive committee consisting of not less than three nor more than five
directors. The Board may also designate additional committees consisting of
at least one director. Each member of a committee shall be a director and
shall hold office at the pleasure of the Board. The Chairman of the Board,
if any, and the President shall be members of the executive committee.
SECTION 4.2. POWERS OF THE EXECUTIVE COMMITTEE. Unless otherwise provided
by resolution of the Board, the executive committee shall have and may
exercise all powers of the Board of Directors, when the Board is not in
session, in the management of the business and affairs of the Fund that may
lawfully be exercised by the full Board except the powers to (i) declare a
dividend; (ii) authorize the issuance of shares; (iii) recommend to
shareholders any matter requiring shareholders' approval; (iv) amend the
Bylaws; or (v) approve any merger or share exchange which does not require
shareholder approval.
SECTION 4.3. PROCEEDINGS, QUORUM AND MANNER OF ACTING. Unless otherwise
provided by the Board, each committee may adopt its own rules and regulations
governing its proceedings, quorum and manner of acting; provided that a
quorum shall be not less than two directors. If any member of a committee is
absent from any meeting, the other members present, whether or not they
constitute a quorum, may appoint a director to act in place of the absent
member.
SECTION 4.4. OTHER COMMITTEES. The Board of Directors may appoint other
committees, each consisting of one or more persons who need not be directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Directors, but shall not
exercise any power which may lawfully be exercised only by the Board of
Directors or a committee thereof.
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ARTICLE V
OFFICERS
SECTION 5.1. GENERAL. The officers of the Fund shall consist of a
President, a Secretary, and a Treasurer, and may include one or more vice
presidents, assistant secretaries or assistant treasurers, and such other
officers as may be determined from time to time by the Board of Directors.
SECTION 5.2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The officers of
the Fund shall be elected by the Board of Directors at its first meeting and
thereafter annually at the Board's annual meeting, or at any subsequent
regular or special meeting. Each officer elected by the Board of Directors
shall hold office until his successor is elected and qualified or until his
earlier death, resignation or removal. Any person may hold one or more
offices of the Fund except (i) the President may not hold the office of vice
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president, and (ii) a person who holds more than one office may not act in
more than one capacity to execute, acknowledge or verify an instrument
required by law to be executed, verified or acknowledged by more than one
officer. An officer need not be a director.
SECTION 5.3. PRESIDENT. The President shall be the chief executive officer
of the Fund and, in the absence of the Chairman of the Board, shall preside
at all shareholders' meetings and at all meetings of the Board of Directors.
Subject to the supervision of the Board of Directors, the President shall
have general charge of the business, affairs and property of the Fund and
general supervision over its officers, employees and agents. The President
shall exercise such other powers and perform such other duties as may be
assigned to him from time to time by the Board.
SECTION 5.4. VICE PRESIDENT. The Board of Directors may from time to time
designate and elect one or more vice presidents who shall have such powers
and perform such duties as may be assigned to them by the Board or the
President. At the request or in the absence or disability of the President,
the vice president (or, if there are two or more vice presidents, the most
senior of them present and able to act) may perform all the duties of the
President and, when so acting, shall have all the powers of and be subject to
all the restrictions upon the President.
SECTION 5.5. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall be the
principal financial and accounting officer of the Fund. He shall deliver all
funds and securities of the Fund which may come into his hands to such bank
or trust company as the Board of Directors shall employ as custodian. He
shall prepare annually a full and correct statement of the affairs of the
Fund, including a balance sheet and a financial statement of operations for
the preceding fiscal year, which shall be filed at the Fund's principal
office within 120 days after the end of the fiscal year. The Treasurer shall
furnish such other reports regarding the business and condition of the Fund
and perform such additional duties as the Board of Directors from time to
time may require or as may be required by applicable law. Any assistant
treasurer may perform the duties of the Treasurer as the Treasurer or the
Board of Directors may assign and, in the absence of the Treasurer, may
perform all the duties of the Treasurer.
SECTION 5.6. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall be
responsible for giving notice of (i) all director and shareholder meetings of
the Fund; and (ii) all meetings of the executive committee and any other
committee of the Board; and shall act as secretary at, and
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record all proceedings of, those meetings in books kept for that purpose. The
Secretary shall have charge of all of the books and records of the Fund and
shall keep them open for inspection at all reasonable times by any director;
provided that the Secretary may require that certain books and records of the
Fund be kept by the Fund's transfer agent, custodian, underwriter, or other
agent, as the case may be, in accordance with the provisions of the 1940 Act.
At every shareholders' meeting, unless the Chairman of the Board has appointed
inspectors pursuant to Section 2.9 of these Bylaws, the Secretary shall
receive and take charge of all proxies and/or ballots and shall decide all
questions regarding the qualification of voters, the validity of proxies and
the acceptance or rejection of votes. The Secretary shall also perform such
other duties as may be required by the Board of Directors. Any assistant
secretary may perform the duties of the Secretary as the Secretary or the
Board of Directors may assign and, in the absence of the Secretary, may
perform all the duties of the Secretary.
SECTION 5.7. RESIGNATION. Any officer may resign his office at any time by
delivering a written resignation to the Board of Directors, the President,
the Secretary, or any assistant secretary. Unless the resignation specifies
otherwise, it shall take effect upon delivery.
SECTION 5.8. REMOVAL. Any officer may be removed from office whenever it is
in the best interest of the Fund in the judgment of the Board of Directors.
An officer shall be removed by vote of a majority of the Board of Directors
at a regular or special meeting of the Board called for such purpose.
SECTION 5.9. VACANCIES AND NEWLY CREATED OFFICES. If a vacancy occurs in
any office by reason of death, resignation, removal, disqualification or
other cause, or if any new office shall be created, such vacancies or newly
created offices may be filled by the Board of Directors at any regular or
special meeting.
SECTION 5.10. SUBORDINATE OFFICERS. The Board of Directors from time to
time may appoint such other officers or agents as it may deem advisable, each
of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Board of Directors may determine.
The Board of Directors from time to time may delegate to one or more officers
or agents the power to appoint any such subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities, duties and
remuneration. The power of delegation may also include the power of removal
and to fill vacancies.
SECTION 5.11. REMUNERATION. The salaries or other compensation of the
officers of the Fund shall be fixed from time to time by resolution of the
Board of Directors.
SECTION 5.12. SURETY BONDS. The Board of Directors may require any officer
or agent of the Fund to execute a bond (including, without limitation, any
bond required by the 1940 Act and the rules and regulations of the Securities
and Exchange Commission) to the Fund in such sum and with such surety or
sureties as the Board of Directors may determine. The bond may be
conditioned upon the faithful performance of the officer's or agent's duties
to the Fund, including responsibility for negligence and for the accounting
of any of the Fund's property, funds or securities that may come into his
hands.
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ARTICLE VI
CUSTODY OF SECURITIES
SECTION 6.1. EMPLOYMENT OF CUSTODIAN. The Fund shall place and at all times
maintain all funds, securities and similar investments owned by the Fund in
the custody of a custodian who shall meet the requirements of Section 17(f)
of the 1940 Act. The Board of Directors shall determine the remuneration to
be paid to the custodian.
SECTION 6.2. OTHER ARRANGEMENTS. The Fund may make such other arrangements
for the custody of its assets (including deposit arrangements) provided such
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arrangements comply with the 1940 Act, the rules and regulations of the
Securities and Exchange Commission, and any other applicable law, rule or
regulation.
ARTICLE VII
FISCAL YEAR; ACCOUNTANT
SECTION 7.1. FISCAL YEAR. The fiscal year of the Fund shall be fixed by
resolution of the Board of Directors.
SECTION 7.2. ACCOUNTANT.
(A) The Fund shall employ an independent accountant or firm of independent
accountants to examine the accounts of the Fund and to sign and certify
financial statements filed by the Fund. The accountant's certificates
and reports shall be addressed both to the Board of Directors and to the
shareholders. The employment of the accountant shall be conditioned upon
the right of the Fund to terminate such employment, without penalty, by
vote of a majority of the outstanding voting securities of the Fund at
any meeting called for that purpose.
(B) A majority of the directors who are not "interested persons" (as defined
in the 1940 Act) of the Fund shall vote in person to select the
accountant at a meeting held within 30 days before or after the beginning
of the fiscal year of the Fund or before the annual shareholders' meeting
(if any) in that year. In addition, any vacancy occurring between annual
shareholders' meetings due to the death or resignation of the accountant
may be filled by a majority of the "disinterested" directors voting in
person at a meeting called for such purpose.
(C) The selection of the accountant, either initially or subsequently to fill
any vacancy, shall be submitted for ratification or rejection at the next
succeeding annual shareholders' meeting, if held. If the selection is
rejected, or if the accountant's employment is terminated pursuant to
paragraph (a) above, the subsequent vacancy may be filled by a vote of a
majority of the outstanding voting securities of the Fund, either at the
meeting at which the rejection or termination occurred or at a subsequent
meeting called for that purpose.
ARTICLE VIII
INDEMNIFICATION AND INSURANCE
SECTION 8.1 INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
Any person who
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is or was a party, or is threatened to be made a party, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was at any time since the inception of the Fund a director, officer, or
employee of the Fund, or is or was at any time since the inception of the Fund
serving at the request of the Fund as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall be indemnified by the Fund against any judgment, penalty, fine,
settlement or reasonable expense incurred to the extent and in the manner
provided by Section 2-418 of the Maryland General Corporation Law (or any
successor statute). In the case of expenses, the Fund may make advances of
such expenses as provided by that statute.
SECTION 8.2. INSURANCE. The Fund may purchase and maintain insurance (or
provide similar protection such as a surety bond) on behalf of any person who
is or was a director, officer, employee, or agent of the Fund, or who, while
a director, officer, employee, or agent of the Fund, is or was serving at the
request of the Fund as a director, officer, employee, partner, trustee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against and incurred by such
person in any such capacity or arising out of such person's position. The
insurance or similar protection may be provided by a subsidiary or affiliate
of the Fund.
SECTION 8.3. NON-EXCLUSIVITY. The indemnification and advancement of
expenses provided by this Article VIII shall be in addition to and shall not
be exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Articles of Incorporation,
these Bylaws, any agreement, vote of shareholders or directors, or otherwise,
both as to action in his or her official capacity and as to action in another
capacity while holding such office.
ARTICLE IX
AMENDMENTS
Subject to the 1940 Act and any other applicable law, rule or regulation,
these Bylaws may be altered, amended or repealed and new Bylaws may be
adopted by the Board of Directors at any regular or special meeting of the
Board; provided that the Board by resolution may provide for the alteration,
amendment or repeal of these Bylaws, or any section thereof, by vote of a
majority of the outstanding voting securities of the Fund at a meeting called
for such purpose.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 NOTICES. Whenever any notice or writing is required by these
Bylaws, it shall be sufficient if the notice is given in written form or by
e-mail, fax, telegram, datagram, or other electronic form.
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INVESTMENT ADVISORY AGREEMENT
OF
FFP NEW HORIZONS FUND, INC.
THIS AGREEMENT is made and entered into by and between FFP Advisory Services,
Inc., a Missouri corporation and FFP New Horizons Fund, Inc., a Maryland
corporation, on behalf of each of its Portfolios listed on the last page of
this Agreement, effective as of the 1st day of January, 1999.
W I T N E S S E T H
WHEREAS, FFP New Horizons Fund, Inc. is an open-end, diversified, management
investment company authorized to issue securities in series or portfolios;
and
WHEREAS, FFP New Horizons Fund, Inc. has authorized the issuance of the six
portfolios listed at the end of this Agreement, each of which has its own
distinct investment objectives and policies; and
WHEREAS, FFP New Horizons Fund, Inc. is registering with the Securities and
Exchange Commission as an investment company under the Investment Company Act
of 1940 and is registering interests in each of its portfolios with the
Commission under the Securities Act of 1933; and
WHEREAS, FFP Advisory Services, Inc. is registered with the Securities and
Exchange Commission as an investment adviser under the Investment Advisers
Act of 1940 and is in the business of acting as an investment adviser; and
WHEREAS, FFP New Horizons Fund, Inc. desires to appoint FFP Advisory
Services, Inc. as the investment adviser for each of its portfolios; and
WHEREAS, FFP Advisory Services, Inc. desires to serve as the investment
adviser for each of the portfolios of FFP New Horizons Fund, Inc.;
NOW THEREFORE, in consideration of the mutual agreements and promises
contained in this Agreement and other valuable consideration, FFP Advisory
Services, Inc. and FFP New Horizons Fund, Inc. agree as follows:
I. APPOINTMENT
FFP New Horizons Fund, Inc. (Fund) hereby appoints FFP Advisory Services,
Inc. (Adviser) as the investment adviser for each of the portfolios of the
Fund listed at the end of this Agreement (Portfolios). The Adviser agrees
that it will act as the investment adviser for each Portfolio of the Fund and
as such direct the investment of the assets of each of the Portfolios,
subject to the terms and conditions contained in this Agreement and to any
applicable provisions of the Investment Company Act of 1940 (1940 Act), the
Investment Advisers Act of 1940 (Advisers Act) and any rules and regulations
adopted by the Securities and Exchange Commission under
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such acts. The Adviser agrees that, except as required to carry out its
duties under this Agreement or otherwise expressly authorized, it is acting
as an independent contractor and not as an agent of the Fund or the
Portfolios and has no authority to act for or represent the Fund or the
Portfolios in any way.
II. DUTIES OF THE ADVISER
In carrying out the terms of this Agreement, the Adviser shall do the
following:
1. supervise all aspects of the operations of each Portfolio;
2. select the securities to be purchased, sold, exchanged, or
otherwise held by each Portfolio in accordance with the
investment objectives, policies and strategies adopted for each
Portfolio as described in the then effective registration
statement for the Fund and its Portfolios (Registration
Statement);
3. place orders with broker-dealers for all such securities and
transactions in securities on behalf of each Portfolio;
4. obtain, develop and evaluate financial, economic, statistical and
other data or pertinent information about or affecting the
securities held by or considered for each Portfolio, the issuers
of those securities and the economy in general;
5. provide economic research and securities analyses to the Board of
Directors of the Fund (Board) as the Board considers necessary or
advisable in connection with evaluating the Adviser's performance
of its duties hereunder;
6. obtain the services of, contract with, and provide instructions
to, custodians and/or subcustodians, transfer agents, dividend
disbursing agents, pricing services and other service providers
as are necessary to carry out the duties of the Adviser under
this Agreement and the terms of this Agreement;
7. prepare financial and performance reports, calculate and report
daily net asset values, and prepare any other financial data or
reports, as the Adviser from time to time, deems necessary or as
are requested by the Board;
8. provide regular reports, at least quarterly, on all of the above
to the Board in the form and to the extent requested by the
Board;
9. provide a written statement by a duly authorized officer, to be
delivered within seven (7) days after the close of each calendar
quarter, certifying that the Portfolios have been in compliance
with the provisions of Subchapter M of the Internal Revenue Code
(Code) and Section 817(h) of the Code; and
10. take any other actions, which appear to the Adviser and the Board
necessary to carry into effect the purposes of this Agreement.
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III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF THE ADVISER
The Adviser hereby represents and warrants to the Fund and each
Portfolio as follows:
1. DUE INCORPORATION AND ORGANIZATION. The Adviser is duly
organized and is in good standing under the laws of the State of
Missouri and is fully authorized to enter into this Agreement and
carry out its duties and obligations hereunder.
2. REGISTRATION. The Adviser is registered as an investment adviser
with the Securities and Exchange Commission under the Advisers
Act, and is registered or licensed as an investment adviser under
the laws of all jurisdictions in which its activities require it
to be so registered or licensed. The Adviser shall maintain such
registration or licenses in effect at all times during the term
of this Agreement.
3. CODE OF ETHICS. The Adviser represents that it has adopted a
Code of Ethics under the provisions of Rule 17j-1 of the 1940
Act, a copy of which has been delivered to the Fund and the
Adviser agrees that, during the term of this Agreement, it shall
maintain such Code in force and that it shall notify the Board in
advance in the event the Adviser proposes to amend or replace
such Code of Ethics. FFP Advisory further certifies that
certification that it has adopted such procedures as are
reasonably necessary to prevent access persons from violating
such code of ethics.
4. INVESTMENT OF ASSETS. The Adviser will at all times invest the
assets of the Portfolios so that the Portfolios will comply with
Section 817(h) of the Code and Treasury Regulations Section
1.817-5 relating to the diversification requirements for variable
annuity or life insurance contracts and any amendments or other
modifications to such Section or Regulations; provided that the
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Adviser will be relieved of its obligations with respect to
compliance with the tax code provisions and shall be held
harmless if the noncompliance is the result of a written
direction from the Board of Directors of the Fund.
5. BEST EFFORTS. The Adviser at all times shall provide its best
judgment and effort to each Portfolio in carrying out its
obligations hereunder.
B. REPRESENTATIONS AND WARRANTIES OF EACH PORTFOLIO AND THE FUND
The Fund, on behalf of each Portfolio, hereby represents and warrants
to the Adviser as follows:
1. DUE INCORPORATION AND ORGANIZATION. The Fund has been duly
incorporated under the laws of the State of Maryland and it is
authorized to enter into this Agreement and carry out its
obligations hereunder.
2. REGISTRATION. The Fund is or will be registered as an investment
company with the Securities and Exchange Commission under the
1940 Act and shares of each Portfolio are or will be registered
or qualified for offer and sale to the public under the
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Securities Act of 1933, as amended (1933 Act) and under the
securities laws of all states where such registration is
required. Such registrations or qualifications will be kept in
effect during the term of this Agreement.
IV. DELEGATION OF RESPONSIBILITIES
A. APPOINTMENT OF SUBADVISER
Subject to the approval of the Board and the shareholders of each
Portfolio, the Adviser may enter into an agreement (Subadvisory
Agreement) with a third party, which party may or may not be affiliated
with the Adviser appointing such party as a subadviser to assist the
Adviser in carrying out its duties to each Portfolio under the terms of
this Agreement.
B. DUTIES OF SUBADVISER
Under a Subadvisory Agreement, the Adviser may delegate to a subadviser
some or all of the duties of the Adviser listed above, except that the
Adviser shall be responsible for all reporting to and interaction with
the Board.
C. DUTIES OF THE ADVISER
If the Adviser appoints a subadviser, the Adviser must:
1. monitor the investments made by the subadviser for each Portfolio
and the compliance program of the subadviser to ensure that the
assets of each Portfolio are invested in compliance with the
terms of the Advisory Agreement and the investment objectives,
policies and strategies of each Portfolio as adopted by the Board
and described in the Registration Statement;
2. Review all data and financial reports prepared by the subadviser
to assure that they are in compliance with applicable
requirements and meet the provisions of applicable laws and
regulations; and
3. oversee all matters relating to the offer and sale of each
Portfolio's shares, the Fund's corporate governance, reports to
the Board, contracts with all third parties on behalf of each
Portfolio for services to each Portfolio, reports to regulatory
authorities and compliance with all applicable rules and
regulations affecting the operations of each Portfolio.
V. RELATIONSHIPS WITH BROKER-DEALERS
A. PORTFOLIO TRADES
The Adviser shall place all orders for the purchase and sale of
portfolio securities for each Portfolio with brokers or dealers
selected by the Adviser, which may include brokers or dealers
affiliated with the Adviser. In selecting broker-dealers to execute a
particular transaction, the Adviser is authorized to select
broker-dealers that, in the Adviser's
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judgment provide best execution for the trades as determined by rules and
regulations of the Securities and Exchange Commission and as discussed
below.
B. BEST EXECUTION
The Adviser shall use its best efforts to seek to execute transactions
for a Portfolio at prices that are advantageous to the Portfolio and at
commission rates that are reasonable in relation to the benefits
received (best execution). In determining what constitutes best
execution, the Adviser is authorized to take into consideration
brokerage and research services that the broker-dealer may provide to
the Portfolio on whose behalf the trade is being made as well as to
other portfolios or accounts for which the Adviser acts as investment
adviser or over which the Adviser has investment discretion. The
Adviser may also select broker-dealers to effect transactions for a
Portfolio, which broker-dealers provide reimbursement for expenses of
the Portfolio. It is understood that under any of these circumstances,
the Adviser is authorized to place trades through broker-dealers who do
not charge the lowest rate for the trades, where those broker-dealers
also provide other services or reimbursements. The Adviser must
determine in good faith that the amount of commissions paid for
transactions is reasonable in relation to the value of the services
provided, or reimbursements made, by such broker-dealer as determined
by the rules and regulations of the Securities and Exchange Commission.
This determination shall be made based on either the services provided
to the particular Portfolio or the overall services that the
broker-dealer provides to the Adviser and its affiliates with respect
to all accounts over which they exercise investment discretion. The
Adviser shall provide the Board periodically with information relating
to the commissions paid by each Portfolio, the services and
reimbursements received and such other information as the Board
requests to evaluate whether the commissions paid appear to be in
compliance with the rules and regulations of the Securities and
Exchange Commission governing best execution.
VI. CONTROL BY THE BOARD
At all times during the term of this Agreement, it is understood that the Board
has the right to provide directives to the Adviser with respect to any duties or
obligations of the Adviser undertaken under this Agreement. Such directives
must be followed at all times, subject to the terms of the Registration
Statement and any applicable provisions of the 1940 Act, the 1933 Act, the
Advisers Act or the rules and regulations of the Securities and Exchange
Commission.
VII. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, the Adviser shall
at all times conform to:
1. all applicable provisions of the 1940 Act, the 1933 Act, the
Advisers Act, the Securities Exchange Act of 1934 and any
applicable rules and regulations of the Securities and Exchange
Commission;
2. all applicable provisions of the Internal Revenue Code and any
applicable rules or regulations of the Internal Revenue Service
or the Treasury Department relating to the Code;
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3. all policies and procedures of the Fund as adopted by the Board
and/or as described in the Registration Statement;
4. the provisions of the Articles of Incorporation for the Fund, as
they may be amended from time to time;
5. the provisions of the Bylaws of the Fund, as they may be amended
from time to time; and
6. any other applicable provisions of state or federal law.
VIII. COMPENSATION
Each Portfolio shall pay to the Adviser a fee equal to an annual rate of 1.5%
of the average daily net assets of each Portfolio for the services provided
by the Adviser under this Agreement. Compensation under this Agreement shall
be calculated and shall accrue daily at the rate of 1/365 of 1.5% of the
daily net assets of each Portfolio determined at the end of each day. If
this Agreement becomes effective subsequent to the first day of a month or
terminates before the last day of a month, compensation shall only accrue and
be paid for that part of the month during which this Agreement is in effect.
The fee shall be payable monthly as promptly as possible after the close of
the month for which the fee is earned. Each fee accrues for each Portfolio
separately and in no event shall any one Portfolio be responsible for the fee
payable by any other Portfolio.
IX. EXPENSES
The expenses in connection with the management of each Portfolio shall be
allocated between each Portfolio and the Adviser as follows:
A. EXPENSES OF THE ADVISER
The Adviser shall pay:
1. The salaries, employment benefits and other related costs and
expenses of those of its personnel engaged in providing
investment advice to each Portfolio, including without
limitation, office space, office equipment, telephone and postage
costs; provided, to the extent the Adviser provides
administrative services to the fund under the provisions of an
administrative services agreement, the Adviser may be reimbursed
for some of its overhead costs in providing such services as set
forth in such administrative services agreement;
2. all fees and expenses of all directors, officers and employees,
if any, of the Fund who are employees of the Adviser or an
affiliated entity, including any salaries and employment benefits
payable to those persons;
B. EXPENSES OF EACH PORTFOLIO
Each Portfolio shall pay:
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1. the fees payable by the Portfolio to the Adviser under Section
IX, A of this Agreement;
2. brokers' commissions, taxes or other transaction costs payable by
the Portfolio in connection with any transactions in securities
for the Portfolio, including portions of commissions that may be
paid to reflect brokerage research services provided to the
Adviser;
3. a proportionate share, based on net assets, of the fees and
expenses of legal counsel to the Fund, independent accountants
for the Fund and any legal counsel for the independent directors
of the Fund;
4. fees and expenses of any administrator, transfer agent,
custodian, dividend, accounting, pricing or disbursing agent
payable by the Portfolio;
5. interest and taxes payable by the Portfolio or a proportionate
share of interest and taxes payable by the Fund;
6. a proportionate share of any fees and expenses of membership in
the Investment Company Institute, the National Association of
Variable Annuities or any similar organization in which the Board
deems it advisable for the Fund to maintain membership;
7. a proportionate share of insurance premiums on property or
personnel (including officers and directors) of the Fund which
benefit the Portfolio;
8. a proportionate share of the fees and expenses of the members of
the Board, who are not interested persons as defined in the 1940
Act of the Fund or the Adviser;
9. a proportionate share of the expenses payable by the Fund of
preparing, printing and distributing proxies, proxy statements,
prospectuses, registration statements and reports to shareholders
or of holding shareholders' meetings;
10. all expenses of the Portfolio incurred in connection with the
payment of any dividend, distribution, withdrawal or redemption
by the Portfolio, whether in shares or in cash;
11. an allocable share of the costs and expenses of promoting the
sale of shares in the Portfolio, including costs of preparing
prospectuses and reports to shareholders of each Portfolio, to
the extent such costs are not charged to and paid by third
parties involved in the distribution and sale of Portfolio
shares;
12. fees payable by each Portfolio to the Securities and Exchange
Commission or to any state securities regulator or other
regulatory authority for the registration of shares of the
Portfolio;
13. a proportionate share of the costs attributable to investor
services, administering shareholder accounts and handling
shareholder relations, (including, without
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limitation telephone and personnel expenses), to the extent
such costs are not charged to third parties by the Adviser; and
14. any other ordinary, routine expenses incurred in the management
of the assets of the Portfolio, and an allocable share of any
nonrecurring or extraordinary expenses, including organizational
expenses, litigation affecting the Portfolio and any
indemnification by the Fund of its officers, directors or agents.
X. EXPENSE LIMITATION
If, for any fiscal year, the total of all ordinary business expenses payable
by each Portfolio, including all investment advisory fees but excluding
brokerage commissions, distribution fees, taxes, interest and extraordinary
expenses and certain other excludable expenses, would exceed the most
restrictive expense limits imposed by any statute or regulatory authority of
any jurisdiction in which shares of each Portfolio are offered for sale
(unless a waiver is obtained), the Adviser shall reduce its advisory fee to
the extent necessary to meet such expense limit. The Adviser will not be
required to reimburse any Portfolio for any expenses, which exceed the amount
of its advisory fee for such fiscal year. The amount of any such reduction
shall be borne by the Adviser and shall be deducted from the monthly advisory
fee otherwise payable to the Adviser during such fiscal year. For the
purposes of this paragraph, the term "fiscal year" shall exclude the portion
of the current fiscal year which shall have elapsed prior to the date hereof
and shall include the portion of the then current fiscal year which shall
have elapsed at the date of termination of this Agreement.
XI. ADDITIONAL SERVICES
Upon the request of the Board, the Adviser may perform any other accounting,
shareholder servicing or other administrative services for one or more
Portfolios or for the Fund, that are not specifically required by the terms
of this Agreement. Before such services are provided, the Adviser and the
Board must reach an agreement concerning the amount of reimbursement for
expenses and/or compensation the Adviser is entitled to receive from the
Portfolio or Portfolios for such services. The Board must make a
determination that the providing of such services by the Adviser is in the
best interests of each Portfolio and its shareholders. Payment or assumption
by the Adviser of any Portfolio expense that the Adviser is not otherwise
required to pay or assume under this Agreement shall not relieve the Adviser
of any of its obligations to each Portfolio nor obligate the Adviser to pay
or assume any similar Portfolio expense on any subsequent occasions. Such
services may include, but are not limited to, (a) the services of a principal
financial officer of the Fund (including applicable office space, facilities
and equipment) whose normal duties consist of maintaining the financial
accounts and books and records of the Fund and each Portfolio and the
services (including applicable office space, facilities and equipment) of any
of the personnel operating under the direction of such principal financial
officer; (b) the services of staff to respond to shareholder inquiries
concerning the status of their accounts, providing assistance to shareholders
in exchanges among the investment companies managed or advised by the
Adviser, changing account designations or changing addresses, assisting in
the purchase or redemption of shares; or otherwise providing services to
shareholders of each Portfolio; and (c) such other administrative services as
may be furnished from time to time by the Adviser to the Fund or each
Portfolio at the request of the Board.
8
<PAGE> 9
XII. NONEXCLUSIVITY
The services of the Adviser to each Portfolio are not to be deemed to be
exclusive, and the Adviser shall be free to act as an underwriter or
distributor of other securities and to provide shareholder and distribution
services to other parties, including other investment companies, and to
engage in other activities, so long as its services under this Agreement are
not impaired. It is understood and agreed that officers and directors of the
Adviser may serve as officers or directors of the Fund, and that officers or
directors of the Fund may serve as officers or directors of the Adviser or
affiliated entities to the extent permitted by law and the rules and
regulations of the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. It is further understood that the
officers and directors of the Adviser are not prohibited from engaging in
any other business activity or from providing services to any other person,
or from serving as partners, officers, directors or trustees of any other
firm or trust, including other investment companies to the full extent
allowed by law.
XIII. TERM
This Agreement shall become effective on the date approved by the Board,
including a majority of the members of the Board who are not interested
persons of the Fund as defined by the 1940 Act, and shall remain in force and
effect through December 31, 2000, unless earlier terminated under the
provisions of Article XV.
XIV. RENEWAL
Following the expiration of its initial term, the Agreement shall
continue in force and effect from year to year, provided that the
continuance for each Portfolio is specifically approved at least
annually:
1. by the Board and by a majority of the directors of the Fund who
are not interested persons of the Fund as defined in the 1940
Act, by votes cast in person at a meeting specifically called for
the purpose of continuing this Agreement; or
2. by the vote of persons holding a majority of the outstanding
voting securities of the Portfolio as determined by rules and
regulations of the Securities and Exchange Commission; or
3. by such other provisions of the 1940 Act or rules and regulations
of the Securities and Exchange Commission as may hereafter be
adopted.
XV. TERMINATION
This Agreement may be terminated at any time, for any Portfolio,
without the payment of any penalty, on sixty (60) days' written notice
to the other party, by:
1. the vote of a majority of the Board; or
9
<PAGE> 10
2. by the vote of persons holding a majority of the outstanding
voting securities of the Portfolio as determined by rules and
regulations of the Securities and Exchange Commission; or
3. by the Adviser.
This Agreement shall automatically terminate in the event of its
"assignment," as that term is defined in the 1940 Act. The 60 days
notice required for termination may be waived, in writing, by the party
to be notified. The termination of this Agreement with respect to any
one Portfolio shall not affect the continuation of the Agreement with
respect to all other Portfolios.
XVI. AMENDMENT
This Agreement may be amended by a writing approved by the Board; provided,
however, all material amendments must be approved by a majority of the
directors of the Fund who are not interested persons of the Fund as defined
in the 1940 Act and by the vote of persons holding a majority of the
outstanding shares of the Fund or the applicable Portfolio as determined by
rules and regulations of the Securities and Exchange Commission.
XVII. LIABILITY
The Adviser shall be liable to each Portfolio and shall indemnify each
Portfolio for any losses incurred by each Portfolio, whether in the purchase,
holding or sale of any security or otherwise, to the extent that such losses
resulted from an act or omission on the part of the Adviser or its officers,
directors or employees, that is found to involve willful misfeasance, bad
faith or negligence, or reckless disregard by the Adviser of its duties, or
in connection with the services rendered by the Adviser, under this
Agreement.
XVIII. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered, mailed postage paid, or sent by other delivery service, or by
facsimile transmission to each party at such address as each party may
designate for the receipt of notice. Until further notice, such addresses
shall be
<TABLE>
<CAPTION>
THE ADVISER: THE PORTFOLIOS THE FUND:
<S> <C> <C>
FFP Advisory Services, Inc. c/o FFP New Horizons Fund, Inc. FFP New Horizons Fund Inc.
15455 Conway Road 15455 Conway Road 15455 Conway Road
Chesterfield, MO 63017 Chesterfield, MO 63017 Chesterfield, MO 63017
Attn: Robin Rodermund Attn: Robin Rodermund Attn: Robin Rodermund
Telephone: 314-537-1040 Telephone: 314-537-1040 Telephone: 314-537-1040
Fax: 314-537-9591 Fax: 314-537-9591 Fax: 314-537-9591
</TABLE>
10
<PAGE> 11
XIX. INTERPRETATION
This Agreement shall be governed by the laws of the State of Missouri. Any
term or provision of this Agreement which is the same as or derived from a
term or provision included in the 1940 Act shall be interpreted by referring
to the 1940 Act and to interpretations of such Act by the United States
Courts or by rules, regulations or orders of the Securities and Exchange
Commission. In addition, any provision of this Agreement that is included
based on or as a result of a requirement of the 1940 Act, shall be deemed
amended or deleted to the extent that the requirement on which the provision
is based is amended or rescinded in the future by rule, regulation or order
of the Securities and Exchange Commission.
XX. SERVICE MARK
The service mark of the Fund and each Portfolio and the name "FFP" have been
adopted by the Fund with the permission of First Financial Planners, Inc. and
their continued use is subject to the right of First Financial Planners, Inc.
to withdraw this permission in the event the Adviser or another subsidiary or
affiliated corporation of First Financial Planners, Inc. should not be the
investment adviser of any Portfolio.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the
date written in the first paragraph hereof.
FFP NEW HORIZONS FUND, INC. FOR ITSELF AND ON BEHALF OF ITS PORTFOLIOS:
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
By: /s/ ROY M. HENRY
-----------------
Roy M. Henry, President
Attest: /s/ ROBIN H. RODERMUND
----------------------
Robin H. Rodermund, Secretary (SEAL)
FFP ADVISORY SERVICES, INC.
By: /s/ ROY M. HENRY
----------------
Roy M. Henry, President
Attest: /s/ ROBERT H. RODERMUND, JR.
----------------------------
Robert H. Rodermund, Jr., Secretary (SEAL)
11
<PAGE> 1
FORM OF
SUBADVISORY AGREEMENT
THIS AGREEMENT is made and entered into by and between FFP Advisory Services,
Inc., a Missouri corporation and Mendel/Sowell Capital Management, Inc., an
Arkansas corporation effective as of the 1st day of January, 1999.
W I T N E S S E T H
WHEREAS, FFP New Horizons Fund, Inc. is an open-end, diversified, management
investment company authorized to issue securities in series or portfolios;
and
WHEREAS, FFP New Horizons Fund, Inc. has authorized the issuance of six
portfolios, including the FFP Century Venus Portfolio, each of which has its
own distinct investment objectives and policies; and
WHEREAS, FFP New Horizons Fund, Inc. is registering with the Securities and
Exchange Commission as an investment company under the Investment Company Act
of 1940 and is registering interests in the FFP Century Venus Portfolio with
the Commission under the Securities Act of 1933; and
WHEREAS, FFP Advisory Services, Inc. has entered into an investment advisory
agreement with FFP New Horizons Fund, Inc., naming FFP Advisory Services,
Inc. the investment adviser of each of the Portfolios, including the FFP
Century Venus Portfolio; and
WHEREAS, Mendel/Sowell Capital Management, Inc. is registered as an
investment adviser under the Investment Advisers Act of 1940 and is engaged
in the business of rendering investment management services; and
WHEREAS, FFP New Advisory Services, Inc. desires to appoint Mendel/Sowell
Capital Management, Inc. as the Subadviser for the FFP Century Venus
Portfolio and Mendel/Sowell Capital Management, Inc. desires to serve as the
Subadviser for the FFP Century Venus Portfolio;
NOW THEREFORE, in consideration of the mutual agreements and promises
contained in this Agreement and other valuable consideration, FFP Advisory
Services, Inc. and Mendel/Sowell Capital Management, Inc. agree as follows:
I. APPOINTMENT
FFP Advisory Services, Inc. (FFP Advisory) hereby retains Mendel/Sowell
Capital Management, Inc. (Mendel Sowell) to assist FFP Advisory in its
capacity as investment adviser of the FFP Century Venus Portfolio (Century
Venus). Mendel Sowell agrees to supervise and direct the investment and
reinvestment of the assets of Century Venus in accordance with the investment
goals and policies of Century Venus as set forth in the Prospectus and
Statement of Additional Information for Century Venus, as amended from time
to time. Mendel Sowell agrees to manage the assets of Century Venus subject
to the oversight and review of FFP Advisory and the Board
1
<PAGE> 2
of Directors of FFP New Horizons Fund, Inc. (Fund) and the terms and conditions
of this Agreement. Mendel Sowell further agrees that, except as required to
carry out its duties under this Agreement or otherwise expressly authorized,
it is acting as an independent contractor and not as an agent of FFP Advisory,
and that it has no authority to act for or represent FFP Advisory in any way.
II. DUTIES OF MENDEL SOWELL
In carrying out the terms of this Agreement, Mendel Sowell has the
following duties and responsibilities:
1. Mendel Sowell shall develop and implement an investment plan for
Century Venus to carry out the investment goal of Century Venus
and in connection with such plan, shall determine in its
discretion the securities to be purchased or sold by Century
Venus, subject to the direction of FFP Advisory and the Board of
Directors of the Fund;
2. Mendel Sowell shall provide FFP Advisory with such reports for
Century Venus as FFP Advisory or the Board of Directors of the
Fund may request from time to time, but which shall include at
least the following:
A. all reports required under the Investment Company Act of
1940 (1940 Act) with respect to FFP Century Venus
Portfolio;
B. a written statement by a duly authorized officer of Mendel
Sowell, delivered within seven (7) days after the close of
each calendar quarter, certifying that Century Venus has
been in compliance with the provisions of Subchapter M of
the Internal Revenue Code (Code) and Section 817(h) of the
Code.
III. COMPLIANCE WITH APPLICABLE REQUIREMENTS
A. COMPLIANCE BY MENDEL SOWELL
During the term of this Agreement, Mendel Sowell represents and
warrants that in managing the assets of Century Venus it shall at all
times comply with:
1. all applicable provisions of the 1940 Act, the Securities Act of
1933, the Investment Advisers Act of 1940 (Advisers Act), the
Securities Exchange Act of 1934, and any applicable rules and
regulations of the Securities and Exchange Commission issued
under those acts;
2. all policies and procedures applicable to Century Venus adopted
by the Board of Directors of the Fund and/or as described in the
then current Prospectus and Statement of Additional Information
for Century Venus;
3. the Articles of Incorporation of the Fund, as they may be amended
from time to time;
4. the Bylaws of the Fund, as they may be amended from time to time;
2
<PAGE> 3
5. all applicable provisions of the Internal Revenue Code and any
applicable rules and regulations of the Internal Revenue Service
or the Treasury Department relating to the Code.
B. COMPLIANCE BY FFP ADVISORY
During the term of this Agreement, FFP Advisory represents and warrants
that in acting as investment adviser for Century Venus it shall at all
times comply with:
1. all applicable provisions of the 1940 Act, the Securities Act of
1933, the Investment Advisers Act of 1940 (Advisers Act), the
Securities Exchange Act of 1934, and any applicable rules and
regulations of the Securities and Exchange Commission issued
under those acts;
2. all policies and procedures applicable to Century Venus adopted
by the Board of Directors of the Fund and/or as described in the
then current Prospectus and Statement of Additional Information
for Century Venus;
3. the Articles of Incorporation of the Fund, as they may be amended
from time to time;
4. the Bylaws of the Fund, as they may be amended from time to time;
5. all applicable provisions of the Internal Revenue Code and any
applicable rules and regulations of the Internal Revenue Service
or the Treasury Department relating to the Code.
IV. COMPENSATION
FFP Advisory shall pay to Mendel Sowell, for all services rendered to Century
Venus by Mendel Sowell hereunder, the fees set forth in Exhibit A attached to
this Agreement. During the term of this Agreement, Mendel Sowell will bear
all expenses incurred by it in the performance of its duties hereunder.
V. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF MENDEL SOWELL
Mendel Sowell hereby represents and warrants to FFP Advisory as
follows:
1. DUE INCORPORATION AND ORGANIZATION. Mendel Sowell has been duly
incorporated and is in good standing under the laws of the State
of Arkansas and has full authority to enter into this Agreement
and carry out its duties and obligations hereunder.
2. REGISTRATION. Mendel Sowell is registered as an investment
adviser with the Securities and Exchange Commission under the
Advisers Act and is registered or licensed as an investment
adviser under the laws of all jurisdictions in which its
activities require it to be so registered or licensed. Mendel
Sowell shall maintain such registration or licenses in effect at
all times during the term of this Agreement and it
3
<PAGE> 4
will promptly notify FFP Advisory (i) if it ceases to be so
registered, (ii) if its registration is suspended for any reason,
or (iii) if it is notified by any regulatory organization or court
of competent jurisdiction that it should show cause why its
registration should not be suspended or terminated.
3. CODE OF ETHICS. Mendel Sowell has adopted a written Code of
Ethics complying with the requirements of Rule 17j-1 under the
1940 Act and, if it has not already done so, will provide FFP
Advisory and the Board of Directors of the Fund with a copy of
such Code of Ethics, together with evidence of its adoption.
Mendel Sowell is in full compliance with the terms of such Code
of Ethics.
4. INVESTMENT OF ASSETS. Mendel Sowell will at all times invest the
assets of Century Venus so that the Portfolio will comply with
Section 817(h) of the Code and Treasury Regulations Section
1.8175 relating to the diversification requirements for variable
annuity or variable life insurance contracts and any amendments
or other modifications to such Section or Regulations; provided,
Mendel Sowell will be relieved of its obligations with respect to
compliance with the tax code provisions and shall be held
harmless if the noncompliance is a result of written direction
from FFP Advisory or the Board of Directors of the Fund.
5. BEST EFFORTS. Mendel Sowell at all times shall provide its best
judgment and effort to Century Venus in carrying out its
obligations hereunder.
B. REPRESENTATIONS AND WARRANTIES OF FFP ADVISORY
FFP Advisory hereby represents and warrants to Mendel Sowell as
follows:
1. DUE INCORPORATION AND ORGANIZATION. FFP Advisory is duly
organized and is in good standing under the laws of the state of
Missouri and has full authority to enter into this Agreement and
carry out its duties and obligations hereunder.
2. REGISTRATION. FFP Advisory is registered as an investment
adviser with the Securities and Exchange Commission under the
Advisers Act and is registered or licensed as an investment
adviser under the laws of all jurisdictions in which its
activities require it to be so registered or licensed. FFP
Advisory shall maintain such registration or licenses in effect
at all times during the term of this Agreement and it will
promptly notify Mendel Sowell (i) if it ceases to be so
registered, (ii) if its registration is suspended for any reason,
or (iii) if it is notified by any regulatory organization or
court of competent jurisdiction that it should show cause why its
registration should not be suspended or terminated.
3. CODE OF ETHICS. FFP Advisory has adopted a written Code of
Ethics complying with the requirements of Rule 17j-1 under the
1940 Act and has provided copies to Mendel Sowell and the Board
of Directors together with evidence of its adoption. FFP
Advisory is in full compliance with the terms of such Code of
Ethics.
4. INVESTMENT OF ASSETS. To the extent that FFP Advisory makes
decisions about the investment of the assets of Century Venus,
FFP Advisory will make such decisions so
4
<PAGE> 5
that the Portfolio will comply with Section 817(h) of the Code and
Treasury Regulations Section 1.8175 relating to the diversification
requirements for variable annuity or variable life insurance
contracts and any amendments or other modifications to such Section
or Regulations; provided, FFP Advisory will be relieved of its
obligations with respect to compliance with the tax code provisions
and shall be held harmless if the noncompliance is a result of
written direction from Mendel Sowell or the Board of Directors of
the Fund.
5. BEST EFFORTS. FFP Advisory at all times shall provide its best
judgment and effort to Century Venus in carrying out its
obligations hereunder.
VI. NONEXCLUSIVITY
The services of Mendel Sowell to Century Venus are not to be deemed exclusive
and Mendel Sowell shall be free to act as an investment adviser to other
clients, including other investment companies, and to engage in other
activities, so long as its services under this Agreement are not impaired.
It is further understood that the officers and directors of Mendel Sowell are
not prohibited from engaging in any other business activity or from providing
services to any other person, or from serving as partners, officers,
directors or trustees of any other firm or trust, including other investment
companies, to the full extent allowed by law; provided that Mendel Sowell
shall notify FFP Advisory immediately should Mendel Sowell or any of its
directors or executive officers be named an executive officer or director of
any bank, financial institution, other investment adviser, other investment
company or broker dealer or should any such party become a controlling
shareholder of any such entity.
VII. TERM
This Agreement shall become effective as of the date set forth above
and shall remain in full force and effect until December 31, 2000. It
shall continue thereafter from year to year if it is approved annually
by
1. the vote of a majority of the directors of the Fund, including a
majority of the directors who are not "interested persons" (as
defined in the 1940 Act) of any party to this Agreement, which
votes are cast in person at a meeting specifically called for the
purpose of continuing this Agreement; or
2. by the vote of holders of a majority of the outstanding voting
securities of Century Venus as determined by the rules and
regulations of the Securities and Exchange Commission.
VIII. TERMINATION
A. This Agreement may be terminated at any time, without payment of any
penalty, on not more than sixty (60) days' written notice to Mendel
Sowell by
1. FFP Advisory; or
2. vote of a majority of the Board of Directors of the Fund; or
5
<PAGE> 6
3. vote of the holders of a majority of the outstanding voting
securities of Century Venus as determined by the rules and
regulations of the Securities and Exchange Commission.
B. In addition, this Agreement may be terminated at any time, without
payment of any penalty, by Mendel Sowell on not more than sixty (60)
days' written notice to FFP Advisory.
C. This Agreement shall automatically terminate in the event of its
"assignment" as defined in the 1940 Act.
The sixty days' notice required for termination may be waived, in writing, by
the party to be notified.
IX. LIABILITY AND INDEMNIFICATION
A. INDEMNIFICATION BY MENDEL SOWELL
Mendel Sowell shall be liable to Century Venus and shall indemnify
Century Venus for any losses incurred by Century Venus, whether in the
purchase, holding or sale of any security or otherwise, to the extent
such losses resulted from an act or omission on the part of Mendel
Sowell or its officers, directors, or employees, that is found to
involve willful misfeasance, bad faith, or reckless disregard by Mendel
Sowell of its duties under this Agreement, in connection with the
services rendered by Mendel Sowell hereunder.
B. INDEMNIFICATION BY FFP
FFP Advisory shall be liable to Mendel Sowell and shall indemnify
Mendel Sowell for any losses incurred by Mendel Sowell, whether in the
purchase, holding or sale of any security or otherwise, to the extent
such losses resulted from an act or omission on the part of FFP
Advisory or its officers, directors, or employees, that is found to
involve willful misfeasance, bad faith, or reckless disregard by FFP
Advisory of its duties under this Agreement, in connection with the
obligations of FFP Advisory hereunder to Mendel Sowell.
X. AMENDMENTS
This Agreement may be amended at any time by agreement of the parties,
provided that the amendment shall be approved both by (i) the vote of a
majority of the Board of Directors of the Fund, including a majority of the
directors who are not "interested persons" (as defined in the 1940 Act) of
any party to this Agreement, cast in person at a meeting specifically called
for that purpose; and (ii) the holders of a majority of the outstanding
voting securities of Century Venus as determined in accordance with the rules
and regulations of the Securities and Exchange Commission.
6
<PAGE> 7
XI. NOTICES
Any notices under this Agreement shall be in writing addressed and delivered,
mailed postage paid, or sent by other delivery service, or by facsimile
transmission to each party at such address as each party may designate for
the receipt of notice. Until further notice, such addresses shall be
<TABLE>
<CAPTION>
FFP ADVISORY: MENDEL SOWELL: THE FUND:
<S> <C> <C>
FFP Advisory Services, Inc. Mendel/Sowell Capital Management, Inc. FFP New Horizons Fund, Inc.
15455 Conway Road 18 Corporate Hill Drive, c/o FFP Advisory Services, Inc.
Chesterfield, MO 63017 Suite 202 15455 Conway Road
Attn: Robin Rodermund Little Rock, Arkansas 72205 Chesterfield, MO 63017
Telephone: (314) 537-1040 Attn: Alan Mendel Attn: Robin Rodermund
Fax: (314) 537-9591 Telephone: (501) 225-1405 Telephone: (314) 537-1040
Fax: (501) 225-1650 Fax: (314) 537-9591
</TABLE>
XII. INTERPRETATION; GOVERNING LAW
This Agreement shall be construed in accordance with and governed by the laws
of the State of Missouri. Any term or provision of this Agreement which is
the same as or derived from a term or provision included in the 1940 Act
shall be interpreted by referring to the 1940 Act and to interpretations of
such Act by the United States Courts or by rules, regulations or orders of
the Securities and Exchange Commission. In addition, any provision of this
Agreement that is included, based on or as a result of a requirement of the
1940 Act shall be deemed amended or deleted to the extent that the
requirement on which the provision is based is amended or rescinded in the
future by rule, regulation or order of the Securities and Exchange
Commission.
XIII. SERVICE MARK
The service mark of the Fund and Century Venus and the name "FFP" have been
adopted by the Fund with the permission of First Financial Planners, Inc. and
their continued use is subject to the right of First Financial Planners, Inc.
to withdraw this permission in the event FFP Advisory or another subsidiary
or affiliated corporation of First Financial Planners, Inc. should not be the
investment adviser of any Portfolio of the Fund.
XIV. ENTIRE AGREEMENT
This Agreement represents the entire agreement and understanding of the
parties hereto and shall supersede any prior agreements, written or oral.
7
<PAGE> 8
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed
as of the date written in the first paragraph above.
FFP ADVISORY SERVICES, INC.
By: -------------------------------------
Roy M. Henry, President
ATTEST: -------------------------------------
Robert H. Rodermund, Jr., Secretary (SEAL)
MENDEL/SOWELL CAPITAL MANAGEMENT, INC.:
By: -------------------------------------
Alan Mendel, President
ATTEST: -------------------------------------
Secretary (SEAL)
8
<PAGE> 1
UNDERWRITING AND SERVICE AGREEMENT
OF
FFP NEW HORIZONS FUND, INC.
THIS AGREEMENT is made and entered into by and between FFP Securities, Inc.,
a Missouri corporation and FFP New Horizons Fund, Inc., a Maryland
corporation, on behalf of each of the Portfolios listed below, effective as
of the 16th day of December, 1998.
W I T N E S S E T H
WHEREAS, FFP New Horizons Fund, Inc. is an open-end, diversified, management
investment company authorized to issue securities in series or portfolios;
and
WHEREAS, FFP New Horizons Fund, Inc. has authorized the issuance of shares of
stock in the six portfolios listed below, each of which has its own distinct
investment objectives and policies; and
WHEREAS, FFP New Horizons Fund, Inc. is registering with the Securities and
Exchange Commission as an investment company under the Investment Company Act
of 1940 and is registering interests in each of its portfolios with the
Commission under the Securities Act of 1933; and
WHEREAS, The portfolios offer their shares only as investments under variable
annuity contracts or variable life insurance policies; and
WHEREAS, FFP New Horizons Fund, Inc. has adopted a Distribution Plan and a
Contract Holder Services Plan in compliance with the provisions of Section
12b and Rule 12b-1 of the Investment Company Act of 1940; and
WHEREAS, FFP Securities, Inc. is registered as a broker-dealer with the
Securities and Exchange Commission and with the applicable states and is a
member in good standing of the National Association of Securities Dealers,
Inc.; and
WHEREAS, FFP New Horizons Fund, Inc. desires to appoint FFP Securities, Inc.
as the underwriter for the sale of the shares in each of its portfolios and
authorize it to provide shareholder and distribution services as authorized
by its Distribution and Contract Holder Services Plans; and
WHEREAS, FFP Securities, Inc. desires to serve as the underwriter for each of
the portfolios of FFP New Horizons Fund, Inc. and to provide shareholder and
distribution services for the portfolios;
NOW THEREFORE, in consideration of the mutual agreements and promises
contained in this Agreement and other valuable consideration, FFP Securities,
Inc. and FFP New Horizons Fund, Inc. agree as follows:
1
<PAGE> 2
I. APPOINTMENT AS UNDERWRITER
A. APPOINTMENT
FFP New Horizons Fund, Inc. (Fund) hereby appoints FFP Securities, Inc.
(FFP Securities) as the underwriter to serve as the agent of the Fund
to sell and to accept redemptions of shares of the capital stock of
each of the following portfolios of the Fund (Portfolios):
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
FFP Millennium Venus Portfolio
FFP Securities agrees that it shall act as underwriter for the shares
of the Portfolios as provided in this Agreement and as described in the
registration statement for the Fund and its Portfolios when it becomes
effective and as it may be amended thereafter (Registration Statement).
FFP Securities agrees that, except as required to carry out its duties
under this Agreement or otherwise expressly authorized, it is acting as
an independent contractor and not as an agent of the Fund or the
Portfolios and has no authority to act for or represent the Fund or the
Portfolios in any way.
B. DUTIES
FFP Securities shall solicit orders for the purchase of shares of the
Portfolios on behalf of the Fund and its Portfolios and it shall
receive and transmit to the Fund shares properly tendered to FFP
Securities by shareholders of the Portfolios for redemption. FFP
Securities agrees that it will solicit orders for shares and accept
shares for redemption on the terms and conditions and as described in
the Registration Statement and as required by rules and regulations of
the Securities and Exchange Commission. It is understood that the
shares are offered only through variable annuity contracts and variable
life policies issued by life insurance companies.
II. APPOINTMENT AS SERVICE AGENT
A. APPOINTMENT
The Fund hereby appoints FFP Securities to provide shareholder and
distribution services for the Portfolios, their shareholders and the
owners or prospective owners of variable annuity contracts or variable
life insurance policies who may invest in the Portfolios through those
contracts and policies. FFP Securities agrees that it will provide
those services as described in and subject to the terms of this
Agreement and the Distribution Plan and Contract Holder Services Plan
(Plans) adopted by the Fund on behalf of the Portfolios and subject to
the rules and regulations of the Securities and Exchange Commission.
2
<PAGE> 3
B. DUTIES
During the time when the Distribution and Contract Holder Services
Plans adopted by the Fund and this Agreement are in effect, FFP
Securities shall provide services to (i) persons who own variable
annuity contracts or variable life insurance policies who have
investments in the Portfolios through those contracts and policies,
(ii) persons who are considering allocating assets to the Portfolios
through their variable annuity contracts or variable life insurance
policies, and/or (iii) persons who are considering purchasing variable
annuity contracts or variable life insurance policies which include the
Portfolios as investment options. In addition, FFP Securities may
provide services designed to increase the sale of shares in the
Portfolios through variable annuity contracts or variable life
insurance policies. The services shall be subject to the terms of, and
as described in, the Plans. The services shall include, but not be
limited to:
1. advice about the allocation of purchase payments among the
Portfolios under the variable annuity contracts or variable life
insurance policies;
2. discussion of the risks involved in the various Portfolios used
as investment options under the variable annuity contracts or
variable life insurance policies;
3. asset allocation advice and advice about the balancing
investments among different classes of assets;
4. obtaining information and providing explanations about the
investment objectives, policies and strategies of each Portfolio;
5. holding seminars to educate contract and policy owners about
asset allocation of their purchase payments and the management of
the Portfolios;
6. providing ongoing customer service to owners of the variable
annuity contracts or variable life insurance policies, including
providing information about the management and performance of
each Portfolio and the individual accounts of each owner in each
Portfolio; and
7. responding to questions about shareholder reports, proxy
statements or other information provided to contract and policy
owners by the Fund;
8. printing and mailing prospectuses, statements of additional
information, supplements and shareholder reports;
9. developing, preparing, printing and mailing advertisements, sales
literature and other promotional materials describing and/or
relating to the Portfolios;
10. holding seminars and sales meetings designed to promote the
Portfolios as investment options under the variable annuity
contracts or variable life insurance policies; and
11. educating sales personnel and prospective customers about the
Portfolios and their performance and the management styles of the
investment advisers of the Portfolios.
3
<PAGE> 4
C. REPORTS
While FFP Securities is providing services under the Distribution and
Shareholder Services Plans, it shall provide to the Fund and its
Board, at least quarterly, reports in such form and containing such
information as the Board may reasonably request. These reports shall
include information necessary for the Board to make an informed
determination concerning whether the Plans should be continued. Such
information shall include a written report of the aggregate amounts
received by FFP Securities under this Agreement for the services
described in this Section II and the amounts spent by FFP Securities in
providing those services.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF FFP SECURITIES
FFP Securities hereby represents and warrants to the Fund and each
Portfolio as follows:
1. DUE INCORPORATION AND ORGANIZATION. FFP Securities is duly
organized and is in good standing under the laws of the State of
Missouri and is fully authorized to enter into this Agreement and
carry out its duties and obligations hereunder.
2. REGISTRATION. FFP Securities is registered as a broker-dealer
with the Securities and Exchange Commission and with all the
states in which its activities require it to be so registered and
FFP Securities shall maintain such registrations in effect at all
times during the term of this Agreement.
3. CODE OF ETHICS. FFP Securities represents that it has adopted a
Code of Ethics under the provisions of Rule 17j-1 of the 1940
Act, a copy of which has been delivered to the Fund and FFP
Securities agrees that, during the term of this Agreement, it
shall maintain such Code in force and that it shall notify the
Board in advance in the event it proposes to amend or replace
such Code of Ethics. FFP Securities further certifies that it
has adopted such procedures as are reasonably necessary to
prevent access persons from violating such code of ethics.
4. BEST EFFORTS. FFP Securities at all times shall provide its best
judgment and effort to each Portfolio in carrying out its
obligations hereunder and shall act in compliance with all the
provisions of the Plan and the Registration Statement.
B. REPRESENTATIONS AND WARRANTIES OF EACH PORTFOLIO AND THE FUND
The Fund, on behalf of each Portfolio, hereby represents and warrants
to FFP Securities as follows:
1. DUE INCORPORATION AND ORGANIZATION. The Fund has been duly
incorporated under the laws of the state of Maryland and is
authorized to enter into this Agreement and carry out its
obligations hereunder.
4
<PAGE> 5
2. REGISTRATION. The Fund is or will be registered as an investment
company with the Securities and Exchange Commission under the
1940 Act and shares of each Portfolio are or will be registered
or qualified for offer and sale to the public under the
Securities Act of 1933, as amended (1933 Act) and under the
securities laws of all states where such registration is
required. Such registrations or qualifications will be kept in
effect during the term of this Agreement.
IV. COMPLIANCE WITH APPLICABLE REQUIREMENTS
In carrying out its obligations under this Agreement, FFP Securities
shall at all times comply with:
1. all applicable provisions of the 1940 Act, the 1933 Act, the
Securities Exchange Act of 1934 and any applicable rules and
regulations of the Securities and Exchange Commission;
2. all applicable rules and regulations of the National Association
of Securities Dealers Inc. and the statutes and rules of the
applicable state securities regulators;
3. all policies and procedures of the Fund as adopted by the Board
and/or as described in the Registration Statement;
4. the provisions of the Articles of Incorporation for the Fund, as
they may be amended from time to time;
5. the provisions of the Bylaws of the Fund, as they may be amended
from time to time; and
6. any other applicable provisions of state or federal law.
V. COMPENSATION
A. FOR ITS DUTIES AS UNDERWRITER
FFP Securities shall receive no compensation for providing services as
an underwriter under Section I of this Agreement. It is understood,
however, that FFP Securities may participate in the offer and sale of
the variable annuity contracts or variable life insurance policies that
use the Portfolios as investment options and FFP Securities may receive
compensation from the life insurance companies for such services as
authorized by the registration statements and distribution agreements
for the variable annuity contracts or variable life insurance policies.
In addition, FFP Securities may receive compensation for providing
shareholder and distribution services for the Portfolios as provided in
Subsection B, below.
B. FOR ITS DUTIES IN PROVIDING SHAREHOLDER AND DISTRIBUTION SERVICES.
Each Portfolio shall pay to FFP Securities a fee equal to an annual
rate of .75% of the average daily net assets of each Portfolio for the
services provided by FFP Securities under
5
<PAGE> 6
Section II of this Agreement. Compensation under this Agreement shall be
calculated and shall accrue daily at the rate of 1/365 of .75% of the
daily net assets of each Portfolio determined at the end of each day. If
this Agreement becomes effective subsequent to the first day of a month
or terminates before the last day of a month, compensation shall only
accrue and be paid for that part of the month during which this Agreement
is in effect. The fee shall be payable quarterly upon review by the
Board of the reports provided to the Board under Section II.C of this
Agreement. Each fee accrues for each Portfolio separately and in no
event shall any one Portfolio be responsible for the fee payable by any
other Portfolio.
VI. EXPENSES
The expenses in connection with the management of each Portfolio shall be
allocated between each Portfolio and FFP Securities as follows:
A. EXPENSES OF FFP SECURITIES
FFP Securities shall be responsible for the payment of all fees and
expenses it incurs in distributing the shares and in providing the
services described in Section II of this agreement. Those expenses
include, but are not limited to:
1. costs of printing and mailing prospectuses, statements of
additional information, supplements and shareholder reports that
are used to solicit new investments in the Portfolios;
2. developing, preparing, printing and mailing advertisements, sales
literature and other promotional materials describing and/or
relating to the Portfolios;
3. fees paid to registered representatives in connection with
providing the services described in Section II; and
4. costs of communicating with shareholders, contract owners and
policy holders about their interests in the Portfolios.
B. EXPENSES OF EACH PORTFOLIO
Each Portfolio shall pay:
1. the fees payable by the Portfolio to FFP Securities under this
Agreement;
2. its proportionate share of the expenses payable by the Fund for
preparing, printing and distributing proxies, proxy statements,
prospectuses, registration statements and reports to existing
shareholders of the Portfolios and of holding shareholders'
meetings; and
3. fees payable by each Portfolio to the Securities and Exchange
Commission or to any state securities regulator or other
regulatory authority for the registration of shares of the
Portfolio.
6
<PAGE> 7
VII. STATUS OF UNDERWRITER AND OTHER PERSONS.
FFP Securities is an independent contractor and shall be agent for the Fund
only for the sale and redemption of the shares. Any person who serves both
as an officer, director, employee or agent of FFP Securities and of the Fund
shall be deemed to be providing services only to the Fund when acting on any
business of the Fund, and shall not be deemed to be acting as an officer,
director, employee or agent, or under the control or direction, of FFP
Securities even though such person is receiving compensation from FFP
Securities.
VIII. NONEXCLUSIVITY
The services of FFP Securities to each Portfolio are not to be deemed to be
exclusive, and FFP Securities shall be free to act as an underwriter or
distributor of other securities and to provide shareholder and distribution
services to other parties, including other investment companies, and to
engage in other activities, so long as its services under this Agreement are
not impaired. It is understood and agreed that officers and directors of FFP
Securities may serve as officers or directors of the Fund, and that officers
or directors of the Fund may serve as officers or directors of FFP Securities
or affiliated entities to the extent permitted by law and the rules and
regulations of the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc. It is further understood that the
officers and directors of FFP Securities are not prohibited from engaging in
any other business activity or from providing services to any other person,
or from serving as partners, officers, directors or trustees of any other
firm or trust, including other investment companies to the full extent
allowed by law.
IX. TERM
This Agreement shall become effective on the date approved by the Board,
including a majority of the members of the Board who are not interested
persons of the Fund as defined by the 1940 Act and who have no direct or
indirect financial interest in this Agreement or in the operation of the
Distribution and Contract Holder Services Plans of the Fund or in any
agreements related to the Plans (disinterested directors). This Agreement
shall remain in force and effect through December 31, 1999, unless earlier
terminated under the provisions of Section XI.
X. RENEWAL
Following the expiration of its initial term, this Agreement shall continue
in force and effect from year to year, provided that the continuation for
each Portfolio is specifically approved at least annually by the Board and by
a majority of the disinterested directors. The approval must be done in
person at a meeting specifically called for the purpose of continuing the
Agreement.
XI. TERMINATION
This Agreement may be terminated at any time, for any Portfolio,
without the payment of any penalty, on sixty (60) days' written notice
to the other party, by:
1. the vote of a majority of the Board; or
2. the vote of a majority of the disinterested directors; or
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<PAGE> 8
3. the vote of persons holding a majority of the outstanding voting
securities of the Portfolio as determined by rules and
regulations of the Securities and Exchange Commission.
This Agreement shall automatically terminate in the event of its
"assignment," as that term is defined in the 1940 Act. The termination
of this Agreement with respect to any one Portfolio shall not affect
the continuation of this Agreement with respect to other Portfolios.
The termination of the appointment of FFP Securities as the provider of
shareholder and distribution services for any Portfolio under the
provisions of Section II of this Agreement shall not affect the
appointment and duties of FFP Securities as an underwriter for the
Portfolios under Section I of this Agreement.
XII. AMENDMENT
This Agreement may be amended by a writing approved by the Board. All
material amendments must be approved by a majority of the disinterested
directors of the Fund.
XIII. LIABILITY
FFP Securities shall be liable to each Portfolio and shall indemnify each
Portfolio for any losses incurred by the Portfolio to the extent that such
losses resulted from an act or omission on the part of FFP Securities or its
officers, directors or employees, that is found to involve willful
misfeasance, bad faith or negligence, or reckless disregard by FFP Securities
of its duties, or in connection with the services rendered by FFP Securities,
under this Agreement.
XIV. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered, mailed postage paid, or sent by other delivery service, or by
facsimile transmission or e-mail to each party at such address as each party
may designate for the receipt of notice. Until further notice, such
addresses shall be:
<TABLE>
<CAPTION>
THE FUND: THE PORTFOLIOS: FFP SECURITIES:
<S> <C> <C>
FFP New Horizons Fund, Inc. c/o FFP New Horizons Fund, Inc. FFP Securities, Inc.
15455 Conway Road 15455 Conway Road 15455 Conway Road
Chesterfield, MO 63017 Chesterfield, MO 63017 Chesterfield, MO 63017
314-537-1040 314-537-1040 314-537-1040
Fax: 314-537-9591 Fax: 314-537-9591 Fax: 314-537-9591
</TABLE>
XV. INTERPRETATION
This Agreement shall be governed by the laws of the State of Missouri. Any
term or provision of this Agreement which is the same as or derived from a
term or provision included in the 1940 Act shall be interpreted by referring
to the 1940 Act and to interpretations of such Act by the United States
Courts or by rules, regulations or orders of the Securities and Exchange
Commission. In addition, any provision of this Agreement that is included
based on or as a result of a requirement of the 1940 Act, shall be deemed
amended or deleted to the extent that
8
<PAGE> 9
the requirement on which the provision is based is amended or rescinded in the
future by rule, regulation or order of the Securities and Exchange Commission.
XVI. SERVICE MARK
The service mark of the Fund and each Portfolio and the name "FFP" have been
adopted by the Fund with the permission of First Financial Planners, Inc. and
their continued use is subject to the right of First Financial Planners, Inc.
to withdraw this permission in the event FFP Securities or another subsidiary
or affiliated corporation of First Financial Planners, Inc. is not the
underwriter of any Portfolio.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the
date written in the first paragraph of this Agreement.
FFP SECURITIES, INC.
By: /s/ ROY M. HENRY
----------------
Roy M. Henry, President
ATTEST: /s/ ROBERT H. RODERMUND, JR.
----------------------------
Robert H. Rodermund, Jr., Secretary (SEAL)
FFP NEW HORIZONS FUND, INC. ON BEHALF OF ITS PORTFOLIOS:
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
FFP Millennium Venus Portfolio
By: /s/ ROY M. HENRY
----------------
Roy M. Henry, President
ATTEST: /s/ ROBIN H. RODERMUND
----------------------
Robin H. Rodermund, Secretary (SEAL)
9
<PAGE> 1
FORM OF
CUSTODY AND INVESTMENT ACCOUNTING AGREEMENT
THIS AGREEMENT is made effective the --- day of ----------, 19--, by and
between INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under
the laws of the state of Missouri, having its principal office and place of
business at 801 Pennsylvania Avenue, Kansas City, Missouri 64105 ("IFTC"),
and FFP New Horizons Fund, Inc., a Maryland corporation having its principal
office and place of business at 15455 Conway Road, Chesterfield, MO 63017
("Fund").
WITNESSETH:
WHEREAS, Fund desires to appoint IFTC as custodian of the assets of the
Fund's investment portfolio or portfolios (each a "Portfolio", and
collectively the "Portfolios") and as its agent to perform certain investment
accounting and record keeping functions; and
WHEREAS, IFTC is willing to accept such appointment on the terms and
conditions hereinafter set forth;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant
and agree as follows:
1. APPOINTMENT OF CUSTODIAN AND AGENT. Fund hereby constitutes and
----------------------------------
appoints IFTC as:
A. Custodian of the investment securities, interests in loans and
other non-cash investment property, and monies at any time owned by
each of the Portfolios and delivered to IFTC as custodian hereunder
("Assets"); and
B. Agent to perform certain accounting and record keeping functions
relating to portfolio transactions required of a duly registered
investment company under Rule 31a of the Investment Company Act of
1940, as amended (the "1940 Act") and to calculate the net asset value
of the Portfolios.
2. REPRESENTATIONS AND WARRANTIES.
------------------------------
A. Fund hereby represents, warrants and acknowledges to IFTC:
1. That it is a corporation duly organized and existing and in
good standing under the laws of its state of organization, and
that it is registered under the 1940 Act; and
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<PAGE> 2
2. That it has the requisite power and authority under
applicable law and its articles of incorporation and its bylaws
to enter into this Agreement; it has taken all requisite action
necessary to appoint IFTC as custodian and investment accounting
and record keeping agent; this Agreement has been duly executed
and delivered by Fund; and this Agreement constitutes a legal,
valid and binding obligation of Fund, enforceable in accordance
with its terms.
B. IFTC hereby represents, warrants and acknowledges to Fund:
1. That it is a trust company duly organized and existing and in
good standing under the laws of the State of Missouri; and
2. That it has the requisite power and authority under applicable
law, its charter and its bylaws to enter into and perform this
Agreement; this Agreement has been duly executed and delivered by IFTC;
and this Agreement constitutes a legal, valid and binding obligation of
IFTC, enforceable in accordance with its terms.
3. DUTIES AND RESPONSIBILITIES OF THE PARTIES.
------------------------------------------
A. Delivery of Assets. Except as permitted by the 1940 Act, Fund
------------------
will deliver or cause to be delivered to IFTC on the effective date
hereof, or as soon thereafter as practicable, and from time to time
thereafter, all Assets acquired by, owned by or from time to time
coming into the possession of each of the Portfolios during the term
hereof. IFTC has no responsibility or liability whatsoever for or on
account of assets not so delivered.
B. Delivery of Accounts and Records. Fund will turn over or cause
--------------------------------
to be turned over to IFTC all accounts and records needed by IFTC to
perform its duties and responsibilities hereunder fully and properly.
IFTC may rely conclusively on the completeness and correctness of such
accounts and records.
C. Delivery of Assets to Third Parties. IFTC will receive delivery
-----------------------------------
of and keep safely the Assets of each Portfolio segregated in a
separate account. Upon delivery of any such Assets to a subcustodian
appointed pursuant hereto (hereinafter referred to as "Subcustodian"),
IFTC will create and maintain records identifying such Assets as
belonging to the applicable Portfolio. IFTC is responsible for the
safekeeping of the Assets only until they have been transmitted to and
received by other persons as permitted under the terms hereof, except
for Assets transmitted to Subcustodians, for which IFTC remains
responsible to the extent provided herein. IFTC may participate
directly or indirectly through a subcustodian in the Depository Trust
Company (DTC), Treasury/Federal Reserve Book Entry System (Fed System),
Participant Trust Company (PTC) or other depository approved by Fund
(as such entities are defined at 17 CFR Section 270.17f-4(b)) (each a
"Depository" and collectively the "Depositories"). IFTC will be
responsible to Fund for any loss, damage or expense suffered or
incurred by Fund resulting from the actions or omissions of any
Depository only to the same extent such Depository is responsible to
IFTC.
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<PAGE> 3
D. Registration. IFTC will at all times hold registered Assets in
------------
the name of IFTC as custodian, the applicable Portfolio, or a nominee
of either of them, unless specifically directed by Instructions, as
hereinafter defined, to hold such registered Assets in so-called
"street name," provided that, in any event, IFTC will hold all such
Assets in an account of IFTC as custodian containing only Assets of the
applicable Portfolio, or only assets held by IFTC as a fiduciary or
custodian for customers; and provided further, IFTC's records will at
all times indicate the Portfolio or other customer for which such
Assets are held and the respective interests therein. If, however,
Fund directs IFTC to maintain Assets in "street name", notwithstanding
anything contained herein to the contrary, IFTC will be obligated only
to utilize its best efforts to timely collect income due the Portfolio
on such Assets and to notify the Portfolio of relevant information,
such as maturities and pendency of calls, and corporate actions
including, without limitation, calls for redemption, tender or exchange
offers, declaration, record and payment dates and amounts of any
dividends or income, reorganization, recapitalization, merger,
consolidation, split-up of shares, change of par value, or conversion
("Corporate Actions"). All Assets and the ownership thereof by
Portfolio will at all times be identifiable on the records of IFTC.
Fund agrees to hold IFTC and its nominee harmless for any liability as
a shareholder of record of securities held in custody.
E. Exchange. Upon receipt of Instructions, IFTC will exchange, or
--------
cause to be exchanged, Assets held for the account of a Portfolio for
other Assets issued or paid in connection with any Corporate Action or
otherwise, and will deposit any such Assets in accordance with the
terms of any such Corporate Action. Without Instructions, IFTC is
authorized to exchange Assets in temporary form for Assets in
definitive form, to effect an exchange of shares when the par value of
stock is changed, and, upon receiving payment therefor, to surrender
bonds or other Assets at maturity or when advised of earlier call for
redemption, except that IFTC will receive Instruction prior to
surrendering any convertible security.
F. Purchases of Investments -- Other Than Options and Futures. On
----------------------------------------------------------
each business day on which a Portfolio makes a purchase of Assets other
than options and futures, Fund will deliver to IFTC Instructions
specifying with respect to each such purchase:
1. If applicable, the name of the Portfolio making such
purchase;
2. The name of the issuer and description of the Asset;
3. The number of shares and the principal amount purchased,
and accrued interest, if any;
4. The trade date;
5. The settlement date;
6. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the purchase;
7. The total amount payable upon such purchase;
8. The name of the person from whom or the broker or dealer
through whom the purchase was made; and
3
<PAGE> 4
9. Whether the Asset is to be received in certificated form or
via a specified Depository.
In accordance with such Instructions, IFTC will pay for out of monies
held for the purchasing Portfolio, but only insofar as such monies are
available for such purpose, and receive the Assets so purchased by or
for the account of such Portfolio, except that IFTC, or a Subcustodian,
may in its sole discretion advance funds to such Portfolio which may
result in an overdraft because the monies held on behalf of such
Portfolio are insufficient to pay the total amount payable upon such
purchase. Except as otherwise instructed by Fund, IFTC will make such
payment only upon receipt of Assets: (a) by IFTC; (b) by a clearing
corporation of a national exchange of which IFTC is a member; or (c) by
a Depository. Notwithstanding the foregoing, (i) IFTC may release
funds to a Depository prior to the receipt of advice from the
Depository that the Assets underlying a repurchase agreement have been
transferred by book-entry into the account maintained with such
Depository by IFTC on behalf of its customers; provided that IFTC's
instructions to the Depository require that the Depository make payment
of such funds only upon transfer by book-entry of the Assets underlying
the repurchase agreement in such account; (ii) IFTC may make payment
for time deposits, call account deposits, currency deposits and other
deposits, foreign exchange transactions, futures contracts or options,
before receipt of an advice or confirmation evidencing said deposit or
entry into such transaction; and (iii) IFTC may make, or cause a
Subcustodian to make, payment for the purchase of Assets the settlement
of which occurs outside of the United States of America in accordance
with generally accepted local custom and market practice.
G. Sales and Deliveries of Investments -- Other Than Options and
-------------------------------------------------------------
Futures. On each business day on which a Portfolio makes a sale of
-------
Assets other than options and futures, Fund will deliver to IFTC
Instructions specifying with respect to each such sale:
1. If applicable, the name of the Portfolio making such sale;
2. The name of the issuer and description of the Asset;
3. The number of shares and principal amount sold, and accrued
interest, if any;
4. The date on which the Assets sold were purchased or other
information identifying the Assets sold and to be delivered;
5. The trade date;
6. The settlement date;
7. The sale price per unit and the brokerage commission, taxes
or other expenses payable in connection with such sale;
8. The total amount to be received by the Portfolio upon such
sale; and
9. The name and address of the broker or dealer through whom
or person to whom the sale was made.
IFTC will deliver or cause to be delivered the Assets thus designated
as sold for the account of the selling Portfolio as specified in the
Instructions. Except as otherwise
4
<PAGE> 5
instructed by Fund, IFTC will make such delivery upon receipt of: (a)
payment therefor in such form as is satisfactory to IFTC; (b) credit to
the account of IFTC with a clearing corporation of a national securities
exchange of which IFTC is a member; or (c) credit to the account
maintained by IFTC on behalf of its customers with a Depository.
Notwithstanding the foregoing: (i) IFTC will deliver Assets held in
physical form in accordance with "street delivery custom" to a broker or
its clearing agent; or (ii) IFTC may make, or cause a Subcustodian to
make, delivery of Assets the settlement of which occurs outside of the
United States of America upon payment therefor in accordance with
generally accepted local custom and market practice.
H. Purchases or Sales of Options and Futures. On each business day
-----------------------------------------
on which a Portfolio makes a purchase or sale of the options and/or
futures listed below, Fund will deliver to IFTC Instructions specifying
with respect to each such purchase or sale:
1. If applicable, the name of the Portfolio making such
purchase or sale;
2. In the case of security options:
a. The underlying security;
b The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded; and
j. Name and address of the broker or dealer through whom
the sale or purchase was made.
3. In the case of options on indices:
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
d The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
5
<PAGE> 6
i. Whether the option is written or purchased; and
j. The name and address of the broker or dealer through
whom the sale or purchase was made, or other applicable
settlement instructions.
4. In the case of security index futures contracts:
a. The last trading date specified in the contract and,
when available, the closing level, thereof;
b. The index level on the date the contract is entered
into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition
to Instructions, and if not already in the possession of
IFTC, Fund will deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement, incorporated herein by reference); and
f. The name and address of the futures commission
merchant through whom the sale or purchase was made, or
other applicable settlement instructions.
5. In the case of options on index future contracts:
a. The underlying index future contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening,
exercising, expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased; and
i. The market on which the option is traded.
I. Assets Pledged or Loaned. If specifically allowed for in the
------------------------
prospectus of a Portfolio, and subject to such additional terms and
conditions as IFTC may require:
1. Upon receipt of Instructions, IFTC will release or cause to
be released Assets to the designated pledgee by way of pledge or
hypothecation to secure any loan incurred by a Portfolio;
provided, however, that IFTC will release Assets only upon
payment to IFTC of the monies borrowed, except that in cases
where additional collateral is required to secure a borrowing
already made, further Assets may be released or caused to be
released for that purpose. Upon receipt of Instructions, IFTC
will pay, but only from funds available for such purpose, any
6
<PAGE> 7
such loan upon redelivery to it of the Assets pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing such loan.
2. Upon receipt of Instructions, IFTC will release Assets to
the designated borrower; provided, however, that the Assets will
be released only upon deposit with IFTC of full cash collateral
as specified in such Instructions, and that the lending Portfolio
will retain the right to any dividends, interest or distribution
on such loaned Assets. Upon receipt of Instructions and the
loaned Assets, IFTC will release the cash collateral to the
borrower.
J. Routine Matters. IFTC will, in general, attend to all routine
---------------
and mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with the Assets
except as may be otherwise provided herein or upon Instruction from
Fund.
K. Deposit Accounts. IFTC will open and maintain one or more
----------------
special purpose deposit accounts for each Portfolio in the name of IFTC
in such banks or trust companies (including, without limitation,
affiliates of IFTC) as may be designated by it or Fund in writing
("Accounts"), subject only to draft or order by IFTC upon receipt of
Instructions. IFTC will deposit all monies received by IFTC from or
for the account of a Portfolio in an Account maintained for such
Portfolio. Subject to Section 5 hereof, IFTC agrees:
1. To make Fed Funds available to the applicable Portfolio at
9:00 a.m., Kansas City time, on the second business day after
deposit of any check into an Account, in the amount of the check;
2. To make funds available immediately upon a deposit made by
Federal Reserve wire; and
3. To make funds available on the next business day after
deposit of ACH wires.
L. Income and Other Payments. IFTC will:
-------------------------
1. Collect, claim and receive and deposit for the account of
the applicable Portfolio all income (including income from the
Accounts) and other payments which become due and payable on or
after the effective date hereof with respect to the Assets, and
credit the account of such Portfolio in accordance with the
schedule attached hereto as Exhibit A. If, for any reason, a
Portfolio is credited with income that is not subsequently
collected, IFTC may reverse that credited amount. If monies are
collected after such reversal, IFTC will credit the Portfolio in
that amount;
2. Execute ownership and other certificates and affidavits for
all federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with
7
<PAGE> 8
a. the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of all coupons and other
income items requiring presentation; and all other
Assets which may mature or be called, redeemed,
retired or otherwise become payable and regarding
which IFTC has actual knowledge, or should reasonably
be expected to have knowledge; and
b. the endorsement for collection, in the name of Fund
or a Portfolio, of all checks, drafts or other
negotiable instruments.
IFTC, however, will not be required to institute suit or take
other extraordinary action to enforce collection except upon
receipt of Instructions and upon being indemnified to its
satisfaction against the costs and expenses of such suit or other
actions. IFTC will receive, claim and collect all stock
dividends, rights and other similar items and will deal with the
same pursuant to Instructions.
M. Proxies and Notices. IFTC will promptly deliver or mail or have
-------------------
delivered or mailed to Fund all proxies properly signed, all notices of
meetings, all proxy statements and other notices, requests or
announcements affecting or relating to Assets and will, upon receipt of
Instructions, execute and deliver or mail (or cause its nominee to
execute and deliver or mail) such proxies or other authorizations as
may be required. Except as provided herein or pursuant to Instructions
hereafter received by IFTC, neither it nor its nominee will exercise
any power inherent in any such Assets, including any power to vote the
same, or execute any proxy, power of attorney, or other similar
instrument voting any of such Assets, or give any consent, approval or
waiver with respect thereto, or take any other similar action.
N. Disbursements. IFTC will pay or cause to be paid, insofar as
-------------
funds are available for the purpose, bills, statements and other
obligations of each Portfolio (including but not limited to obligations
in connection with the conversion, exchange or surrender of Assets,
interest charges, dividend disbursements, taxes, management fees,
custodian fees, legal fees, auditors' fees, transfer agents' fees,
brokerage commissions, compensation to personnel, and other operating
expenses of such Portfolio) pursuant to Instructions setting forth the
name of the person to whom payment is to be made, and the amount and
purpose of the payment.
O. Daily Statement of Accounts. IFTC will, within a reasonable
---------------------------
time, render to Fund a detailed statement of the amounts received or
paid and of Assets received or delivered for the account of each
Portfolio during each business day. IFTC will maintain such books and
records as are necessary to enable it to render, from time to time
upon request by Fund, a detailed statement of the Assets. IFTC will
permit, and upon Instruction will cause any Subcustodian to permit,
such persons as are authorized by Fund, including Fund's independent
public accountants, reasonable access to such records or will provide
reasonable confirmation of the contents of such records, and if
demanded, IFTC will permit, and will cause any Subcustodian to permit,
federal and state regulatory agencies to examine the Assets, books and
records of the Portfolio.
8
<PAGE> 9
P. Appointment of Subcustodians. Notwithstanding any other
----------------------------
provisions hereof:
1. All or any of the Assets may be held in IFTC's own custody
or in the custody of one or more other banks or trust companies
(including, without limitation, affiliates of IFTC) acting as
Subcustodians as may be selected by IFTC. Any such Subcustodian
selected by IFTC must have the qualifications required for a
custodian under the 1940 Act. IFTC will be responsible to the
applicable Portfolio for any loss, damage or expense suffered or
incurred by such Portfolio resulting from the actions or
omissions of any Subcustodians selected and appointed by IFTC
(except Subcustodians appointed at the request of Fund and as
provided in Subsection 2 below) to the same extent IFTC would be
responsible to Fund hereunder if it committed the act or omission
itself.
2. Upon request of Fund, IFTC will contract with other
Subcustodians reasonably acceptable to IFTC for purposes of (a)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a common
custodian or subcustodian, or (b) providing depository and
clearing agency services with respect to certain variable rate
demand note securities, or (c) for other reasonable purposes
specified by Fund; provided, however, that IFTC will be
responsible to Fund for any loss, damage or expense suffered or
incurred by Fund resulting from the actions or omissions of any
such Subcustodian only to the same extent such Subcustodian is
responsible to IFTC. Fund may review IFTC's contracts with such
Subcustodians.
Q. Foreign Custody Manager.
-----------------------
1. Delegation to IFTC as FCM. The Fund, pursuant to
-------------------------
resolution adopted by its Board of Trustees or Directors (the
"Board"), hereby delegates to IFTC, subject to Section (b) of
Rule 17f-5, the responsibilities set forth in this Section Q
with respect to Foreign Assets held outside the United States,
and IFTC hereby accepts such delegation, as FCM of each
Portfolio. It is understood and agreed that IFTC will
sub-contract the performance of its responsibilities hereunder
with State Street Bank & Trust Company. IFTC will be responsible
to the applicable Portfolio for any loss, damage or expense
suffered or incurred by such Portfolio resulting from the actions
or omissions of State Street Bank & Trust Company to the same
extent IFTC would be responsible to Fund hereunder if it
committed the act or omission itself. References herein to
Foreign Custody Manager ("FCM") shall include IFTC and State
Street Bank & Trust Company.
2. Definitions. Capitalized terms in this Section Q have the
-----------
following meanings:
"Country Risk" means all factors reasonably related to the
systemic risk of holding Foreign Assets in a particular country
including, but not limited to, such country's political
environment; economic and financial infrastructure (including
financial institutions such as any Mandatory Securities
Depositories operating in the country); prevailing or developing
custody and settlement practices; and laws
9
<PAGE> 10
and regulations applicable to the safekeeping and recovery of
Foreign Assets held in custody in that country.
"Eligible Foreign Custodian" has the meaning set forth in section
(a)(1) of Rule 17f-5, except that the term does not include
Mandatory Securities Depositories.
"Foreign Assets" means any of the Portfolios' investments
(including foreign currencies) for which the primary market is
outside the United States and such cash and cash equivalents in
amounts deemed by Fund to be reasonably necessary to effect the
Portfolios' transactions in such investments.
"Foreign Custody Manager" or "FCM" has the meaning set forth in
section (a)(2) of Rule 17f-5.
"Mandatory Securities Depository" means a foreign securities
depository or clearing agency that, either as a legal or
practical matter, must be used if the Fund determines to place
Foreign Assets in a country outside the United States (i) because
required by law or regulation; (ii) because securities cannot be
withdrawn from such foreign securities depository or clearing
agency; or (iii) because maintaining or effecting trades in
securities outside the foreign securities depository or clearing
agency is not consistent with prevailing or developing custodial
or market practices.
3. Countries Covered. The FCM is responsible for performing
-----------------
the delegated responsibilities defined below only with respect to
the countries and custody arrangements for each such country
listed on Exhibit D hereto, which may be amended from time to
time by the FCM. The FCM will list on Exhibit D the Eligible
Foreign Custodians selected by the FCM to maintain the assets of
each Portfolio. Mandatory Securities Depositories are listed on
Exhibit E hereto, which Exhibit E may be amended from time to
time by the FCM. The FCM will provide amended versions of
Exhibits D and E in accordance with subsection 7 of this Section Q.
Upon the receipt by the FCM of Instructions to open an account,
or to place or maintain Foreign Assets, in a country listed on
Exhibit D, and the fulfillment by the Fund of the applicable
account opening requirements for such country, the FCM is deemed
to have been delegated by the Board responsibility as FCM with
respect to that country and to have accepted such delegation.
Following the receipt of Instructions directing the FCM to close
the account of a Portfolio with the Eligible Foreign Custodian
selected by the FCM in a designated country, the delegation by
the Board to IFTC as FCM for that country is deemed to have been
withdrawn and IFTC will immediately cease to be the FCM of the
Portfolio with respect to that country.
The FCM may withdraw its acceptance of delegated responsibilities
with respect to a designated country upon written notice to the
Fund. Thirty days (or such longer period as to which the parties
agree in writing) after receipt of any such
10
<PAGE> 11
notice by the Fund, IFTC will have no further responsibility as FCM
to a Portfolio with respect to the country as to which IFTC's
acceptance of delegation is withdrawn.
4. Scope of Delegated Responsibilities.
-----------------------------------
a. Selection of Eligible Foreign Custodians. Subject to
----------------------------------------
the provisions of this Section Q, the FCM may place and
maintain the Foreign Assets in the care of the Eligible
Foreign Custodian selected by the FCM in each country listed
on Exhibit D, as amended from time to time.
In performing its delegated responsibilities as FCM to place
or maintain Foreign Assets with an Eligible Foreign Custodian,
the FCM will determine that the Foreign Assets will be subject
to reasonable care, based on the standards applicable to
custodians in the country in which the Foreign Assets will be
held by that Eligible Foreign Custodian, after considering
all factors relevant to the safekeeping of such assets,
including, without limitation, those set forth in
Rule 17f-5(c)(1)(i) through (iv).
b. Contracts With Eligible Foreign Custodians. The FCM
------------------------------------------
will determine that the contract (or the rules or established
practices or procedures in the case of an Eligible Foreign
Custodian that is a foreign securities depository or clearing
agency) governing the foreign custody arrangements with each
Eligible Foreign Custodian selected by the FCM will provide
reasonable care for the Foreign Assets held by that Eligible
Foreign Custodian based on the standards applicable to
custodians in the particular country. Each such contract will
include the provisions set forth in Rule 17f-5(c)(2)(I)(A)
through (F), or, in lieu of any or all of the provisions set
forth in said (A) through (F), such other provisions that the
FCM determines will provide, in their entirety, the same or
greater level of care and protection for the Foreign Assets as
the provisions set forth in said (A) through (F) in their
entirety.
c. Monitoring. In each case in which the FCM maintains
----------
Foreign Assets with an Eligible Foreign Custodian selected by
the FCM, the FCM will establish a system to monitor (a) the
appropriateness of maintaining the Foreign Assets with such
Eligible Foreign Custodian and (b) the contract governing the
custody arrangements established by the FCM with the Eligible
Foreign Custodian. In the event the FCM determines that the
custody arrangements with an Eligible Foreign Custodian it has
selected are no longer appropriate, the FCM will notify the
Board in accordance with subsection 7 of this Section Q.
5. Guidelines for the Exercise of Delegated Authority. For
--------------------------------------------------
purposes of this Section Q, the Board will be solely responsible
for considering and determining to accept such Country Risk as is
incurred by placing and maintaining the Foreign
11
<PAGE> 12
Assets in each country for which IFTC is serving as FCM of a
Portfolio, and the Board will be solely responsible for monitoring
on a continuing basis such Country Risk to the extent that the
Board considers necessary or appropriate. The Fund, on behalf of
the Portfolios, and IFTC each expressly acknowledge that the FCM
will not be delegated any responsibilities under this Section Q
with respect to Mandatory Securities Depositories.
6. Standard of Care as FCM of a Portfolio. In performing the
--------------------------------------
responsibilities delegated to it, the FCM agrees to exercise
reasonable care, prudence and diligence such as a person having
responsibility for the safekeeping of assets of management
investment companies registered under the 1940 Act would
exercise.
7. Reporting Requirements. The FCM will report the withdrawal
----------------------
of the Foreign Assets from an Eligible Foreign Custodian and the
placement of such Foreign Assets with another Eligible Foreign
Custodian by providing to the Board amended Exhibits D and E at
the end of the calendar quarter in which an amendment to either
Schedule has occurred. The FCM will make written reports
notifying the Board of any other material change in the foreign
custody arrangements of a Portfolio described in this Section Q
after the occurrence of the material change.
8. Representations with Respect to Rule 17f-5. The FCM
------------------------------------------
represents to the Fund that it is a U.S. Bank as defined in section
(a)(7) of Rule 17f-5.
The Fund represents to IFTC that the Board has determined that it
is reasonable for the Board to rely on IFTC and State Street Bank
& Trust Company to perform the responsibilities delegated
pursuant to this Contract to IFTC and State Street Bank & Trust
Company as the FCM of each Portfolio and that IFTC has been
granted the authority by Fund to delegate to State Street Bank &
Trust Company the FCM functions to which IFTC has been appointed
by Fund.
9. Effective Date and Termination of IFTC as FCM. The Board's
---------------------------------------------
delegation to IFTC as FCM of a Portfolio will be effective as of
the date hereof and will remain in effect until terminated at any
time, without penalty, by written notice from the terminating
party to the non-terminating party. Termination will become
effective thirty days after receipt by the non-terminating party
of such notice. The provisions of subsection 3 of this Section Q
govern the delegation to and termination of IFTC as FCM of the
Fund with respect to designated countries.
R. Accounts and Records. IFTC will prepare and maintain, under the
--------------------
direction of and as interpreted by Fund, Fund's or Portfolio's
accountants and/or other advisors, in complete, accurate and current
form such accounts and records: (1) required to be maintained by Fund
with respect to portfolio transactions under Section 31(a) of the 1940
Act and the rules and regulations from time to time adopted thereunder;
(2) required as a basis for calculation of each Portfolio's net asset
value; and (3) as otherwise agreed upon by the parties. Fund will
advise IFTC in writing of all applicable record retention requirements,
other than those set forth in the 1940 Act. IFTC will preserve such
12
<PAGE> 13
accounts and records in the manner and for the periods prescribed in
the 1940 Act or for such longer period as is agreed upon by the
parties. Fund will furnish, in writing or its electronic or digital
equivalent, accurate and timely information needed by IFTC to complete
such accounts and records, including Corporate Actions, when such
information is not readily available from generally accepted securities
industry services or publications.
S. Accounts and Records Property of Fund. IFTC acknowledges that
-------------------------------------
all of the accounts and records maintained by IFTC pursuant hereto are
the property of Fund, and will be made available to Fund for inspection
or reproduction within a reasonable period of time, upon demand. IFTC
will assist Fund's independent auditors, or upon the prior written
approval of Fund, or upon demand, any regulatory body, in any requested
review of Fund's accounts and records, provided that Fund will
reimburse IFTC for all expenses and employee time invested in any such
review outside of routine and normal periodic reviews. Upon receipt
from Fund of the necessary information or instructions, IFTC will
supply information from the books and records it maintains for Fund
that Fund may reasonably request for tax returns, questionnaires,
periodic reports to shareholders and such other reports and information
requests as Fund and IFTC may agree upon from time to time.
T. Adoption of Procedures. IFTC and Fund hereby adopt the Funds
----------------------
Transfer Operating Guidelines attached hereto as Exhibit B. IFTC and
Fund may from time to time adopt such additional procedures as they
agree upon, and IFTC may conclusively assume that no procedure approved
or directed by Fund, Fund's or Portfolio's accountants or other
advisors conflicts with or violates any requirements of the prospectus,
the articles of incorporation, bylaws, any applicable law, rule or
regulation, or any order, decree or agreement by which Fund may be
bound. Fund will be responsible for notifying IFTC of any changes in
statutes, regulations, rules, requirements or policies which may impact
IFTC's responsibilities or procedures under this Agreement.
U. Valuation of Assets. IFTC will value the Assets in accordance
-------------------
with Fund's Instructions utilizing the pricing sources designated by
Fund ("Pricing Sources"). In the event that Fund specifies Reuters
America, Inc., it will enter into the Agreement attached hereto as
Exhibit C. IFTC will calculate each Portfolio's net asset value in
accordance with the Portfolio's prospectus.
V. Advances. Fund will pay on demand any advance of cash or
--------
securities made by IFTC or any Subcustodian, in its sole discretion,
for any purpose (including but not limited to securities settlements,
purchase or sale of foreign exchange or foreign exchange contracts and
assumed settlement) for the benefit of any Portfolio. Any such cash
advance will be subject to an overdraft charge at the rate set forth in
the then-current fee schedule from the date advanced until the date
repaid. As security for each such advance, Fund hereby grants IFTC and
such Subcustodian a lien on and security interest in all Assets at any
time held for the account of the applicable Portfolio, including
without limitation all Assets acquired with the amount advanced.
Should Fund fail to promptly repay the advance, IFTC and such
Subcustodian may utilize available cash and dispose of such Portfolio's
Assets pursuant to applicable law to the extent necessary to obtain
reimbursement of the amount advanced and any related overdraft charges.
13
<PAGE> 14
W. Exercise of Rights; Tender Offers. Upon receipt of Instructions,
---------------------------------
IFTC will: (1) deliver warrants, puts, calls, rights or similar
securities to the issuer or trustee thereof, or to the agent of such
issuer or trustee, for the purpose of exercise or sale, provided that
the new Assets, if any, are to be delivered to IFTC; and (2) deposit
securities upon invitations for tenders thereof, provided that the
consideration for such securities is to be paid or delivered to IFTC or
the tendered securities are to be returned to IFTC.
X. Fund Shares.
-----------
1. Fund will deliver to IFTC Instructions with respect to the
declaration and payment of any dividend or other distribution on
the shares of capital stock of a Portfolio ("Fund Shares") by a
Portfolio. On the date specified in such Instruction, IFTC will
pay out of the monies held for the account of the Portfolio,
insofar as it is available for such purposes, and credit to the
account of the Dividend Disbursing Agent for the Portfolio, the
amount specified in such Instructions.
2. Whenever Fund Shares are repurchased or redeemed by a
Portfolio, Portfolio or its agent will give IFTC Instructions
regarding the aggregate dollar amount to be paid for such shares.
Upon receipt of such Instruction, IFTC will charge such aggregate
dollar amount to the account of the Portfolio and either deposit
the same in the account maintained for the purpose of paying for
the repurchase or redemption of Fund Shares or deliver the same
in accordance with such Instruction. IFTC has no duty or
responsibility to determine that Fund Shares have been removed
from the proper shareholder accounts or that the proper number of
Fund Shares have been canceled and removed from the shareholder
records.
3. Whenever Fund Shares are purchased from Fund, Fund will
deposit or cause to be deposited with IFTC the amount received
for such shares. IFTC has no duty or responsibility to determine
that Fund Shares purchased from Fund have been added to the
proper shareholder account or that the proper number of such
shares have been added to the shareholder records.
4. INSTRUCTIONS.
------------
A. The term "Instructions", as used herein, means written (including
telecopied, telexed, or electronically transmitted) or oral
instructions which IFTC reasonably believes were given by a designated
representative of Fund. Fund will deliver to IFTC, prior to delivery
of any Assets to IFTC and thereafter from time to time as changes
therein are necessary, written Instructions naming one or more
designated representatives to give Instructions in the name and on
behalf of Fund, which Instructions may be received and accepted by IFTC
as conclusive evidence of the authority of any designated
representative to act for Fund and may be considered to be in full
force and effect until receipt by IFTC of notice to the contrary.
Unless such written Instructions delegating authority to any person to
give Instructions specifically limit such authority to specific matters
or require that the approval of anyone else will first have been
obtained, IFTC will be under no obligation to inquire into the right of
such person, acting alone, to give
14
<PAGE> 15
any Instructions whatsoever. If Fund fails to provide IFTC any such
Instructions naming designated representatives, any Instructions received
by IFTC from a person reasonably believed to be an appropriate
representative of Fund will constitute valid and proper Instructions
hereunder. The term "designated representative" may include Fund's or a
Portfolio's employees and agents, including investment managers and their
employees.
B. No later than the next business day immediately following each
oral Instruction, Fund will send IFTC written confirmation of such oral
Instruction. At IFTC's sole discretion, IFTC may record on tape, or
otherwise, any oral Instruction whether given in person or via
telephone, each such recording identifying the date and the time of the
beginning and ending of such oral Instruction.
C. Fund will provide, upon IFTC's request, a certificate signed by
an officer or designated representative of Fund, as conclusive proof of
any fact or matter required to be ascertained from Fund hereunder.
Fund will also provide IFTC Instructions with respect to any matter
concerning this Agreement requested by IFTC. If IFTC reasonably
believes that it could not prudently act according to the Instructions,
or the instruction or advice of Fund's or a Portfolio's accountants or
counsel, it may in its discretion, with notice to Fund, not act
according to such Instructions.
5. LIMITATION OF LIABILITY OF IFTC. IFTC is not responsible or liable for,
-------------------------------
and Fund will indemnify and hold IFTC harmless from and against, any and all
costs, expenses, losses, damages, charges, counsel fees (including without
limitation, disbursements and the allocable cost of in-house counsel),
payments and liabilities which may be asserted against or incurred by IFTC or
for which IFTC may be held to be liable, arising out of or attributable to:
A. IFTC's action or failure to act pursuant hereto; provided that
IFTC has acted in good faith and with reasonable care; and provided
further, that in no event is IFTC liable for consequential, special, or
punitive damages;
B. IFTC's payment of money as requested by Fund, or the taking of
any action which might make it or its nominee liable for payment of
monies or in any other way; provided, however, that nothing herein
obligates IFTC to take any such action or expend its own monies in its
sole discretion;
C. IFTC's action or failure to act hereunder upon any Instructions,
advice, notice, request, consent, certificate or other instrument or
paper appearing to it to be genuine and to have been properly executed,
including any Instruction, communications, data or other information
received by IFTC by means of the Systems, as hereinafter defined, or
any electronic system of communication;
D. IFTC's action or failure to act in good faith reliance on the
advice or opinion of counsel for Fund or of its own counsel with
respect to questions or matters of law, which advice or opinion may be
obtained by IFTC at the expense of Fund, or on the Instruction, advice
or statements of any officer or employee of Fund, or Fund's accountants
or other authorized individuals, and other persons believed by it in
good faith to be expert in matters upon which they are consulted;
15
<PAGE> 16
E. The purchase or sale of any securities or foreign currency
positions. Without limiting the generality of the foregoing, IFTC is
under no duty or obligation to inquire into:
1. The validity of the issue of any securities purchased by or
for any Portfolio, or the legality of the purchase thereof or of
foreign currency positions, or evidence of ownership required by
Fund to be received by IFTC, or the propriety of the decision to
purchase or the amount paid therefor;
2. The legality of the sale of any securities or foreign
currency positions by or for any Portfolio, or the propriety of
the amount for which the same are sold; or
3. The legality of the issue or sale of any Fund Shares, or
the sufficiency of the amount to be received therefor, the
legality of the repurchase or redemption of any Fund Shares, or
the propriety of the amount to be paid therefor, or the legality
of the declaration of any dividend by Fund, or the legality of
the issue of any Fund Shares in payment of any stock dividend.
F. Any error, omission, inaccuracy or other deficiency in any
Portfolio's accounts and records or other information provided to IFTC
by or on behalf of a Portfolio, including the accuracy of the prices
quoted by the Pricing Sources or for the information supplied by Fund
to value the Assets, or the failure of Fund to provide, or provide in a
timely manner, any accounts, records, or information needed by IFTC to
perform its duties hereunder;
G. Fund's refusal or failure to comply with the terms hereof
(including without limitation Fund's failure to pay or reimburse IFTC
under Section 5 hereof), Fund's negligence or willful misconduct, or
the failure of any representation or warranty of Fund hereunder to be
and remain true and correct in all respects at all times;
H. The use or misuse, whether authorized or unauthorized, of the
Systems or any electronic system of communication used hereunder, by
Fund or by any person who acquires access to the Systems or such other
systems through the terminal device, passwords, access instructions or
other means of access to such Systems or such other system which are
utilized by, assigned to or otherwise made available to Fund, except to
the extent attributable to any negligence or willful misconduct by
IFTC;
I. Any money represented by any check, draft, wire transfer,
clearinghouse funds, uncollected funds, or instrument for the payment
of money to be received by IFTC on behalf of a Portfolio until actually
received; provided, however, that IFTC will advise Fund promptly if it
fails to receive any such money in the ordinary course of business and
will cooperate with Fund toward the end that such money is received;
J. Except as provided in Section 3.P hereof, loss occasioned by the
acts, omissions, defaults or insolvency of any broker, bank, trust
company, securities system or any other person with whom IFTC may deal;
and
16
<PAGE> 17
K. The failure or delay in performance of its obligations hereunder,
or those of any entity for which it is responsible hereunder, arising
out of or caused, directly or indirectly, by circumstances beyond the
affected entity's reasonable control, including, without limitation:
any interruption, loss or malfunction of any utility, transportation,
computer (hardware or software) or communication service; inability to
obtain labor, material, equipment or transportation, or a delay in
mails; governmental or exchange action, statute, ordinance,
rulings,regulations or direction, war, strike, riot, emergency, civil
disturbance, terrorism, vandalism, explosions, labor disputes, freezes,
floods, fires, tornadoes, acts of God or public enemy, revolutions, or
insurrection.
6. COMPENSATION. In consideration for its services hereunder, Fund will
------------
pay to IFTC the compensation set forth in a separate fee schedule,
incorporated herein by reference, to be agreed to by Fund and IFTC from time
to time, and upon demand, reimbursement for IFTC's cash disbursements and
reasonable out-of-pocket costs and expenses, including attorney's fees and
disbursements, incurred by IFTC in connection with the performance of
services hereunder. IFTC may charge such compensation against monies held by
it for the account of the Portfolios. IFTC will also be entitled to charge
against any monies held by it for the account of the Portfolios the amount of
any loss, damage, liability, advance, overdraft or expense for which it is
entitled to reimbursement from Fund, including but not limited to fees and
expenses due to IFTC for other services provided to Fund by IFTC. IFTC will
be entitled to reimbursement by Fund for the losses, damages, liabilities,
advances, overdrafts and expenses of Subcustodians only to the extent that
(a) IFTC would have been entitled to reimbursement hereunder if it had
incurred the same itself directly, and (b) IFTC is obligated to reimburse the
Subcustodian therefor.
7. TERM AND TERMINATION. The initial term of this Agreement is for a
--------------------
period of one (1) year. Thereafter, either Fund or IFTC may terminate this
Agreement by notice in writing, delivered or mailed, postage prepaid, to the
other party and received not less than ninety (90) days prior to the date
upon which such termination will take effect. Upon termination hereof:
A. Fund will pay IFTC its fees and compensation due hereunder and
its reimbursable disbursements, costs and expenses paid or incurred to
such date;
B. Fund will designate a successor investment accounting and record
keeping agent (which may be Fund) by Instruction to IFTC;
C. Fund will designate a successor custodian by Instruction to IFTC.
In the event no such Instruction has been delivered to IFTC on or
before the date when such termination becomes effective, then IFTC may,
at its option, (i) choose as successor custodian a bank or trust
company meeting the qualifications for custodian set forth in the 1940
Act and having not less than Two Million Dollars ($2,000,000) aggregate
capital, surplus and undivided profits, as shown by its last published
report, or (ii) apply to a court of competent jurisdiction for the
appointment of a successor or other proper relief, or take any other
lawful action under the circumstances; provided, however, that Fund
will reimburse IFTC for its costs and expenses, including reasonable
attorney's fees, incurred in connection therewith; and
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D. IFTC will, upon payment of all sums due to IFTC from Fund
hereunder or otherwise, deliver at IFTC's office (i) all accounts and
records to the successor investment accounting and record keeping agent
or, if none, to Fund; and (ii) all Assets, duly endorsed and in form
for transfer, to the successor custodian, or as specified by the court.
IFTC will cooperate in effecting changes in book-entries at all
Depositories. Upon delivery to a successor or as specified by the
court, IFTC will have no further obligations or liabilities hereunder.
Thereafter such successor will be the successor hereunder and will be
entitled to reasonable compensation for its services.
In the event that accounts, records or Assets remain in the possession
of IFTC after the date of termination hereof for any reason other than
IFTC's failure to deliver the same, IFTC is entitled to compensation as
provided in the then-current fee schedule for its services during such
period, and the provisions hereof relating to the duties and
obligations of IFTC will remain in full force and effect.
8. NOTICES. Notices, requests, instructions and other writings addressed
-------
to Fund at the address set forth above, or at such other address as Fund may
have designated to IFTC in writing, will be deemed to have been properly
given to Fund hereunder. Notices, requests, Instructions and other writings
addressed to IFTC at the address set forth above, Attention: Custody
Department, or to such other address as it may have designated to Fund in
writing, will be deemed to have been properly given to IFTC hereunder.
9. THE SYSTEMS; CONFIDENTIALITY.
----------------------------
A. If IFTC provides Fund direct access to the computerized
investment portfolio custody, record keeping and accounting systems
used by IFTC ("Systems") or if IFTC and Fund agree to utilize any
electronic system of communication, Fund agrees to implement and
enforce appropriate security policies and procedures to prevent
unauthorized or improper access to or use of the Systems or such other
system.
B. Fund will preserve the confidentiality of the Systems and the
tapes, books, reference manuals, instructions, records, programs,
documentation and information of, and other materials relevant to, the
Systems and the business of IFTC or its affiliates ("Confidential
Information"). Fund agrees that it will not voluntarily disclose any
such Confidential Information to any other person other than its own
employees who reasonably have a need to know such information pursuant
hereto. Fund will return all such Confidential Information to IFTC upon
termination or expiration hereof.
C. Fund has been informed that the Systems are licensed for use by
IFTC and its affiliates from one or more third parties ("Licensors"),
and Fund acknowledges that IFTC and Licensors have proprietary rights
in and to the Systems and all other IFTC or Licensor programs, code,
techniques, know-how, data bases, supporting documentation, data
formats, and procedures, including without limitation any changes or
modifications made at the request or expense or both of Fund
(collectively, the "Protected Information"). Fund acknowledges that
the Protected Information constitutes confidential material and trade
secrets of IFTC and Licensors. Fund will preserve the confidentiality
of the Protected Information, and Fund hereby acknowledges that any
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<PAGE> 19
unauthorized use, misuse, disclosure or taking of Protected
Information, residing or existing internal or external to a computer,
computer system, or computer network, or the knowing and unauthorized
accessing or causing to be accessed of any computer, computer system,
or computer network, may be subject to civil liabilities and criminal
penalties under applicable law. Fund will so inform employees and
agents who have access to the Protected Information or to any computer
equipment capable of accessing the same. Licensors are intended to be
and are third party beneficiaries of Fund's obligations and
undertakings contained in this Section.
D. Fund hereby represents and warrants to IFTC that it has
determined to its satisfaction that the Systems are appropriate and
suitable for its use. THE SYSTEMS ARE PROVIDED ON AN AS IS, AS
AVAILABLE BASIS. IFTC EXPRESSLY DISCLAIMS ALL WARRANTIES, INCLUDING,
BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, EXCEPT THOSE WARRANTIES STATED
EXPRESSLY HEREIN.
10. MULTIPLE PORTFOLIOS. If Fund is comprised of more than one Portfolio,
-------------------
the following provisions apply:
A. Each Portfolio will be regarded for all purposes hereunder as a
separate party apart from each other Portfolio. Unless the context
otherwise requires, with respect to every transaction covered hereby,
every reference herein to Fund is deemed to relate solely to the
particular Portfolio to which such transaction relates. Under no
circumstances will the rights, obligations or remedies with respect to
a particular Portfolio constitute a right, obligation or remedy
applicable to any other Portfolio. The use of this single document to
memorialize the separate agreement as to each Portfolio is understood
to be for clerical convenience only and will not constitute any basis
for joining the Portfolios for any reason.
B. Fund may appoint IFTC as its custodian and investment accounting
and record keeping agent for additional Portfolios from time to time by
written notice, provided that IFTC consents to such addition. Rates or
charges for each additional Portfolio will be as agreed upon by IFTC
and Fund in writing.
11. MISCELLANEOUS.
-------------
A. This Agreement will be construed according to, and the rights and
liabilities of the parties hereto will be governed by, the laws of the
State of Missouri without reference to the choice of laws principles
thereof.
B. All terms and provisions hereof will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
C. The representations and warranties, the indemnification extended
hereunder, and the provisions of Section 9 hereof are intended to and
will continue after and survive the expiration, termination or
cancellation hereof.
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<PAGE> 20
D. No provisions hereof may be amended or modified in any manner
except by a written agreement properly authorized and executed by each
party hereto.
E. The failure of either party to insist upon the performance of any
terms or conditions hereof or to enforce any rights resulting from any
breach of any of the terms or conditions hereof, including the payment
of damages, will not be construed as a continuing or permanent waiver
of any such terms, conditions, rights or privileges, but the same will
continue and remain in full force and effect as if no such forbearance
or waiver had occurred. No waiver, release or discharge of any party's
rights hereunder will be effective unless contained in a written
instrument signed by the party sought to be charged.
F. The captions herein are included for convenience of reference
only, and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect.
G. This Agreement may be executed in two or more counterparts, each
of which is deemed an original but all of which together constitute one
and the same instrument.
H. If any provision hereof is determined to be invalid, illegal, in
conflict with any law or otherwise unenforceable, the remaining
provisions hereof will be considered severable and will not be affected
thereby, and every remaining provision hereof will remain in full force
and effect and will remain enforceable to the fullest extent permitted
by applicable law.
I. The benefits of this Agreement may not be assigned by either
party nor may either party delegate all or a portion of its duties
hereunder without the prior written consent of the other party.
Notwithstanding the foregoing, Fund agrees that IFTC may delegate all
or a portion of its duties to an affiliate of IFTC, provided that such
delegation will not reduce the obligations of IFTC under this
Agreement.
J. Neither the execution nor performance hereof will be deemed to
create a partnership or joint venture by and between IFTC and Fund or
any Portfolio.
K. Except as specifically provided herein, this Agreement does not
in any way affect any other agreements entered into among the parties
hereto and any actions taken or omitted by either party hereunder will
not affect any rights or obligations of the other party hereunder.
L. Notice is hereby given that a copy of Fund's Trust Agreement and
all amendments thereto is on file with the Secretary of State of the
state of its organization; that this Agreement has been executed on
behalf of Fund by the undersigned duly authorized representative of
Fund in his/her capacity as such and not individually; and that the
obligations of this Agreement are binding only upon the assets and
property of Fund and not upon any trustee, officer of shareholder of
Fund individually.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
INVESTORS FIDUCIARY TRUST FFP NEW HORIZONS FUND, INC.
COMPANY
By:------------------------------- By:----------------------------
Title:---------------------------- Title:-------------------------
Attest:--------------------------- Attest:------------------------
21
<PAGE> 1
FORM OF
ADMINISTRATION AGREEMENT
AGREEMENT made this 16th day of December, 1998 by and between FFP NEW
HORIZONS FUND, INC., a Maryland corporation (the "Fund"), and INVESTMENT
COMPANY ADMINISTRATION, L.L.C., an Arizona corporation (the "Administrator").
W I T N E S S E T H
WHEREAS, the Fund is being registered as an open-end management investment
company under the Investment Company Act of 1940 (the "1940 Act"), with
shares of common stock organized into separate series as set forth on
Schedule A hereto ("series" or "portfolios"); and
WHEREAS, the Fund wishes to retain the Administrator to provide certain
administrative services in connection with the management of the operations
of the various portfolios of the Fund and the Administrator is willing to
furnish such services:
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints the Administrator to provide
certain administrative services, hereinafter enumerated, in connection with
the management of the portfolios' operations for the period and on the terms
set forth in this Agreement. The Administrator agrees to comply with all
relevant provisions of the 1940 Act, applicable rules and regulations
thereunder, and other applicable law.
2. SERVICES ON A CONTINUING BASIS. The Administrator will perform the
following services on a regular basis which would be daily, weekly or as
otherwise appropriate:
(A) prepare and coordinate reports and other materials to be supplied to
the Board of Directors of the Fund;
(B) prepare and/or supervise the preparation and filing of all securities
filings, periodic financial reports, prospectuses, statements of
additional information, marketing materials, tax returns, shareholder
reports and other regulatory reports or filings required of the Fund and
the portfolios.
(C) prepare all required filings necessary to maintain the Fund's and
portfolios' qualification and/or registration to sell shares in all states
where the Fund and portfolios currently do, or intend to do business;
(D) coordinate the preparation, printing and mailing of all materials
(e.g., Annual Reports) required to be sent to shareholders, including
underlying contract holders;
(E) coordinate the preparation and payment of Fund and portfolio related
expenses;
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<PAGE> 2
(F) conduct relations with, and monitor and oversee the activities of the
Fund's and the portfolios' servicing agents (i.e., transfer agent,
custodian, fund accounting agent, underwriters, brokers and dealers,
corporate fiduciaries, and banks) and such other persons in any such other
capacity deemed to be necessary or desirable;
(G) review and adjust as necessary the portfolios' daily expense accruals;
(H) maintain and keep such books and records of the Fund as required by
law or for the proper operation of the Fund and its portfolios other than
those maintained and kept by the Fund's Adviser and servicing agents;
(I) provide the Fund with (i) the services of persons competent to perform
the administrative and clerical functions described herein, and (ii)
personnel to serve as officers of the Fund;
(J) provide the portfolios with office space as well as administrative
offices and such data processing facilities as are necessary for the
performance of its duties under this Agreement.
(K) monitor each portfolio's compliance with investment policies and
restrictions as set forth in the portfolio's currently effective
Prospectus and Statement of Additional Information under the Securities
Act of 1933.
(L) perform such additional services as may be agreed upon by the Fund and
the Administrator.
3. RESPONSIBILITY OF THE ADMINISTRATOR. The Administrator shall be under no
duty to take any action on behalf of the Fund or the portfolios except as set
forth herein or as may be agreed to by the Administrator in writing. In the
performance of its duties hereunder, the Administrator shall be obligated to
exercise reasonable care and diligence and to act in good faith and to use
its best efforts. Without limiting the generality of the foregoing or any
other provision of this Agreement, the Administrator shall not be liable for
delays or errors or loss of data occurring by reason of circumstances beyond
the Administrator's control.
4. RELIANCE UPON INSTRUCTIONS. The Fund agrees that the Administrator shall
be entitled to rely upon any instructions, oral or written, actually received
by the Administrator from the Board of Directors of the Fund and shall incur
no liability to the Fund or the investment adviser to any portfolio in acting
upon such oral or written instructions, provided such instructions reasonably
appear to have been received from a person duly authorized by the Board of
Directors of the Fund to give oral or written instructions on behalf of the
Fund or any portfolio.
5. CONFIDENTIALITY. The Administrator agrees on behalf of itself and its
employees to treat confidentially all records and other information relative
to the Fund and portfolios and all prior, present or potential shareholders
of any and all portfolios, except after prior notification to, and approval
of release of information in writing by, the Fund, which approval shall not
be unreasonably withheld where the Administrator may be exposed to civil or
criminal contempt
2
<PAGE> 3
proceedings for failure to comply, when requested to divulge such information
by duly constituted authorities, or when so requested by the Fund or by a
portfolio.
6. EQUIPMENT FAILURES. In the event of equipment failures or the occurrence
of events beyond the Administrator's control which render the performance of
the Administrator's functions under this Agreement impossible, the
Administrator shall take reasonable steps to minimize service interruptions
and is authorized to engage the services of third parties to prevent or
remedy such service interruptions.
7. COMPENSATION. As compensation for services rendered by the Administrator
during the term of this Agreement, each portfolio of the Fund will pay to the
Administrator a monthly fee at the annual rate as set forth in Schedule A.
The Fund also agrees to reimburse the Administrator for reasonable
out-of-pocket expenses advanced by the Administrator on behalf of the Fund.
8. INDEMNIFICATION. The Fund and portfolios agree to indemnify and hold
harmless the Administrator from all taxes, filing fees, charges, expenses,
assessments, claims and liabilities (including without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the 1940 Act, and any state and foreign securities laws, all as
amended from time to time) and expenses, including (without limitation)
reasonable attorneys fees and disbursements, reasonably arising directly or
indirectly from any action or thing which the Administrator takes or does or
omits to take or do at the request of or in reliance upon the advice of the
Board of Directors of the Fund, provided that the Administrator will not be
indemnified against any liability to a portfolio or to shareholders (or any
expenses incident to such liability) arising out of the Administrator's own
willful misfeasance, bad faith, negligence or reckless disregard of its
duties and obligations under this Agreement. The Administrator agrees to
indemnify and hold harmless the Fund and each of its Directors from all
claims and liabilities (including without limitation, liabilities under the
Securities Act of 1933, the Securities Exchange Act of 1934, The 1940 Act,
and any state and foreign securities laws, all as amended from time to time)
and expenses, including (without limitation) reasonable attorneys fees and
disbursements, arising directly or indirectly from any action or thing which
the Administrator takes or does or omits to take or do which is in violation
of this Agreement or not in accordance with instructions properly given to
the Administrator, or arising out of the Administrator's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
9. DURATION AND TERMINATION. This Agreement shall continue until termination
by the Fund on behalf of any portfolio (by resolution of the Board of
Directors) or the Administrator on 60 days' written notice to the other
party. All notices and other communications hereunder shall be in writing.
10. AMENDMENTS. This Agreement or any part hereof may be changed or waived
only by instrument in writing signed by the party against which enforcement
of such change or waiver is sought, provided such amendment is specifically
approved by the Board of Directors of the Fund.
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<PAGE> 4
11. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties thereto with respect to the services to be
performed hereunder, and supersedes all prior agreements and understandings,
relating to the subject matter hereof. The captions in this Agreement are
included for convenience of reference only and in no way define or limit any
of the provisions hereof or otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in New York and governed
by New York law. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement will not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date first written above.
FFP NEW HORIZONS FUND, INC.
By:----------------------------------------
Name: -------------------------------------
Title: ------------------------------------
Attest: -----------------------------------
Secretary
INVESTMENT COMPANY
ADMINISTRATION, L.L.C.
By:----------------------------------------
Name: -------------------------------------
Title: ------------------------------------
Attest:------------------------------------
Secretary
4
<PAGE> 1
FORM OF
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this 16th day of December, 1998, by
and between FFP NEW HORIZONS FUND, INC., a Maryland Corporation (hereinafter
referred to as the "Fund") and Investment Company Administration Corporation,
a corporation organized under the laws of the State of Delaware (hereinafter
referred to as the "Agent").
W I T N E S S E T H:
WHEREAS, the Fund is an open-ended management investment company which is
registered under the Investment Company Act of 1940; and
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Agent is, among other things, is in the business of
administering transfer and dividend disbursing agent functions for the
benefit of its customers; and
WHEREAS, the Fund, on behalf of the separate series, desires to appoint the
Agent as its transfer agent and dividend disbursing agent and the Agent
desires to accept such appointment;
NOW, THEREFORE, the Fund and the Agent do mutually promise and agree as
follows:
I. TERMS OF APPOINTMENT; DUTIES OF THE AGENT
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer agent and
dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program) in accordance with
procedures established from time to time by agreement between the Fund on
behalf of each series, as applicable, and the Agent, including but not
limited to:
(A) Receive orders for the purchase of shares, with prompt delivery, where
appropriate, of payment and supporting documentation to the Fund's
custodian;
(B) Process purchase orders and issue the appropriate number of
certificated or uncertificated shares with such uncertificated shares
being held in the appropriate shareholder account;
(C) Process redemption requests received in good order and, where
relevant, deliver appropriate documentation to the Fund's custodian;
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<PAGE> 2
(D) Pay monies (upon receipt from the Fund's custodian, where relevant) in
accordance with the instructions of redeeming shareholders;
(E) Process transfers of shares in accordance with the shareowner
instructions;
(F) Process exchanges between funds within the same family of funds;
(G) Issue and/or cancel certificates as instructed; replace lost, stolen
or destroyed certificates upon receipt of satisfactory indemnification
or surety bond;
(H) Prepare and transmit payments for dividends and distributions declared
by the Fund;
(I) Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
(J) Record the issuance of shares of the Fund and maintain, pursuant to
Section Rule 17ad-1 0(e), a record of the total number of shares of the
Fund which are authorized, issued and outstanding;
(K) Prepare shareholder meeting lists and, if applicable, mail, receive
and tabulate proxies;
(L) Mail shareholder reports and prospectuses to current shareholders;
(M) Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and
distributions for all shareholders;
(N) Provide shareholder account information upon request and prepare and
mail confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed
upon with the Fund; and
(O) Provide a Blue Sky System which will enable the Fund to monitor the
total number of shares sold in each state. In addition, the Fund shall
identify to the Agent in writing those transactions and assets to be
treated as exempt from the Blue Sky reporting to the Fund for each
state. The responsibility of the Agent for the Fund's Blue Sky state
registration status is solely limited to the initial compliance by the
Fund and the reporting of such transactions to the Fund.
II. COMPENSATION
The Fund agrees to pay the Agent for performance of the duties listed in this
Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage,
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<PAGE> 3
forms, stationery, record retention, mailing, insertion, programming, labels,
shareholder lists and proxy expenses.
These fees and reimbursable expenses may be changed from time to time subject
to mutual written agreement between the Fund and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within twenty-one
(21) days following the mailing of the billing notice.
The Fund shall compensate Agent pursuant to the fee schedule attached hereto
as Exhibit A.
III. REPRESENTATIONS OF AGENT
The Agent represents and warrants to the Fund that:
(A) It is a registered transfer agent, duly organized, existing and in
good standing under the laws of Delaware;
(B) It is duly qualified to carry on its business in the state of Delaware
and Arizona;
(C) It is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement;
(D) All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and
(E) It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement.
IV. REPRESENTATIONS OF THE FUND
The Fund represents and warrants to the Agent that:
(A) The Fund is an open-ended diversified investment company under the
Investment Company Act of 1940;
(B) The Fund is a corporation organized, existing, and in good standing
under the laws of Maryland;
(C) The Fund is empowered under applicable laws and by its Articles of
Incorporation and Bylaws to enter into and perform this Agreement;
(D) All necessary proceedings required by the Articles of Incorporation
and Bylaws have been taken to authorize it to enter into and perform
this Agreement;
(E) The Fund will comply with all applicable requirements of the
Securities and Exchange Acts of 1933 and 1934, as amended, the
Investment Company Act of
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<PAGE> 4
1940, as amended, and any laws, rules and regulations of governmental
authorities having jurisdiction; and
(F) A registration statement under the Securities Act of 1933 is currently
effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made, with respect
to all shares of the Fund being offered for sale.
V. COVENANTS OF FUND AND AGENT
The Fund shall furnish the Agent a certified copy of the resolution of the
Board of Directors of the Corporation authorizing the appointment of the
Agent and the execution of this Agreement. The Fund shall provide to the
Agent a copy of the Articles of Incorporation, Bylaws of the Corporation, and
all amendments.
The Agent 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 Investment Company Act of 1940, as amended, and
the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
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 to the Fund on and in accordance with its request.
VI. INDEMNIFICATION; REMEDIES UPON BREACH
The Agent agrees to use reasonable care and act in good faith in performing
its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or responsible
for delays or errors occurring by reason of circumstances beyond its control,
including acts of civil or military authority, national or state emergencies,
fire, mechanical or equipment failure, flood or catastrophe, acts of God,
insurrection or war. In the event of a mechanical breakdown beyond its
control, the Agent shall take all reasonable steps to minimize service
interruptions for any period that such interruption continues beyond the
Agent's control. The Agent will make every reasonable effort to restore any
lost or damaged data, and the correcting of any errors resulting from such a
breakdown will be at the Agent's expense. The Agent agrees that it shall, at
all times, have reasonable contingency plans with appropriate parties, making
reasonable provision for emergency use of electrical data processing
equipment to the extent appropriate equipment is available. Representatives
of the Fund shall be entitled to inspect the Agent's premises and operating
capabilities at any time during regular business hours of the Agent, upon
reasonable notice to the Agent.
The Fund will indemnify and hold the Agent harmless against any and all
losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit
not resulting from the Agent's bad faith or negligence, and arising out of or
in connection with the Agent's duties on behalf of the Fund hereunder.
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<PAGE> 5
Further, the Fund will indemnify and hold the Agent harmless against any and
all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action or suit
as a result of the negligence of the Fund or the principal underwriter
(unless contributed to by the Agent's own negligence or bad faith); or as a
result of the Agent acting upon telephone instructions relating to the
exchange or redemption of shares received by the Agent and reasonably
believed by the Agent to have originated from the record owner of the subject
shares; or as a result of the Agent acting upon any instructions executed or
orally communicated by a duly authorized officer or employee of the Fund,
according to such lists of authorized officers and employees furnished to the
Agent and as amended from time to time in writing by a resolution of the
Board of Directors of the Corporation; or as a result of acting in reliance
upon any genuine instrument or stock certificate signed, countersigned or
executed by any person or persons authorized to sign, countersign or execute
the same.
In order for this section to apply, it is understood that if in any case the
Fund may be asked to indemnify or hold harmless the Agent, the Fund shall be
advised of all pertinent facts concerning the situation in question, and it
is further understood that the Agent will use reasonable care to notify the
Fund promptly concerning any situation which presents or appears likely to
present a claim for indemnification against the Fund. The Fund shall have
the option to defend the Agent against any claim which may be the subject of
this indemnification and, in the event that the Fund so elects, the Agent
will so notify the Fund, and thereupon the Fund shall take over complete
defense of the claim and the Agent shall sustain no further legal or other
expenses in such situation for which the Agent shall seek indemnification
under this section. The Agent will in no case confess any claim or make any
compromise in any case in which the Fund will be asked to indemnify the
Agent, except with the Fund's prior written consent.
VII. CONFIDENTIALITY
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not be disclosed to any other party, except after
prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld and may not be withheld where the Agent
may be exposed to civil or criminal contempt proceedings for failure to
comply after being requested to divulge such information by duly constituted
authorities.
VIII. ADDITIONAL SERIES
In the event that the Fund establishes one or more series, in addition to the
series listed in Exhibit A, with respect to which it desires to have the
Agent render services as transfer agent under the terms hereof, it shall so
notify the Agent in writing, and if the Agent agrees in writing to provide
such services, Exhibit A shall be amended to include such series.
IX. ARIZONA LAW TO APPLY
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Arizona.
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<PAGE> 6
X. AMENDMENT, ASSIGNMENT, TERMINATION AND NOTICE
(A) This Agreement may be amended by the mutual written consent of the
parties.
(B) After the second full year, this Agreement may be terminated upon
ninety (90) day's written notice given by one party to the other.
(C) This Agreement and any right or obligation hereunder may not be
assigned by either party without the signed, written consent of the
other party.
(D) Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered,
or mailed to the principal place of business of the other party.
(E) In the event that the Fund gives to the Agent its written intention to
terminate and appoint a successor transfer agent, the Agent agrees to
cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other
data established or maintained by the Agent under this Agreement.
(F) Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the date first written above.
FFP NEW HORIZONS FUND, INC.
By:--------------------------------------------
Name:------------------------------------------
Title: ----------------------------------------
Attest:----------------------------------------
Secretary
INVESTMENT COMPANY
ADMINISTRATION CORP.
By:--------------------------------------------
Name:------------------------------------------
Title:-----------------------------------------
Attest:----------------------------------------
Secretary
6
<PAGE> 1
FORM OF
OPERATING EXPENSES AGREEMENT
FFP NEW HORIZONS FUND, INC.
THIS OPERATING EXPENSES AGREEMENT (the "Agreement") is effective as of
January 1, 1999 by and between FFP NEW HORIZONS FUND, INC., (the "Fund
Group"), a Maryland corporation, on behalf of each portfolio of the Fund
Group listed in Appendix A, as may be amended from time to time (each a
"Fund" and collectively the "Funds"), and the Adviser of each of the Funds,
FFP Advisory Services, Inc. (the "Adviser").
WITNESSETH:
WHEREAS, the Adviser renders advice and services to the Funds pursuant to the
terms and provisions of an Investment Advisory Agreement between the Fund
Group and the Adviser dated December 16, 1998, (the "Investment Advisory
Agreement"); and
WHEREAS, the Funds are responsible for, and have assumed the obligation for,
payment of certain expenses pursuant the Investment Advisory Agreement that
have not been assumed by the Adviser; and
WHEREAS, the Adviser realizes that the initial success of the Adviser in
managing the Funds is determined by the investment return of the Funds and
that excessive expenses during the initial period of the Funds would
negatively impact that return, and
WHEREAS, the Adviser desires to limit the Funds' respective Operating
Expenses (as that term is defined in Paragraph 2 of this Agreement) pursuant
to the terms and provisions of this Agreement, and the Fund Group (on behalf
of the Funds) desires to allow the Adviser to implement those limits;
NOW THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties, intending to be legally bound hereby,
mutually agree as follows:
1. LIMIT ON OPERATING EXPENSES. To minimize the negative impact of
expenses on the Funds, the Adviser hereby agrees to limit each Fund's
Operating Expenses to the respective annual rate of total Operating Expenses
specified for that Fund in Appendix A of this Agreement.
2. DEFINITION. For purposes of this Agreement, the term "Operating
Expenses" with respect to a Fund is defined to include all expenses necessary
or appropriate for the operation of the Fund including the Adviser's
investment Advisory or management fee under Paragraph 8 of the Investment
Advisory Agreement, and other expenses described in Section IX of the
Investment Advisory Agreement, but does not include any front-end or
contingent deferred
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<PAGE> 2
loads, taxes, interest, brokerage commissions, expenses incurred in connection
with any merger or reorganization or extraordinary expenses such as litigation.
3. REIMBURSEMENT OF FEES AND EXPENSES. The Adviser retains its right to
receive reimbursement of reductions of its investment Advisory fee and
Operating Expenses paid by it that are not its responsibility under the
Investment Advisory Agreement.
4. TERM. This Agreement shall become effective on the date specified
herein and shall remain in effect for a period of two (2) years, unless
sooner terminated as provided in Paragraph 5 of this Agreement. This
Agreement shall continue in effect thereafter for additional periods not
exceeding sixteen (16) months so long as such continuation is approved for
each Fund at least annually by the Board of Directors of the Fund Group (and
separately by the disinterested Directors of the Fund Group).
5. TERMINATION. This Agreement may be terminated by the Fund Group on
behalf of any one or more of the Funds at any time without payment of any
penalty or by the Board of Directors of the Fund Group, upon sixty (60) days'
written notice to the Adviser. The Adviser may decline to renew this
Agreement by written notice to the Fund Group at least thirty (30) days
before its annual expiration date.
6. ASSIGNMENT. This Agreement and all rights and obligations hereunder may
not be assigned without the written consent of the other party.
7. SEVERABILITY. If any provision of this Agreement shall be held or made
invalid by a court decision, statute or rule, or shall be otherwise rendered
invalid, the remainder of this Agreement shall not be affected thereby.
8. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Missouri without giving effect to
the conflict of laws principles thereof; provided that nothing herein shall
be construed to preempt, or to be inconsistent with, any federal law,
regulation or rule, including the Investment Company Act of 1940, as amended
and the Investment Advisers Act of 1940, as amended and any rules and
regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested by their duly authorized officers, all on the day and
year first above written.
FFP NEW HORIZONS FUND, INC.
By:
----------------------------
Title: FFP ADVISORY SERVICES, INC.
------------------------- By:
Attest: -----------------------------
------------------------ Title:
--------------------------
Attest:
-------------------------
2
<PAGE> 1
FORM OF
PARTICIPATION AGREEMENT
THIS AGREEMENT is made and entered into by and among FFP New Horizons Fund,
Inc., a Maryland corporation; FFP Securities, Inc., a Missouri corporation,
and First Variable Life Insurance Company, a ----- corporation, on its own
behalf and on behalf of its First Variable Annuity Fund A, First Variable
Annuity Fund E, First Variable Annuity Fund M and Separate Account VL,
effective as of the --- day of ----------, 1998.
WHEREAS, FFP New Horizons Fund, Inc. (Fund) is an open-end, diversified,
management investment company authorized to issue securities in series or
portfolios, each of which has its own distinct investment objectives and
policies; and
WHEREAS, FFP New Horizons Fund, Inc. has authorized the issuance of shares in
each of the six portfolios listed on Appendix I to this Agreement
(Portfolios); and
WHEREAS, FFP New Horizons Fund, Inc. is registering with the Securities and
Exchange Commission as an investment company under the Investment Company Act
of 1940 and is registering interests in each of its Portfolios with the
Securities and Exchange Commission under the Securities Act of 1933; and
WHEREAS, FFP New Horizons Fund, Inc. will offer its shares in the Portfolios
only to separate accounts of insurance companies for investments under
variable annuity contracts or variable life insurance policies issued by
those companies; and
WHEREAS, First Variable Life Insurance Company (First Variable) is authorized
to issue variable annuity contracts through its First Variable Annuity Fund
A, First Variable Annuity Fund E and First Variable Annuity Fund M, and to
issue variable life insurance policies through its Separate Account VL; and
WHEREAS, First Variable Life Insurance Company has registered its First
Variable Annuity Fund A, First Variable Annuity Fund E, First Variable
Annuity Fund M and Separate Account VL (First Variable Accounts) with the
Securities and Exchange Commission as investment companies under the
Investment Company Act of 1940 (1940 Act) and has registered interests in the
First Variable Accounts with the Commission under the Securities Act of 1933
(1933 Act); and
WHEREAS, FFP Securities, Inc. (FFP Securities) is registered as a
broker-dealer with the Securities and Exchange Commission under the
Securities Exchange Act of 1934 and has entered into an agreement with FFP
New Horizons Fund, Inc. appointing it as principal underwriter for the
distribution of the shares of the Portfolios of the Fund; and
WHEREAS, First Variable Life Insurance Company, through the First Variable
Accounts would like to offer shares of the Portfolios of FFP New Horizons
Fund, Inc. as investment options under its variable annuity contracts and
variable life insurance policies;
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<PAGE> 2
NOW THEREFORE, in consideration of the mutual agreements and promises
contained in this Agreement and other valuable consideration, FFP New
Horizons Fund, Inc., FFP Securities, Inc. and First Variable Life Insurance
Company on behalf of its First Variable Annuity Fund A, First Variable
Annuity Fund E, First Variable Annuity Fund M and Separate Account VL, agree
as follows:
I. SALE OF FUND SHARES; PRICING
A. PURCHASE AND SALE OF SHARES.
The Fund through its underwriter FFP Securities will make shares of the
Portfolios available to be purchased by First Variable for the First
Variable Accounts and will accept redemption orders from First Variable
for the First Variable Accounts on the following terms and conditions and
subject to the other provisions contained elsewhere in this Agreement:
Fund shares shall be purchased and redeemed in such quantity and at such
time as determined by First Variable under the terms of the variable
annuity contracts and variable life insurance policies (Contracts) through
which owners or holders of the Contracts (Contract Holders) may direct
investments in the Portfolios.
The Fund, FFP Securities or First Variable may refuse to sell shares of
any Portfolio through First Variable to any Owner, or may suspend or
terminate the offering of shares of any Portfolio, if such action is
required by law or by regulatory authorities having jurisdiction over
First Variable, the Fund, the Portfolio or FFP Securities; or if, in the
sole discretion of the Board of Directors of the Fund, acting in good
faith, such action is necessary and in the best interests of the
shareholders of such Portfolio.
The Fund will not sell its shares to any insurance company other than
First Variable, unless the right to do so is given in writing to the Fund
by First Variable.
B. APPOINTMENT OF AGENT.
FFP Securities hereby appoints First Variable as its agent for the limited
purpose of accepting purchase and redemption orders for Fund shares from
Contract Holders, subject to the following:
C. PRICING OF SHARES.
The price at which orders for purchase or redemption of shares sent to FFP
Securities by First Variable subject to the following:
Purchase or redemption orders received by First Variable as agent prior to
the close of the New York Stock Exchange on any day on which the New York
Stock Exchange is open for business (Business Day) will be executed by FFP
Securities at the net asset value determined as of the close of the New
York Stock Exchange on such Business Day; provided That FFP Securities
receives notice of such order by 9:00 a.m. eastern time on the following
Business Day.
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<PAGE> 3
Any purchase or redemption orders received by First Variable as agent
after the close of the New York Stock Exchange on any given Business Day
will be executed by FFP Securities at the net asset value determined as of
the close of the New York Stock Exchange on the next Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value
pursuant to the rules of the Commission.
Each notice of purchase or redemption orders by First Variable to FFP
Securities will constitute a representation that such orders were received
by First Variable prior to the close of regular trading on the New York
Stock Exchange on the Business Day on which the purchase or redemption
order is priced in accordance with Rule 22c-1 under the 1940 Act.
The Fund will use its best efforts to provide to First Variable closing
net asset value, dividend and capital gain information determined for the
Portfolios at the close of trading each Business Day no later than 7:00
p.m. eastern time.
D. REPRESENTATIONS
First Variable shall not, without the written consent of FFP Securities,
in the then current prospectus and in current printed sales literature
approved by FFP Securities. First Variable agrees to purchase and redeem
shares of the Portfolios offered by the then current prospectus of the
Fund in accordance with the provisions of such prospectus.
II. PAYMENT
A. PURCHASE ORDERS
Payment for net purchases of shares of the Fund will be wired by First
Variable to a custodial account designated by FFP Securities on the same
Business Day that notice of an order for purchase of shares of the Fund is
received by FFP Securities. Payments shall be in federal funds
transmitted by wire.
B. REDEMPTION ORDERS
Payment for net redemption orders that are timely received by FFP
Securities will be wired by FFP Securities from the Fund's custodial
account to an account designated by First Variable. The Fund will not
bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds; First Variable alone will be responsible
for such action.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF FIRST VARIABLE
First Variable represents and warrants to FFP Securities as follows:
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<PAGE> 4
1. First Variable is an insurance company duly organized, validly existing
and in good standing under the laws of the state of ---- and is
qualified to do business and licensed to sell insurance in all states
in which its business requires it to be so qualified or licensed.
2. The Contracts have been qualified for sale under the insurance laws of
all states in which they will be offered and sold.
3. First Variable has registered the First Variable Accounts as unit
investment trusts under the provisions of the 1940 Act and will have
or has registered interests in the Contracts for sale under the 1933
Act and it will maintain such registrations for so long as any
Contracts are outstanding, unless regulations of the Securities and
Exchange Commission permit deregistration at an earlier time.
4. The Contracts will be issued and sold in compliance with all applicable
federal and state laws, including state and federal insurance and
securities laws and in particular suitability requirements of
applicable state and federal securities laws and state insurance laws.
5. First Variable has legally and validly established each of the First
Variable Accounts as a separate account under applicable state law and
the First Variable Accounts will remain so qualified as long as any
Contracts are outstanding.
6. First Variable will amend the registration statement under the 1933 Act
for the Contracts and the registration statement under the 1940 Act for
the First Variable Accounts from time to time as required in order to
maintain a continuous offering of the Contracts or as may otherwise be
required by applicable law.
7. First Variable will register or qualify the Contracts for sale under
the securities laws of any state or states which require such
registration.
8. The variable annuity contracts that will use the Portfolios as
investments are currently and at the time of issuance will be treated
as annuity contracts under applicable provisions of the Internal
Revenue Code, and it will make every effort to maintain such treatment.
First Variable will notify the Fund and FFP Securities immediately if
it has any reason to believe that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
9. First Variable will not purchase shares of the Portfolios with assets
derived from tax-qualified retirement plans except, indirectly, through
Contracts purchased in connection with such plans.
B. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants as follows:
4
<PAGE> 5
1. The Fund is a corporation duly organized, validly existing and in good
standing under the laws of the state of Maryland and is qualified to do
business in all states in which its business requires it to be so
qualified.
2. The Fund is or will be registered as an investment company under the
1940 Act and has or will have registered its shares for sale under the
1933 Act and it will maintain such registrations for so long as any
shares are outstanding through the Contracts, unless regulations of the
Securities and Exchange Commission permit deregistration at an earlier
time.
3. The Fund will amend the registration statement for its shares under the
1933 Act from time to time as required to maintain a continuous
offering of its shares or as may otherwise be required by applicable
law.
4. The Fund will register or qualify its shares for sale under the
securities laws of any state or states which require such registration.
5. Each Portfolio is currently qualified as a regulated investment company
under Subchapter M of the Internal Revenue Code and the Fund will make
every effort to maintain such qualification under Subchapter M or any
successor or similar provision and it will notify First Variable
immediately upon having a reasonable basis for believing that a
Portfolio has ceased to so qualify or that it might not so qualify in
the future.
6. In performing the services described in this Agreement, the Fund will
comply with all applicable laws, rules and regulations of the
Securities and Exchange Commission and any state securities regulator,
including complying with applicable provisions of the 1940 Act in all
material respects; provided, however, the Fund makes no representation
as to whether any aspect of its operations including, but not limited
to, fees and expenses and investment policies, objectives and
restrictions complies with the insurance laws and regulations of any
state.
7. The Fund agrees that upon request it will use its best efforts to
furnish the information required by state insurance regulators so that
First Variable can obtain the authority needed to issue the Contracts
in the various states.
C. REPRESENTATIONS AND WARRANTIES OF FFP SECURITIES
FFP Securities represents and warrants as follows:
1. FFP Securities is a corporation duly organized, validly existing and in
good standing under the laws of the state of Missouri and is qualified
to do business in all states in which its business requires it to be so
qualified.
2. FFP Securities is registered as a broker-dealer with the Commission
under the Securities Exchange Act of 1934 (1934 Act) and is a member in
good standing of the National Association of Securities Dealers, Inc.
5
<PAGE> 6
3. FFP Securities represents and warrants that it is and will remain duly
registered under all applicable federal and state securities laws and
that it will perform its obligations for the Fund in all material
respects in accordance with any applicable state and federal securities
laws during the term of this Agreement.
4. FFP Securities will distribute the Fund shares in accordance with the
provisions of all applicable federal and state securities laws.
IV. RECORDS
Each party to this Agreement will maintain all records required by law,
including records detailing the services it provides. Such records will be
preserved, maintained and made available to the extent required by law and in
accordance with the 1940 Act and the rules thereunder. Each party to this
Agreement will cooperate with each other party and all appropriate
governmental authorities (including, without limitation, the Commission, the
NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Upon request by the Fund or FFP Securities, First
Variable agrees to promptly make copies or, if required, originals of all
records pertaining to the performance of services under this Agreement
available to the Fund or FFP Securities, as the case may be. The Fund agrees
that First Variable will have the right to inspect, audit and copy all
records pertaining to the performance of services under this Agreement
pursuant to the requirements of any state insurance department. Each party
also agrees to promptly notify the other parties if it experiences any
difficulty in maintaining the records in an accurate and complete manner.
This provision will survive termination of this Agreement.
V. PROSPECTUSES AND PROXY STATEMENTS; VOTING
A. PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION
The Fund or FFP Securities will provide First Variable a copy of each
Prospectus and Statement of Additional Information for the Fund and its
Portfolios when amended, as soon as practicable after such Prospectus and
Statement of Additional Information are declared effective by the
Securities and Exchange Commission. First Variable shall be responsible
for making copies of such documents for distribution to prospective
Contract Holders.
B. PROXIES AND REPORTS
The Fund or FFP Securities will provide First Variable with copies of any
proxy materials, reports to shareholders or other communications required
or desired by the fund to be distributed to shareholders.
C. VOTING OF PROXIES
First Variable shall be responsible for distributing proxy materials to
Contract Holders as required by applicable rules of the Securities and
Exchange Commission. First Variable shall be responsible for tabulating
any votes required of Contract Holders and providing
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<PAGE> 7
the Fund with such tabulations prior to any shareholders meeting. If and to
the extent required by law, First Variable will:
1. solicit voting instructions from Contract Holders;
2. vote the shares of the Portfolios held in the First Variable Accounts
in accordance with instructions received from Contract Holders; and
3. vote shares of the Portfolios held in the First Variable Accounts for
which no timely instructions have been received, as well as shares it
owns, in the same proportion as shares of such Portfolio for which
instructions have been received from the Contract Holders, so long as
and to the extent that the Commission continues to interpret the 1940
Act to require pass-through voting privileges for variable Contract
Holders.
Except as set forth above, First Variable reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the
extent permitted by law. First Variable will be responsible for assuring
that each of its Accounts participating in the Fund calculates voting
privileges in a manner consistent with all legal requirements.
D. ALLOCATION OF COSTS
Unless otherwise provided in the Service Agreement which is executed by
the parties simultaneously with this agreement, the Fund or FFP Securities
shall be responsible for the cost of preparing and printing the Fund's
prospectus, statement of additional information, proxy materials, reports
to shareholders and other communications to shareholders; provided,
however, that if at any time FFP Securities reasonably deems the usage of
such items to be excessive, it may require First Variable to pay the cost
of printing (including press time and paper) any additional copies of such
materials that are requested by First Variable. First Variable shall be
responsible for the cost of distributing such materials to existing or
prospective Contract Holders.
VI. EXPENSES
Except as otherwise provided in this Agreement, each party shall pay its own
expenses incident to its obligations hereunder. FFP Securities will pay all
expenses incident to the management and operation of the Fund, including the
cost of registration of the shares of the Portfolios with the Commission and
in states where required.
VII. ADVERTISING MATERIALS
A. REVIEW BY FFP
Each piece of advertising, sales literature or promotional material with
respect to the Fund prepared by First Variable or its agents for use with
the general public, the Contract Holders or any participants shall be
submitted to FFP Securities for review and approval before such material
is used. FFP Securities shall advise the submitting party in writing
within ten (10) Business Days of receipt of such materials of its approval
or disapproval of such materials.
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<PAGE> 8
B. DELIVERY OF COPIES TO FIRST VARIABLE
FFP Securities will provide to First Variable at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments or supplements to any of the above, that
relate to the Fund or its shares contemporaneously with the filing of such
document with the Sec, the NASD or other regulatory authority.
C. DELIVERY OF COPIES TO THE FUND
First Variable will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional
information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments to any of the above,
that relate to the Contracts or each Account, contemporaneously with the
filing of such document with the Sec, the NASD or other regulatory
authority.
VIII. INDEMNIFICATION
A. INDEMNIFICATION BY FIRST VARIABLE
First Variable agrees to indemnify and hold harmless the Fund, FFP
Securities, the Fund's investment adviser, transfer agent and/or
custodian, and each person, if any, who controls or is associated with the
Fund, FFP Securities, the Fund's investment adviser, transfer agent and/or
custodian within the meaning of such terms under the 1933 Act, and any
director, officer, partner, employee or agent of the foregoing
(collectively, the "Indemnified Parties") against any and all losses,
claims, expenses, damages, or liabilities (including reasonable legal and
other expenses) to which the Indemnified Parties may become subject
insofar as such losses, claims, damages, liabilities or expenses
1. arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration
statement, prospectus, statement of additional information or sales
literature or other promotional material for the Contracts (including
any supplements or amendments); or
2. arise out of or are based upon the omission or the alleged omission to
state in any of the foregoing documents a material fact required to be
stated or necessary to make such statements not misleading in light of
the circumstances in which they were made; or
3. arise out of or as a result of statements or representations by or on
behalf of First Variable or wrongful conduct of First Variable or
persons under its control, with respect to the sale or distribution of
the Contracts or Fund shares; or
4. arise as a result of any failure by First Variable to provide the
services and furnish the materials under the terms of this Agreement;
or
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<PAGE> 9
5. arise out of any material breach of any representation and/or warranty
made by First Variable in this Agreement or arise out of or result from
any other material breach by First Variable of this Agreement.
This indemnification will be in addition to any liability that First
Variable otherwise may have.
B. INDEMNIFICATION BY THE FUND AND FFP SECURITIES
The Fund and FFP Securities agree to indemnify and hold harmless First
Variable, its directors, officers, employees, agents and each person, if
any, who controls First Variable within the meaning of the 1933 Act
against any losses, claims, expenses, damages or liabilities (including
reasonable legal and other expenses) to which First Variable or any such
director, officer, employee, agent or controlling person may become
subject, insofar as such losses, claims, expenses, damages or liabilities
1. arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus, statement of additional information or sales literature of
the Fund;
2. arise out of or are based upon an omission or the alleged omission to
state in any of the foregoing documents a material fact required to be
stated or necessary to make such statements not misleading in light of
the circumstances in which they were made; or
3. arise out of or as a result of statements or representations made by or
on behalf of the Fund or FFP Securities, or wrongful conduct by the
Fund or FFP Securities, or persons under their control, with respect to
the sale or distribution of Fund shares; or
4. arise as a result of any failure by the Fund or FFP Securities to
provide the services and furnish the materials under the terms of this
Agreement; or
5. arise out of any material breach of any representation and/or warranty
made by the Fund or FFP Securities in this Agreement; or
6. arise out of or result from any other material breach by the Fund or
FFP Securities of this Agreement.
C. LIMITS ON INDEMNIFICATION
No party will be entitled to indemnification under this Agreement to the
extent such loss, claim, damage, liability or litigation is due to the
willful misfeasance, bad faith, or gross negligence by such party, its
respective directors, officers, employees, agents, or any controlling
person, or by reason of such party's reckless disregard of its obligations
or duties under this Agreement.
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<PAGE> 10
D. NOTICE
Promptly after receipt by an indemnified party under this Agreement of
notice of the commencement of any litigation, proceeding, complaint or
action, such indemnified party will, if a claim is to be made against an
indemnifying party hereunder, notify the indemnifying party; but the
failure to so notify the indemnifying party will not relieve it from any
liability which it may otherwise have to an indemnified party under this
Agreement.
E. PARTICIPATION
The indemnifying party is entitled to participate in, and, to the extent
that it may wish, to assume the defense of any action brought against an
indemnified party of which notice has been given pursuant to this
Agreement, with counsel satisfactory to both the indemnified and
indemnifying parties. In such case, the indemnifying party will not be
liable to the indemnified party under this Agreement for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense of such action.
IX. TERMINATION
A. EVENTS OF TERMINATION
This Agreement will terminate:
1. At the option of any party, with or without cause, with respect to some
or all of the Portfolios, upon ninety (90) days' advance written notice
to the other parties;
2. At the option of First Variable with respect to any Portfolio if (a)
shares of the Portfolio are not reasonably available to meet the
requirements of the Contracts as determined in good faith by First
Variable; or (b) any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or federal law,
or such law precludes the use of such shares as the underlying
investment media of the Contracts issued or to be issued by First
Variable; or (c) the Portfolio ceases to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, or
under any successor or similar provision, or if First Variable
reasonably and in good faith believes that the Portfolio may fail to so
qualify;
3. At the option of the Fund or First Variable, upon institution of formal
disciplinary or investigative proceedings against First Variable, the
Fund, or FFP Securities by the NASD, the Commission, the insurance
commission of any state, or any other regulatory body regarding any
parties' duties under this Agreement, or related to the sale or
administration of the Contracts, the sale or purchase of Fund shares,
or the operation of the First Variable Accounts; [provided that the
party electing to terminate this Agreement determines in its sole
judgment, exercised in good faith, that any such proceeding would have
a material adverse effect on the other party's ability to perform its
obligations under this Agreement];
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<PAGE> 11
4. At the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement which is not cured
within thirty (30) days of written notice of such breach;
5. At the option of First Variable, if First Variable determines in its
sole judgment exercised in good faith, that either the Fund or FFP
Securities has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement, or
is the subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of First
Variable, such termination to be effective sixty (60) days' after
receipt by the other parties of written notice of the election to
terminate;
6. At the option of the Fund or FFP Securities, if the Fund or FFP
Securities, respectively, determines in its sole judgment exercised in
good faith, that First Variable has suffered a material adverse change
in its business, operations or financial condition since the date of
this Agreement or is the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Fund or FFP Securities, such termination to be
effective sixty (60) days' after receipt by the other parties of
written notice of the election to terminate;
7. At the option of First Variable or the Fund, upon receipt of any
necessary regulatory approvals and/or the vote of the Contract Holders
having an interest in the First Variable Accounts to substitute the
shares of another investment company for the corresponding Portfolio
shares of the Fund in accordance with the terms of the Contracts for
which those Portfolio shares had been selected to serve as the
underlying investment media. First Variable will give sixty (60) days'
prior written notice to the Fund of the date of any proposed vote or
other action taken to replace the Fund's shares;
8. Upon assignment of this Agreement by any party, unless made with the
written consent of all other parties hereto; provided, however, that
(a) First Variable may assign, without agreement of the Fund or FFP
Securities, its duties and responsibilities under this Agreement to any
affiliate of First Variable, and (b) FFP Securities may assign, without
agreement of First Variable, its duties and responsibilities under this
Agreement to any of its affiliates;
9. At the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable federal and/or state law.
Termination in accordance with this provision will be effective
immediately upon such occurrence without notice.
B. EFFECTIVE DATE OF TERMINATION
Except as otherwise specified in this Section, termination of this
Agreement shall be effective upon receipt of prior written notice to all
other parties stating the basis for such termination.
11
<PAGE> 12
C. CONTINUATION OF SALES AFTER TERMINATION
In the event of any termination of this Agreement other than pursuant to
paragraphs 3, 6 or 9 above, the Fund and FFP Securities will, at the
option of First Variable, continue to make additional shares of the Fund
available pursuant to the terms and conditions of this Agreement for all
Contracts in effect as of the effective date of termination of this
Agreement (Existing Contracts.) Specifically, the owners of the Existing
Contracts will be permitted to reallocate investments in the Portfolios
(as in effect on such date), redeem investments in the Portfolios and/or
invest in the Portfolios upon making additional purchase payments under
the Existing Contracts.
D. SURVIVAL OF OBLIGATIONS
Notwithstanding any termination of this Agreement, each party's
obligations under this Agreement to indemnify other parties will survive
and not be affected by any termination of this Agreement. In addition,
each party' obligations under paragraph H of Section IX will survive and
not be affected by any termination of this Agreement. Finally, with
respect to Existing Contracts, all provisions of this Agreement also will
survive and not be affected by any termination of this Agreement.
X. AMENDMENT AND WAIVER
This Agreement constitutes the entire agreement and understanding between the
parties hereto and supersedes all prior agreements and understandings,
written or oral, relating to the subject matter hereof. Neither this
Agreement nor any provision hereof may be amended, waived, discharged or
terminated orally, but only by an instrument in writing signed by the parties
hereto; provided, however, the parties to this Agreement may amend the
schedules to this Agreement from time to time to reflect changes in or
relating to the Contracts, the First Variable Accounts or the Portfolios of
the Fund or other applicable terms of this Agreement.
XI. NOTICES
All notices and other communications hereunder shall be given or made in
writing and shall be delivered personally, or sent by telex, telecopier,
express delivery or registered or certified mail, postage prepaid, return
receipt requested, to the party or parties to whom they are directed at the
following address, or at such other addresses as may be designated by notice
from such party to all other parties:
<TABLE>
<CAPTION>
TO FIRST VARIABLE: TO FFP SECURITIES: TO THE FUND:
<S> <C> <C>
First Variable Life Insurance Company FFP Securties, Inc. FFP New Horizons, Fund, Inc.
21222 York Road, Suite 300 15455 Conway Road 15455 Conway Road
Oak Brook, Illinois 60523 Chesterfield, MO 63017 Chesterfield, MO 63017
Attn: Attn: Attn: Robin Rodermund
(630) 684-9270 314-537-1040 314-537-1040
Fax: Fax: 314-537-9591 Fax: 314-537-9591
</TABLE>
12
<PAGE> 13
Any notice, demand or other communication given in a manner prescribed in
this paragraph shall be deemed to have been delivered on receipt.
XII. SUCCESSORS AND ASSIGNS
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
XIII. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any party hereto may
execute this Agreement by signing any such counterpart.
XIV. SEVERABILITY
In case any one or more of the provisions contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby.
XV. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws
of the State of Missouri.
XVI. ENFORCEABILITY
Each party represents that the execution and delivery of this Agreement and
the consummation of the transactions contemplated herein, have been duly
authorized by all necessary corporate or board action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
XVII. REMEDIES
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized
representatives as of the date specified in the first paragraph.
FFP SECURITIES, INC.
By:----------------------------------
Roy M. Henry, President
ATTEST:-----------------------------------------
Robert H. Rodermund, Jr., Secretary (SEAL)
13
<PAGE> 14
FFP NEW HORIZONS FUND, INC. FOR ITSELF AND ON BEHALF OF ITS PORTFOLIOS:
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
By: ---------------------------------
Roy M. Henry, President
ATTEST:---------------------------------
Robin H. Rodermund, Secretary (SEAL)
FIRST VARIABLE LIFE INSURANCE COMPANY FOR ITSELF AND ON BEHALF OF ITS
SEPARATE ACCOUNTS:
First Variable Annuity Fund A
First Variable Separate Account VL
By: ---------------------------------
President
ATTEST:---------------------------------
Secretary (SEAL)
14
<PAGE> 1
FORM OF
SERVICE AGREEMENT
THIS AGREEMENT Is made and entered into by and between FFP Advisory Services,
Inc., a Missouri corporation, and First Variable Life Insurance Company, a
- ----------- corporation, effective as of the --- day of ----------, 1999.
WHEREAS, FFP Advisory Services Inc. has entered into an investment ADVISORY
agreement with FFP New Horizons Fund, Inc., appointing FFP Advisory as the
investment adviser of FFP New Horizons Fund, Inc.; and
WHEREAS, FFP Advisory Services, Inc. is obligated to provide certain
administrative services to shareholders of the FFP New Horizons Fund, Inc.
under the terms of the Advisory agreement; and
WHEREAS, First Variable Life Insurance Company has entered into a
Participation Agreement with FFP New Horizons Fund, Inc. and FFP Advisory
Services, Inc. to offer shares of the FFP New Horizons Fund, Inc. as
investments under a variable annuity contract and a variable life insurance
policy to be offered by First Variable Life Insurance Company; and
WHEREAS, First Variable Life Insurance Company is willing to provide certain
administrative services in connection with the FFP New Horizons Fund, Inc.;
NOW THEREFORE, in consideration of the mutual agreements and promises
contained in this Agreement and other valuable consideration, FFP Advisory
Services, Inc. and First Variable Life Insurance Company, mutually, agree as
follows:
I. SERVICES
First Variable Life Insurance Company (First Variable) agrees to
provide the following services for FFP Advisory Services, Inc. (FFP
Advisory) with respect to FFP New Horizons Fund, Inc. (Fund) and its
portfolios (Portfolios):
1. responding to inquiries from persons (Contract Holders) who have
premiums invested in the Fund through a variable annuity contract or
variable life insurance policy issued by First Variable, including,
but not limited to, the amount of their respective interests in each
of the Portfolios, the performance of the Portfolios through their
variable annuity contract or variable life insurance policy; any
annual or periodic reports concerning the Fund, proxy statements
sent to Contract Holders for the Fund and any other information
Contract Holders may receive concerning the Fund;
2. providing any other ongoing customer service to Contract Holders
concerning their interests in the Fund;
1
<PAGE> 2
3. mailing quarterly reports, annual reports, proxy statements, or
other notices prepared by the Fund or FFP Advisory concerning the
Fund to Contract Holders;
4. mailing prospectuses and other information concerning the Fund,
which may be necessary or appropriate for Contract Holders to have;
5. providing such other similar services as FFP Advisory may reasonably
request in connection with providing information or services to
Contract Holders.
II. COMPENSATION AND REIMBURSEMENT.
A. AMOUNT OF FEE
As full consideration and reimbursement for the cost of providing the
above services, FFP Advisory agrees to pay to First Variable a fee
equal to an annual rate of .25% of the average daily net assets of each
Portfolio held in the name of First Variable on behalf of Contract
Holders. The parties agree that the fee payable under this Article II
is for administrative services only and does not constitute payment in
any manner for investment Advisory services or for distribution costs.
B. CALCULATION OF FEE
The fee payable under this Agreement shall be calculated and shall
accrue quarterly based on the average assets held in the Portfolios
during the preceding calendar quarter. The average aggregate amount
held by First Variable during quarter shall be computed by totaling
First Variable's aggregate investment (share net asset value multiplied
by total number of shares held by First Variable) on each business day
during the quarter and dividing by the total number of business days
during each quarter.
C. PRORATION OF FEE
If this Agreement becomes effective subsequent to the first day of a
calendar quarter or terminates before the last day of a calendar
quarter, compensation shall only accrue and be paid for that part of
the quarter during which this Agreement is in effect.
D. PAYMENT OF FEE
The fee shall be paid within 30 days following the end of each calendar
quarter. The reimbursement payment will be accompanied by a statement
showing the calculation of the monthly amounts payable by FFP Advisory
and such other supporting data as may be reasonably requested by First
Variable.
III. REPRESENTATIONS AND WARRANTIES
A. REPRESENTATIONS AND WARRANTIES OF FFP ADVISORY
FFP Advisory hereby represents and warrants to First Variable as
follows:
2
<PAGE> 3
1. DUE INCORPORATION AND ORGANIZATION. FFP Advisory is duly organized
and is in good standing under the laws of the State of Missouri and
is fully authorized to enter into this Agreement and carry out its
duties and obligations hereunder.
2. FUND INCORPORATION. The Fund has been duly incorporated under the
laws of the state of Maryland and is authorized to enter into this
Agreement and carry out its obligations hereunder.
3. FUND REGISTRATION. The Fund is or will be registered as an
investment company with the Securities and Exchange Commission under
the Investment Company Act of 1940 (1940 Act) and shares of each
Portfolio are or will be registered or qualified for offer and sale
to the public under the Securities Act of 1933, as amended (1933
Act) and under the securities laws of all states where such
registration is required. Such registrations or qualifications will
be kept in effect during the term of this Agreement.
B. REPRESENTATIONS AND WARRANTIES OF FIRST VARIABLE
First Variable hereby represents and warrants to FFP Advisory as
follows:
DUE INCORPORATION AND ORGANIZATION. First Variable is duly organized
and is in good standing under the laws of the State of -----, is
qualified to do business in all states in which its activities
require it to be so registered and is fully authorized to enter into
this Agreement and carry out its duties and obligations hereunder.
IV. INDEMNIFICATION
A. INDEMNIFICATION BY FIRST VARIABLE
First Variable agrees to indemnify and hold harmless FFP Advisory and
its directors, officers, and employees from any and all loss, liability
and expense resulting from any gross negligence or willful wrongful act
of First Variable under this Agreement or a breach of a material
provision of this Agreement, except to the extent such loss, liability
or expense is the result of FFP Advisory's own willful misfeasance, bad
faith or gross negligence in the performance of its duties.
B. INDEMNIFICATION BY FFP ADVISORY
FFP Advisory agrees to indemnify and hold harmless First Variable and
its directors, officers, and employees from any and all loss, liability
and expense resulting from any gross negligence or willful wrongful act
of FFP Advisory under this Agreement or a breach of a material
provision under this Agreement, except to the extent such loss,
liability or expense is the result of First Variable's own willful
misfeasance, bad faith or gross negligence in the performance of its
duties.
V. TERMINATION
Either party may terminate this Agreement, without penalty, (i) on sixty (60)
days written notice to the other party, for any cause or without cause, or
(ii) on reasonable notice to the other party,
3
<PAGE> 4
if it is not permissible to continue the arrangement described herein under
laws, rules or regulations applicable to either party or the Fund. This
Agreement will terminate immediately upon the termination of the Participation
Agreement among FFP Advisory Services, Inc., First Variable and the Fund.
VI. CONFIDENTIALITY
The terms of this arrangement will be held confidential by each party except
to the extent that either party or its counsel may deem it necessary to
disclose this arrangement.
VII. CONSTRUCTION AND AMENDMENT
This Agreement represents the entire Agreement of the parties on the subject
matter hereof and it cannot be amended or modified except in writing, signed
by the parties. This Agreement may be executed in one or more separate
counterparts, all of which, when taken together, shall constitute one and the
same Agreement.
VIII. AMENDMENT
This Agreement may be amended by a writing approved by both parties to this
Agreement.
IX. NOTICES
Any notices under this Agreement shall be in writing, addressed and
delivered, mailed postage paid, or sent by other delivery service, or by
facsimile transmission or e-mail to each party at such address as each party
may designate for the receipt of notice. Until further notice, such
addresses shall be:
FFP ADVISORY:
FFP Advisory Services, Inc.
15455 Conway Road
Chesterfield, MO 63017
Telephone: 314-537-1040
Fax: 314-537-9591
FIRST VARIABLE:
First Variable Life Insurance Company
21222 York Road, Suite 300
Oak Brook, Illinois 60523
Attn:
(630) 684-9270
Fax:
4
<PAGE> 5
X. INTERPRETATION
This Agreement shall be governed by the laws of the State of Missouri. Any
term or provision of this Agreement which is the same as or derived from a
term or provision included in the 1940 Act shall be interpreted by referring
to the 1940 Act and to interpretations of such Act by the United States
Courts or by rules, regulations or orders of the Securities and Exchange
Commission. In addition, any provision of this Agreement that is included
based on or as a result of a requirement of the 1940 Act, shall be deemed
amended or deleted to the extent that the requirement on which the provision
is based is amended or rescinded in the future by rule, regulation or order
of the Securities and Exchange Commission.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of the
date written in the first paragraph of this Agreement.
FFP ADVISORY SERVICES, INC.:
By: ---------------------------------------
Roy M. Henry, President
ATTEST:--------------------------------------
Robert H. Rodermund, Jr., Secretary SEAL
FIRST VARIABLE LIFE INSURANCE COMPANY:
By: ---------------------------------------
John Soukup, President
ATTEST:--------------------------------------
Secretary SEAL
5
<PAGE> 1
FORM OF
CONTRACT HOLDER SERVICES PLAN
OF
FFP NEW HORIZONS FUND, INC.
THIS PLAN is adopted by FFP New Horizons Fund, Inc., a Maryland corporation,
on behalf of each of its Portfolios listed below, effective as of the -- day
of March, 1999.
W I T N E S S E T H
WHEREAS, FFP New Horizons Fund, Inc. is an open-end, diversified, management
investment company authorized to issue shares in series or portfolios; and
WHEREAS, FFP New Horizons Fund, Inc. has authorized the issuance of shares in
each of the five portfolios listed below, each of which has its own distinct
investment objectives and policies; and
WHEREAS, FFP New Horizons Fund, Inc. is registering with the Securities and
Exchange Commission as an investment company under the Investment Company Act
of 1940 and is registering interests in each of its portfolios with the
Commission under the Securities Act of 1933; and
WHEREAS, THe portfolios offer their shares only as investments under variable
annuity contracts or variable life insurance policies; and
WHEREAS, FFP New Horizons Fund, Inc. desires to reimburse and compensate
persons who provide services to individuals who have investments in the
Portfolios through their variable annuity contracts or variable life policies
and who provide distribution services for the Portfolios.
NOW THEREFORE, FFP New Horizons Fund, Inc. hereby adopts this Contractholder
Services Plan.
I. APPLICATION OF THE PLAN
This Contractholder Services Plan (Plan) applies to shares of each of the
portfolios (Portfolios) of FFP New Horizons Fund, Inc. (Fund) which are:
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
1
<PAGE> 2
It is understood, however, that this Plan may be applied to each Portfolio
separately and may be terminated by any single Portfolio without affecting
the application of the Plan to the remaining Portfolios.
II. SERVICES TO BE PROVIDED
Broker-dealers who distribute the shares of the Portfolios may provide
financial planning and asset allocation services to individuals who hold
the variable annuity contracts and variable life insurance policies that
use the Portfolios as investment options. The Fund has determined that
it is in the best interests of the Portfolios to reimburse these
broker-dealers for the costs incurred by them in providing these
services. The services are provided through the properly licensed
registered representatives of the broker dealer to variable annuity
contract or variable life insurance policy owners. The services
include:
1. obtaining information and providing explanations about the risks
involved in the various Portfolios used as investment options under
the nvariable annuity contracts or variable life insurance
policies;
2. providing information about the different classes of assets held by
the different Portfolios;
3. obtaining information and providing explanations about the
investment objectives, policies and strategies of each Portfolio;
4. holding seminars to educate contract and policy owners about
various aspects of the Portfolios;
5. providing ongoing customer service to variable annuity contract
owners and variable life insurance policy holders having an
interest in the Portfolios, including providing information about
the management and performance of each Portfolio and the individual
accounts of each owner in each Portfolio; and
6. responding to questions about shareholder and contractholder
reports, proxy statements or other information provided to contract
and policy owners by the Fund.
III. COMPENSATION
A. COMPENSATION FOR SERVICES
Each Portfolio shall pay an amount equal to an annual rate of .25% of
its average daily net assets to FFP Securities and/or other
broker-dealers, as reimbursement for their costs in providing the
services described in Section II, above to the owners of the variable
annuity contracts or variable life insurance policies who have assets
invested in the Portfolios. All or a portion of these amounts may be
paid by the broker-dealers as compensation to the registered
representatives who provide the services to the contract and policy
owners.
2
<PAGE> 3
B. PAYMENT OF FEES
The maximum amount of fees payable hereunder and the times when they
shall be payable shall be determined by the Board of Directors of the
Fund (Board) from time to time. Until the Board determines otherwise,
the Portfolios are authorized to pay the full amount of the fees under
this agreement for contract and policy owner servicing. The amounts due
hereunder shall be payable within 30 days following the end of each
quarter for services provided during the prior quarter.
IV. RELATED AGREEMENTS
This Plan may be implemented by the execution of one or more related
agreements between the Fund on behalf of its Portfolios and the
broker-dealers, which will be providing the contract or policy owner services
or distribution services to the Portfolios. The agreements will be in such
form as is approved by a majority of the members of the Board who are not
interested persons of the Fund as defined by the 1940 Act and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan. The agreements shall be approved initially
and shall continue in effect in the same manner and for the same time periods
as for the Plan as described in Sections V and VI, below. The agreement shall
provide that it may be terminated as described in Section VII, below. The
agreements shall require that any party entering into such an agreement with
the Fund must agree to provide to the Fund and its Board quarterly reports
that include information reasonably necessary for the Board to make an
informed determination concerning whether the Plan should be continued. Such
information shall include a written report of the aggregate amounts received
by the party under the agreement pursuant to this Plan and the amounts spent
by such party in providing the services contemplated by the Plan.
V. EFFECTIVE DATE
This Plan shall become effective on the date approved by the Board, including
a majority of the members of the Board who are not interested persons of the
Fund as defined by the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the
Plan. This Plan shall remain in force and effect through December 31, 1999,
unless earlier terminated under the provisions of Section VII.
VI. RENEWAL
Following the expiration of its initial term, this Plan shall continue in
force and effect from year to year, provided that the continuation for each
Portfolio is specifically approved at least annually by the Board and by a
majority of the directors of the Fund who are not interested persons of the
Fund as defined in the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the
Plan. The approval must be done in person at a meeting specifically called
for the purpose of continuing the Plan. The members of the Board who vote to
approve the Plan must conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under state law and under the
applicable provisions of the 1940 Act, that there is a reasonable likelihood
that the Plan will benefit each Portfolio, its shareholders and the
contractholders having an interest in the Portfolios.
3
<PAGE> 4
VII. TERMINATION
A. TERMINATION OF THE PLAN
This Plan may be terminated at any time, for any Portfolio, by:
1. the vote of a majority of the members of the Board; or
2. the vote of a majority of the members of the Board who are not
interested persons of the Fund as defined by the 1940 Act and who
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan; or
3. by the vote of persons holding a majority of the outstanding voting
securities of the Portfolio as determined by rules and regulations
of the Securities and Exchange Commission.
Termination of the Plan with respect to any one Portfolio shall not
affect the continuation of the Plan with respect to other Portfolios.
B. TERMINATION OF AGREEMENTS RELATED TO THE PLAN
Any agreement relating to this Plan as described in Section IV, above,
must provide that the agreement can be terminated at any time, by any
Portfolio, without the payment of any penalty, on sixty (60) days'
written notice to the other party, by:
1. the vote of a majority of the Board; or
2. the vote of a majority of the members of the Board who are not
interested persons of the Fund as defined by the 1940 Act and who
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan; or
3. the vote of persons holding a majority of the outstanding voting
securities of the Portfolio as determined by rules and regulations
of the Securities and Exchange Commission.
Any such agreement must also provide that the agreement shall
automatically terminate in the event of its "assignment," as that term
is defined in the 1940 Act. The termination of a related agreement with
respect to any one Portfolio shall not affect the continuation of such
agreement with respect to other Portfolios.
VIII. REPORTS
During the term of this Plan, the officers of the Fund shall provide to the
Board, at least quarterly, reports containing the information provided by
parties entering into agreements with the Fund as described in Section IV of
this Plan. The reports may aggregate all amounts paid to all parties
pursuant to this Plan and all expenditures by those parties for providing the
services required by this Plan. The reports shall also include an analysis
and evaluation of the
4
<PAGE> 5
information for the purpose of determinng whether the Plan is benefiting the
Portfolios and the Contractholder who have an interest in the Portfolios.
IX. AMENDMENT
This Plan may be amended by a writing approved by the Board; provided,
however, all material amendments must be approved by a majority of the
directors of the Fund who are not interested persons of the Fund as defined
in the 1940 Act and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan. Furthermore,
any amendments that increase materially the amount to be paid under the Plan
by any Portfolio for distribution services, must be approved by the vote of
persons holding a majority of the outstanding shares of the applicable
Portfolio as determined by rules and regulations of the Securities and
Exchange Commission.
X. NOMINATION OF DIRECTORS
During the term of this Plan, the Board shall establish a nominations
committee of the Board that shall have the sole responsibility for selecting
and nominating persons to be submitted for election as directors of the Fund
who are not interested persons of the Fund as defined by the 1940 Act. All
members of the nominations committee must be directors who are not interested
persons of the Fund.
XI. INTERPRETATION
This Plan shall be governed by the laws of the State of Missouri. Any term
or provision of this Plan which is the same as or derived from a term or
provision included in the 1940 Act shall be interpreted by referring to the
1940 Act and to interpretations of such Act by the United States Courts or by
rules, regulations or orders of the Securities and Exchange Commission. In
addition, any provision of this Plan that is included based on or as a result
of a requirement of the 1940 Act, shall be deemed amended or deleted to the
extent that the requirement on which the provision is based is amended or
rescinded in the future by rule, regulation or order of the Securities and
Exchange Commission.
IN WITNESS WHEREOF, FFP New Horizons Fund, Inc. hereby adopts this
Contractholder Services Plan as of the date written in the first paragraph
hereof.
FFP NEW HORIZONS FUND, INC. FOR ITSELF AND ITS PORTFOLIOS:
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
By: -----------------------------------
Roy M. Henry, President
ATTEST: -----------------------------------
Robin H. Rodermund, Secretary (SEAL)
5
<PAGE> 1
CODE OF ETHICS AND INSIDER TRADING POLICY OF
FFP NEW HORIZONS FUND, INC.
<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
I. BACKGROUND 1
A. CODE OF ETHICS 1
B. INSIDER TRADING POLICY 1
II. ADOPTION OF CODE OF ETHICS AND INSIDER TRADING POLICY 2
A. ADOPTION BY THE FUND 2
B. ADOPTION BY THE INVESTMENT ADVISER AND UNDERWRITER 2
III. DEFINITIONS 2
IV. POLICIES 5
A. CODE OF ETHICS 5
B. POLICY ON INSIDER TRADING 5
V. PROHIBITED ACTIVITIES 5
A. PROHIBITED TRADING ACTIVITIES BY ACCESS PERSONS AND INSIDERS 5
B. PROHIBITED TRADING ACTIVITIES BY INSIDERS 6
C. PROHIBITED INVESTMENTS 6
D. OTHER PROHIBITED ACTIVITIES 6
VI. PROCEDURES 7
A. DESIGNATION OF COMPLIANCE OFFICER 7
B. DETERMINATION OF ACCESS PERSONS AND INSIDERS 7
C. EXECUTION AND ACKNOWLEDGEMENT OF CODE AND POLICY 7
D. PREAPPROVAL OF TRADES 8
E. BROKERAGE STATEMENTS AND TRANSACTIONS 8
VII. REPORTS AND RECORDS 9
A. SECURITIES OWNED 9
B. SECURITIES TRANSACTIONS REPORTS 9
C. REPORTS TO THE BOARD 9
D. ANNUAL CERTIFICATION 10
E. RECORDS 10
VIII. EXEMPTIONS 11
A. DISCRETIONARY EXEMPTIONS 11
B. EXEMPT SECURITIES 11
IX. SANCTIONS 12
A. SANCTIONS BY MANAGEMENT 12
B. SANCTIONS BY REGULATORY AUTHORITIES 12
ACKNOWLEDGEMENT 13
</TABLE>
<PAGE> 2
I. BACKGROUND
A. CODE OF ETHICS
1. LIABILITY UNDER RULE 17J-1. Rule 17j-1 (Rule) adopted by the
Securities and Exchange Commission under the Investment Company
Act of 1940 (1940 Act) makes it unlawful for affiliated persons
of a registered investment company, its principal underwriter
or its investment adviser to engage in certain prohibited
activities in connection with the purchase or sale by those
persons, directly or indirectly, of a security held or to be
acquired by the registered investment company. Those
prohibited activities include:
A. employing any device, scheme or artifice to defraud the
registered investment company; or
B. making any untrue statement of a material fact to the
investment company; or
C. omitting to state a material fact to the investment
company which fact is necessary to prevent statements made
by the person, from being misleading in light of the
circumstances under which they were made;
D. engaging in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the
investment company; or
E. engaging in any manipulative practice with respect to the
investment company.
2. PROCEDURAL REQUIREMENTS. The Rule requires each registered
investment company and each underwriter or investment adviser
for each registered investment company to adopt a written code
of ethics containing provisions reasonably necessary to prevent
its access persons, as defined by the Securities and Exchange
Commission, from engaging in any of the activities prohibited
by the Rule. In addition, they must adopt procedures
reasonably designed to prevent violations of those prohibitions
and must use reasonable diligence to enforce those procedures
and prevent violations.
B. INSIDER TRADING POLICY
1. SANCTIONS. The Insider Trading and Securities Fraud
Enforcement Act of 1988 (Insider Trading Act) imposed both
criminal and civil sanctions against persons who purchase or
sell securities while in possession of material, nonpublic
information or who communicate material, nonpublic information
in connection with a transaction in securities. The Insider
Trading Act also imposes liability on persons who control or
are responsible for supervising those who violate the Act if
the controlling persons failed to supervise those persons or
adopt procedures designed to prevent violations.
<PAGE> 3
2. PROCEDURAL REQUIREMENTS. The Insider Trading Act requires
investment advisers, broker-dealers and others who supervise or
control persons who are subject to the insider trading rules to
adopt policies prohibiting violations of the Insider Trading
Act and to establish procedures reasonably designed to prevent
those violations.
II. ADOPTION OF CODE OF ETHICS AND INSIDER TRADING POLICY
A. ADOPTION BY THE FUND
Based on the above, FFP New Horizons Fund, Inc. (Fund) hereby adopts
this Code of Ethics and Insider Trading Policy (Code and Policy)
effective as of the 16th day of December, 1998 under the provisions
of Rule 17j-1 of the Securities and Exchange Commission and the
Insider Trading and Securities Fraud Enforcement Act of 1988. In
adopting this Code and Policy, the members of the Board of Directors
(Board) of the Fund, including a majority of the directors who are
not interested persons of the Fund (Disinterested Directors) as
defined by the Investment Company Act of 1940 (1940 Act), have
determined that this Code and Policy contain provisions reasonably
necessary to prevent access persons from engaging in any act,
practice, or course of business prohibited by the Rule. In addition,
the Board finds that the procedures contained in this Code and Policy
are reasonably designed to prevent violations of the laws prohibiting
the purchase and sale of securities while in possession of material
nonpublic information concerning the securities or communicating such
information in connection with the purchase or sale of securities.
B. ADOPTION BY THE INVESTMENT ADVISER AND UNDERWRITER
To prevent harm to the Fund by persons who may not be under the
control of the Fund, the Fund may not enter into any agreement with
(i) an investment adviser; (ii) a principal underwriter, (iii) any
underwriter that is affiliated with the Fund or its investment
adviser, or (iv) any administrative service provider who would have
access to information about Fund assets, until the Board has reviewed
the codes of ethics and insider trading policies adopted by those
entities. In addition, the Board must obtain from those entities a
certification that they have adopted procedures that they believe are
reasonably necessary to prevent access persons and insiders from
violating their respective codes of ethics and insider trading
policies.
III. DEFINITIONS
All terms used in this Code and Policy that are defined in the Rule
or in other rules and regulations of the Securities and Exchange
Commission have the meanings assigned to them in those rules unless,
based on the context, another meaning clearly applies. Specifically,
the following terms have the meaning indicated when used in this Code
and Policy:
1. ACCESS PERSON:
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<PAGE> 4
A. for FFP New Horizons Fund, Inc. - each member of the Board
of the Fund, each officer of the Fund and each employee of
the Fund who, in connection with such person's regular
duties, makes, participates in, or obtains information
about the purchase or sale of a security by the Fund or
whose functions relate to the making of any
recommendations with respect to such purchases or sales.
B. for FFP Advisory Services, Inc. - each member of the Board
of FFP Advisory Services, Inc., each officer of FFP
Advisory Services, Inc. and each employee of FFP Advisory
Services, Inc. who, in connection with such person's
regular duties, makes, participates in, or obtains
information about the purchase or sale of a security by
the Fund or whose functions relate to the making of any
recommendations with respect to such purchases or sales.
C. for FFP Securities, Inc. - any director or officer of FFP
Securities, Inc., who, in the ordinary course of such
person's regular duties, makes, participates in, or
obtains information about the purchase or sale of a
security by the Fund or whose functions or duties as part
of the ordinary course of such person's business relate to
the making of any recommendation to such investment
company with respect to the purchase or sales of
securities.
D. for affiliates of FFP Advisory Services, Inc. - any
employee of such affiliate who, in the ordinary course of
such person's regular duties, makes, participates in, or
obtains information about the purchase or sale of a
security by the Fund or whose functions or duties as part
of the ordinary course of such person's business relate to
the making of any recommendation to such investment
company with respect to the purchase or sales of
securities.
2. BENEFICIAL OWNERSHIP of a security is determined in the same
manner as it would be for the purposes of Section 16 of the
Securities Exchange Act of 1934, except that such determination
applies to all securities. Generally, a person will be
considered to be the beneficial owner of securities held in his
or her own name or held in trust or for the benefit of such
person. A person will also be considered the beneficial owner
of securities held by his or her spouse, minor children,
relatives including an adult children and parents who share his
or her home. In addition, a person will be considered a
beneficial owner of securities held by a third party if he or
she receives benefits from the securities or if he or she
exercises rights, such as voting or dividend rights, or if he
or she has the ability to exercise rights with respect to those
securities whether such rights are obtained by contract,
understanding, relationship, agreement or otherwise. A person
would also be considered the beneficial owner of securities if
he or she has the right to claim or reclaim ownership of, or
title to, the securities, now or in the future.
3. COMPLIANCE OFFICER is the person designated as such under
Article VI, Section A of this Code and Policy.
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<PAGE> 5
4. FUND means FFP New Horizons Fund, Inc. and, unless the context
clearly indicates otherwise, its Portfolios.
5. INSIDER means any access person and any employee, associate or
affiliate of the Fund, its investment adviser, underwriter,
accountants, lawyers, custodians, transfer agent, administrator
or other service provider or consultant, which employee,
associate or affiliate has access to or obtains any material
information concerning the Fund or any other securities while
performing his or her duties for or services to the Fund. A
person can be an insider on a temporary basis if he or she
enters into a special confidential relationship with the Fund
while working on matters for the Fund or while providing
services to the Fund.
6. MATERIAL INFORMATION is generally information for which there
is a substantial likelihood that a reasonable investor would
consider it important in making his or her investment
decisions, or information that is reasonably certain to have a
substantial effect on the price of the securities to which the
information relates. Information that officers, directors and
employees should consider material includes, but is not limited
to dividend changes, earnings estimates, changes in previously
released earnings estimates, significant merger or acquisition
proposals or agreements, major litigation, liquidation
problems, and extraordinary management developments. Material
information does not have to relate to the business of the Fund
or assets acquired by it. For example, a Wall Street Journal
reporter was found criminally liable for disclosing to others
the dates that reports on various companies would appear in the
Wall Street Journal and whether those reports would be
favorable or not, since the information would affect the market
price of the securities discussed in the report.
7. PUBLIC INFORMATION is information that has been effectively
communicated to the marketplace by appearing in a publication
of general circulation such as the New York Times, Reuters
Economic Services, or the Wall Street Journal, or inclusion in
a report that is available to the public, such as an annual
report filed with the Securities and Exchange Commission.
8. PURCHASE OR SALE includes any purchase or sale of a security as
defined by the securities laws and includes the writing of an
option to purchase or sell the security.
9. SECURITY shall have the meaning set forth in the 1940 Act.
10. SECURITIES HELD OR TO BE ACQUIRED by the Fund include any
security
A. that is currently held by the Fund;
B. that has been held by the Fund within the immediate past
15 days;
C. that is currently being considered for purchase by the
Fund; and
D. that has been considered for purchase by the Fund or by
the investment adviser for the Fund within the immediate
past 15 days.
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<PAGE> 6
IV. POLICIES
A. CODE OF ETHICS
The following policies are adopted by the Fund under the Rule and
apply to all access persons as defined above:
1. no access person shall engage in any act, practice or course of
conduct that would violate the provisions of the Rule;
2. it is the duty of all access persons to place the interest of
Fund shareholders first;
3. all access persons shall conduct personal securities
transactions in a manner that is consistent with this Code and
Policy and that avoids any actual, apparent or potential
conflict of interest or abuse of a position of trust and
responsibility; and
4. no access person shall take inappropriate advantage of his or
her position with the Fund.
B. POLICY ON INSIDER TRADING
The following policies are adopted by the Fund and apply to any
insider of the Fund, whether or not in connection with such insider's
duties to the Fund:
1. insiders are prohibited from trading personally on the basis of
material nonpublic information;
2. insiders are prohibited from trading on behalf of third
parties, including on behalf of mutual funds and private
accounts managed by FFP Advisory Services, Inc. or its
affiliates, on the basis of material nonpublic information; and
3. Insiders are prohibited from communicating material nonpublic
information to others in violation of the law.
V. PROHIBITED ACTIVITIES
A. PROHIBITED TRADING ACTIVITIES BY ACCESS PERSONS AND INSIDERS
In furtherance of the policies adopted above, access persons and
insiders are prohibited from the following trading activities:
1. PURCHASING OR SELLING A SECURITY IF THE SECURITY IS BEING
CONSIDERED for purchase or sale by the Fund;<F1>
2. FRONT-RUNNING any trade of the Fund<F2>;
[FN]
- ---------
<F1>Securities will generally be deemed considered for purchase or sale by the
Fund if the recommendation to trade has been made by the party or parties
responsible for making the recommendation and if the recommendation has been
communicated to others.
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<PAGE> 7
3. TRADING PARALLEL to the Fund, by purchasing or selling a
security at the same time that the same or a related security
is being purchased or sold by the Fund;
4. TRADING AGAINST the Fund by purchasing a security at the same
time that the Fund is selling the same or a related security,
or selling a security at the same time that the Fund is
purchasing the same or a related security;
5. PURCHASING OR SELLING ANY SECURITY WITHIN ONE DAY of the date
on which the Fund purchases or sells the same or a related
security;
6. PURCHASING OR SELLING ANY SECURITY WITHIN SEVEN DAYS of the
date on which the Fund purchases or sells the same or a related
security if the access person is responsible for determining
which securities the Fund will purchase; or
7. PURCHASING OR SELLING ANY SECURITY without obtaining written
approval from the Compliance officer prior to the transaction.
Disinterested Directors who are access persons are not subject to the
prohibitions of this Article V, Section A., unless they have actual
knowledge of the transactions being made by the Portfolio or have
been given access to such information.
B. PROHIBITED TRADING ACTIVITIES BY INSIDERS
No insider shall buy or sell any security for his or her own account
if such person is in possession of, or has access to, material
nonpublic information concerning the security. No insider shall
communicate any material nonpublic information to any person except
as is required in connection with his or her duties hereunder and
only to insiders who are subject to this Code and Policy or a
comparable code of ethics and insider trading policy.
C. PROHIBITED INVESTMENTS
Access persons are prohibited from making the following investments:
1. INVESTMENT IN BROKER-DEALERS. No access person may purchase or
otherwise acquire a security issued by any broker-dealer that
executes transactions for the Fund or that is in a position to
execute brokerage transactions for the Fund.
2. SHORT TERM INVESTMENTS. No access person shall profit from
short term trading - that is purchasing and selling the same
securities within periods of less than 30 days.
3. INVESTMENTS IN INITIAL PUBLIC OFFERINGS. No access person
shall make investments in initial public offerings if the
offering is one in which the Fund could participate.
D. OTHER PROHIBITED ACTIVITIES
[FN]
- -------------
<F2>The term "front-run" means trading on the basis of nonpublic information
regarding an intended transaction by the Fund or Portfolio, whether or not the
access person's trade and the Fund's or Portfolio's trade take place in the same
market or within one day of each other.
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<PAGE> 8
1. GIFTS. No access person or insider shall accept any gift from
any person or entity doing business with or on behalf of the
Fund, except for (i) gifts that have a value of less than $100
(ii) reasonable amounts paid for meals or (iii) reasonable
amounts paid for tickets to sporting events or other forms of
entertainment. All gifts must be reported to the Compliance
Officer as provided in Article VI, Section C, below.
2. PROHIBITION ON DIRECTORSHIPS. No access person shall serve as
a director of publicly traded companies except for companies
affiliated with the investment adviser or underwriter of the
Fund, unless the Board determines, before the access person
accepts the position, that such service would be consistent
with the interests of the Fund and its shareholders. Any
person so serving must be segregated from any persons who make
investment decisions for the Funds.
VI. PROCEDURES
A. DESIGNATION OF COMPLIANCE OFFICER
The President of the Fund shall designate a Compliance Officer of the
Fund, who may be the same as the Compliance Officer of the investment
adviser to the Fund. The name of the Compliance Officer shall be
attached to these procedures and disseminated with them to all
persons who are or may become access persons or insiders to the Fund.
The Compliance Officer may designate assistants who may act for the
Compliance Officer in carrying out some or all of his or her
obligations under this Code and Policy and/or may act in the absence
of the Compliance Officer. Such assistants shall be authorized to
act for the Compliance Officer in carrying out the duties of the
Compliance Officer, but shall not relieve the Compliance Officer of
his or her obligation to oversee compliance with this Code and
Policy.
Until a written designation changing the Compliance Officer for the
Fund is provided to all persons who have executed this Code and
Policy, the Compliance Officer shall be Robin H. Rodermund.
B. DETERMINATION OF ACCESS PERSONS AND INSIDERS
As soon as practicable after the adoption of this Code and Policy,
the Compliance Officer shall make a list of all persons the
Compliance Officer deems are access persons or insiders of the Fund
and who shall be subject to this Code and Policy. The list shall be
amended to add any persons who subsequently become access persons or
insiders and to remove any persons who are no longer access persons
or insiders. The determination of the Compliance Officer of a
person's status as an access person or insider shall be final. A
copy of the list shall be given to each person who is on the list and
the original shall be kept with this Code and Policy.
C. EXECUTION AND ACKNOWLEDGEMENT OF CODE AND POLICY
1. INITIAL EXECUTION. Immediately upon adoption of this Code and
Policy and
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<PAGE> 9
dissemination by the Compliance Officer of the list of access
persons and and Policy and execute the acknowledgement attached
hereto indicating that he or she has read the Code and Policy and
agrees to comply with its terms. Any person who is appointed or
employed in a position that would make them an access person or
insider must review this Code and Policy and execute the
acknowledgment before taking on the duties of the position. In
addition, the Compliance Officer may require that each person
employed by the Fund or who provides services or has access to
information concerning the Fund review this Code and Policy and
agree to comply with its provisions to the extent he or she may
be, or may be deemed, in the future to be, insiders of the Fund.
2. ANNUAL CERTIFICATION. Every year, each access person and
insider shall sign a certification verifying that he or she has
complied with all provisions of the Code and Policy during the
year except for any deviations that have previously been
reported to the Compliance Officer. Each such person shall
further certify that he or she agrees to continue to abide by
its terms. The certification shall also include disclosure of
all gifts that the access person or insider has received from
any person or entity doing business with or on behalf of the
Fund.
D. PREAPPROVAL OF TRADES
No access person or insider shall buy or sell any security or execute
---
any transaction in a security for such person's own account or for
any account in which the person has a beneficial ownership, without
first obtaining written approval from the Compliance Officer. The
Compliance Officer shall approve a transaction unless the Compliance
Officer has reason to believe that the transaction may violate any of
the prohibitions of this Code and Policy. Any approval of a
transaction is effective only for the dates indicated by the
Compliance Officer in giving the approval. If the approval to
execute a transaction is denied due to a potential prohibition under
Article V, Section A, the Compliance Officer may so advise the person
requesting the transaction and that person may request permission to
execute the transaction at a later time. The Compliance Officer may,
but is not obligated to, notify the person requesting the trade when
the trade may be executed.
E. BROKERAGE STATEMENTS AND TRANSACTIONS
Each access person and insider shall provide copies of all brokerage
statements for their own accounts or for any accounts in which such
access person has a beneficial ownership, to the Compliance Officer
upon request of such Compliance Officer. All such persons must also
agree to execute all transactions in securities through a
broker-dealer affiliated with the Fund or the investment adviser of
the Fund as may be designated by the Compliance Officer. This
requirement would apply to transactions for the person's own account
and for any accounts in which he or she has a beneficial ownership
and for which he or she controls the execution of transactions in
such securities.
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<PAGE> 10
VII. REPORTS AND RECORDS
A. SECURITIES OWNED
At the initial adoption of this Code and Policy or at the time a
person becomes an access person or insider if later, and annually
thereafter, each access person and insider shall provide the
Compliance Officer with a list of the securities then owned by such
person.
B. SECURITIES TRANSACTIONS REPORTS
Within 10 days after the end of each calendar quarter every access
person and insider shall submit reports to the Compliance Officer in
the form provided by the Compliance Officer showing all transactions
in securities in which the person has, or by reason of such
transaction acquires, any beneficial ownership. Such reports shall
contain the following information:
1. the date of each transaction in securities during the quarter;
2. the title of each security;
3. the number of shares or units or the principal amount of each
security involved in each transaction;
4. the nature of each transaction (purchase, sale, option, etc.);
5. the price at which each transaction was executed; and
6. the name of the broker, dealer or other financial institution
through which each transaction was executed.
Any report under this Section may contain language stating that the
report shall not be construed as an admission by the person making
the report that he or she has any direct or indirect beneficial
ownership in the security to which the report relates. No access
person needs to report about a transaction in a security for an
account over which the access person has no direct or indirect
influence or control. Furthermore, Disinterested Directors who are
required to submit the reports only because they are directors of the
Fund are not required to submit the reports unless, during the
quarter, they knew, or in the ordinary course of fulfilling their
official duties as a director of the Fund, should have known that
during the 15 day period immediately preceding or after the date of a
transaction in a security by the director, such security was
purchased or sold by the Fund, or the purchase or sale was considered
by the Fund.
C. REPORTS TO THE BOARD
The Compliance Officer of the Fund and of each investment adviser and
principal or affiliated underwriter of the Fund, shall provide the
Board at least annually a report describing all issues arising under
the Code and Policy since the last report to the Board, including,
but not limited to:
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<PAGE> 11
1. a copy of the Code and Policy then in effect for the Fund and
the code of ethics and insider trading policy of each
investment adviser and principal or affiliated underwriter of
the Fund;
2. a summary of the existing procedures adopted by the Fund and
each investment adviser and principal or affiliated underwriter
of the Fund, intended to assure compliance with the provisions
of the Rule and the Insider Trading Act;
3. a description of any violations under this Code and Policy or
under the Codes of Ethics or Insider Trading Policies of the
investment adviser and principal or affiliated underwriter of
the Fund, which violations relate to the Fund;
4. a description of any sanctions imposed for violations of the
respective Codes of Ethics and Insider Trading Policies of the
fund and each investment adviser and principal or affiliated
underwriter of the Fund;
5. a description of any changes to the Codes of Ethics or Insider
Trading Policies of the investment adviser and principal or
affiliated underwriter of the Fund, or in the procedures used
to implement them; and
6. a description of any recommended or proposed changes to the
Code and Policy or in the procedures used to implement it.
D. ANNUAL CERTIFICATION
The management of the Fund, its investment adviser and any principal
or affiliated underwriter shall certify annually to the Board that
each of such parties has adopted such procedures as each deems
reasonably necessary to prevent access persons and insiders from
violating the Rule and the Insider Trading Act.
E. RECORDS
The Compliance Officer shall maintain the following records at the
principal place of business of the Fund and shall make such records
available to the Board, the Securities and Exchange Commission or any
representative of the Securities and Exchange Commission or any other
regulatory authority having jurisdiction over the Fund, during
reasonable business hours:
1. a copy of this Code and Policy as currently in effect and of
any amendments to it or restatements of it that have been in
effect during the current year and any of the past five fiscal
years;
2. a copy of any other Code of Ethics or Insider Trading Policy
which is, or at any time within the past five fiscal years has
been, in effect for the Fund;
3. a record of any violation of any such Code of Ethics or Insider
Trading Policy and of any action taken as a result of such
violation that has occurred during the current year or any of
the past five fiscal years;
4. a copy of each report made by an access person or insider
pursuant to this Code and Policy during the current year and
the past five fiscal years;
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<PAGE> 12
5. a copy of any other reports made to the Board pursuant to this
Code and Policy or any prior Code of Ethics or Insider Trading
Policy during the current year or any of the past five fiscal
years;
6. a list of all access persons and insiders who have been subject
to this Code and Policy or any prior Code of Ethics or Insider
Trading Policy during the current year and the past five fiscal
years;
7. a list of all Compliance Officers designated under this Code
and Policy or under any prior Code of Ethics or Insider Trading
Policy during the current year and the past five fiscal years
of the Fund; and
8. a list of any other persons responsible for reviewing the
reports of securities transactions required from access persons
and insiders during the current year and the past five fiscal
years of the Fund.
VIII. EXEMPTIONS
A. DISCRETIONARY EXEMPTIONS
Any access person or insider may ask the Compliance Officer to
determine, prior to a transaction, based on all available
information, that the proposed transaction by the access person or
insider, in light of all circumstances, should be exempted from the
prohibitions of Article V. Once the Compliance Officer makes a
determination, the access person shall be bound by it.
B. EXEMPT SECURITIES
The following securities are exempt from the reporting requirements
under Article VII, Section B, the prohibitions under Article V,
Section A and the preapproval of securities transactions under
Article VI, Section D:
1. direct obligations issued or guaranteed by the United States,
2. short-term securities issued or guaranteed by an agency or
instrumentality of the United States,
3. bankers' acceptances,
4. bank certificates of deposit,
5. commercial paper;
6. shares of stock purchased under a dividend reinvestment plan;
7. automatic investments made under a prior continuing
authorization; and
8. shares of any open-end management investment company (mutual
fund); provided the Fund does not own and cannot purchase
shares in that mutual fund or in any fund that shares assets or
is in a common family of funds with the mutual fund. The
Compliance Officer may issue, from time to time, a list of
mutual funds that are restricted and subject to all the
provisions of this Code and Policy.
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<PAGE> 13
IX. SANCTIONS
A. SANCTIONS BY MANAGEMENT
This Code and Policy shall be strictly enforced. The Compliance
Officer is required to report all violations immediately to
management and to recommend to management the appropriate sanctions
to apply for violations. Management shall be responsible for making
the final determination concerning the application of sanctions.
Those sanctions may include:
1. fines;
2. disgorgement of profits;
3. payment of amounts equal to any losses avoided;
4. rescission of transactions;
5. assigning securities purchased wrongfully to the Fund
6. restrictions on future trading in securities;
7. suspension;
8. termination; or
9. any penalty that could be imposed under the applicable
securities laws.
B. SANCTIONS BY REGULATORY AUTHORITIES
In the event of a material violation of this Code that also involves
a violation of state or federal securities laws, rules or
regulations, management may notify the appropriate regulatory
authorities of such material violation and provide information to
such authorities necessary for them to investigate and prosecute the
violation. The access person or insider will be subject to all the
penalties under the securities acts for such violations. Those
penalties include:
1. injunctions;
2. fines;
3. criminal sanctions;
4. suspension or bar from the securities business.
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<PAGE> 14
ACKNOWLEDGEMENT
I, the undersigned hereby acknowledge receipt of a copy of this CODE OF
ETHICS AND INSIDER TRADING POLICY for FFP New Horizons Fund, Inc., which I
have read and understand. I further understand and acknowledge that any
violation of the Code, Policy or Procedures including engaging in a
prohibited transaction or failure to file reports as required, may subject me
to disciplinary action, including termination of employment.
SIGNATURE:
Print Name:
Title:
Date:
13
<PAGE> 1
YEAR 2000 PROJECT PLAN
FFP NEW HORIZONS FUND, INC.
I. PROJECT GOAL
The Fund does not have its own employees, equipment or facilities, and its
operations depend entirely on the services of third parties who have
contracts with the Fund to manage various segments of its operations
("service providers"). The goal of the Fund's Year 2000 Project Plan is to
obtain reasonable assurance that all Fund service providers have information
technology that will accurately process date and time data prior to, during
and after the year 2000, without impairing the Fund's operations, when used
alone or in combination with such information technology of other parties.
II. PROJECT TASKS AND TIMETABLE
The first phase of the Project Plan is to determine that all service
providers are aware of the year 2000 problem, have assessed the impact of the
problem on their operations (including identification of appropriate
priorities for conversion, replacement or elimination of data processing
equipment and applications), and have developed plans to convert, replace or
eliminate data processing equipment and applications as necessary to meet the
goal of the Project Plan. This phase of the Project Plan should be completed
no later than October 1, 1998.
The second phase of the Project Plan is to determine that all service
providers have converted, replaced or eliminated data processing equipment
and applications in accordance with their plans. This phase of the Project
Plan should be completed no later than March 30, 1999.
The third phase of the Project Plan is to determine that all service
providers have tested, verified and validated their converted or replaced
data processing equipment and applications, both internally and through
interfaces with the information technologies of other appropriate persons, in
an operational environment. This phase of the Project Plan should be
completed no later than June 30, 1999.
The fourth phase of the Project Plan is to develop contingency plans for the
retention of other service providers to replace those service providers whose
performance is not proceeding satisfactorily on the schedule set forth above.
Such replacement service providers should be identified and arrangements made
for their retention (either immediately or on a contingent basis) no later
than June 30, 1999.
The final phase of the Project Plan is monitoring the services of the fund's
service providers upon implementation of the information technology which
they have represented complies with the goals of the Project Plan, and
retention of other service providers if necessary to ensure that the goals of
the Project Plan are achieved. This phase of the Project Plan will be
ongoing.
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<PAGE> 2
III. PROJECT RESPONSIBILITY
FFP Advisory Services, Inc. (The "Investment Adviser") shall be responsible
for implementation of the Project Plan. The Investment Adviser shall notify
the Board of Directors of the names of one or more of its employees who shall
be responsible for the day-to-day implementation of the Project Plan. Except
with respect to the Investment Adviser's own information technology, the
Investment Adviser be entitled to rely on reasonably detailed reports from
the Fund's other service providers with to their plans and progress in
implementing their plans, and shall not be required to undertake independent
investigations of the service providers' plans or progress (other than
reasonable evaluation of and inquiries based on the written materials
submitted to the Investment Adviser). The Investment Adviser shall provide a
written report to the Board of Directors at each meeting of the board, and at
such other times as it deems appropriate, with respect to the progress of
implementation of the Project Plan.
Dated: October 1, 1998
2
<PAGE> 1
DISTRIBUTION PLAN
OF
FFP NEW HORIZONS FUND, INC.
THIS PLAN is adopted by FFP New Horizons Fund, Inc., a Maryland corporation,
on behalf of each of its Portfolios listed below, effective as of the 16th
day of December, 1998.
W I T N E S S E T H
WHEREAS, FFP New Horizons Fund, Inc. is an open-end, diversified, management
investment company authorized to issue shares in series or portfolios; and
WHEREAS, FFP New Horizons Fund, Inc. has authorized the issuance of shares in
each of the six portfolios listed below, each of which has its own distinct
investment objectives and policies; and
WHEREAS, FFP New Horizons Fund, Inc. is registering with the Securities and
Exchange Commission as an investment company under the Investment Company Act
of 1940 and is registering interests in each of its portfolios with the
Commission under the Securities Act of 1933; and
WHEREAS, the portfolios offer their shares only as investments under variable
annuity contracts or variable life insurance policies; and
WHEREAS, FFP New Horizons Fund, Inc. desires to reimburse and compensate
persons who provide services to individuals who have investments in the
Portfolios through their variable annuity contracts or variable life policies
and who provide distribution services for the Portfolios.
NOW THEREFORE, FFP New Horizons Fund, Inc. hereby adopts this Distribution
Plan.
I. APPLICATION OF THE PLAN
This Distribution Plan (Plan) applies to shares of each of the portfolios
(Portfolios) of FFP New Horizons Fund, Inc. (Fund) which are:
FFP Odyssey Venus Portfolio
FFP Century Venus Portfolio
FFP Discovery Venus Portfolio
FFP Millennium Mercury Portfolio
FFP Discovery Mercury Portfolio
It is understood, however, that this Plan may be applied to each Portfolio
separately and may be terminated by any single Portfolio without affecting
the application of the Plan to the remaining Portfolios.
<PAGE> 2
II. SERVICES TO BE PROVIDED
FFP Securities, Inc. (FFP Securities) and other broker-dealers who offer and
sell the variable annuity contracts or variable life insurance policies that
offer the Portfolios as investment options may provide distribution services
for the Portfolios to prospective variable annuity contract or variable life
insurance policy owners or to current contract or policy owners who are
considering allocating investments to the Portfolios. The broker-dealers may
include affiliates of the life insurance companies that offer the variable
annuity contracts or variable life insurance policies. The distribution
services may include:
1. printing and mailing prospectuses, statements of additional
information, supplements and shareholder reports;
2. developing, preparing, printing and mailing advertisements, sales
literature and other promotional materials describing and/or
relating to the Portfolios;
3. holding seminars and sales meetings designed to promote the
Portfolios as investment options under the variable annuity
contracts or variable life insurance policies;
4. educating sales personnel and prospective customers about the
Portfolios and their performance and management styles.
III. COMPENSATION
A. COMPENSATION FOR DISTRIBUTION SERVICES
Each Portfolio shall pay an amount equal to an annual rate of .75% of
its average daily net assets, less any amounts paid by it under the
Shareholder Services Plan it has adopted this same date, to FFP
Securities and/or other broker-dealers, as reimbursement for their
costs in providing the distribution services described in Section II,
above.
B. PAYMENT OF FEES
The maximum amount of fees payable hereunder and the times when they
shall be payable shall be determined by the Board of Directors of the
Fund (Board) from time to time. Any amounts due shall be payable
within 30 days after the end of each quarter for services rendered
during the prior quarter.
IV. RELATED AGREEMENTS
This Plan may be implemented by the execution of one or more related
agreements between the Fund on behalf of its Portfolios and the
broker-dealers, which will be providing the contract or policy owner services
or distribution services to the Portfolios. The agreements will be in such
form as is approved by a majority of the members of the Board who are not
interested persons of the Fund as defined by the 1940 Act and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to the Plan. The agreements shall be approved initially
and shall continue in effect in the same manner and for the same time periods
as for the Plan as described in Sections V and VI, below. The agreement shall
provide that it may be
2
<PAGE> 3
terminated as described in Section VII, below. The agreements shall require
that any party entering into such an agreement with the Fund must agree to
provide to the Fund and its Board, quarterly reports that include information
reasonably necessary for the Board to make an informed determination concerning
whether the Plan should be continued. Such information shall include a written
report of the aggregate amounts received by the party under the agreement
pursuant to this Plan and the amounts spent by such party in providing the
services contemplated by the Plan.
V. EFFECTIVE DATE
This Plan shall become effective on the date approved by the Board, including
a majority of the members of the Board who are not interested persons of the
Fund as defined by the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the
Plan. This Plan shall remain in force and effect through December 31, 1999,
unless earlier terminated under the provisions of Section VII.
VI. RENEWAL
Following the expiration of its initial term, this Plan shall continue in
force and effect from year to year, provided that the continuation for each
Portfolio is specifically approved at least annually by the Board and by a
majority of the directors of the Fund who are not interested persons of the
Fund as defined in the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the
Plan. The approval must be done in person at a meeting specifically called
for the purpose of continuing the Plan. The members of the Board who vote to
approve the Plan must conclude, in the exercise of reasonable business
judgment and in light of their fiduciary duties under state law and under the
applicable provisions of the 1940 Act, that there is a reasonable likelihood
that the Plan will benefit each Portfolio and its shareholders.
VII. TERMINATION
A. TERMINATION OF THE PLAN
This Plan may be terminated at any time, for any Portfolio, by:
1. the vote of a majority of the members of the Board; or
2. the vote of a majority of the members of the Board who are not
interested persons of the Fund as defined by the 1940 Act and who
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan; or
3. by the vote of persons holding a majority of the outstanding
voting securities of the Portfolio as determined by rules and
regulations of the Securities and Exchange Commission.
Termination of the Plan with respect to any one Portfolio shall not
affect the continuation of the Plan with respect to other Portfolios.
3
<PAGE> 4
B. TERMINATION OF AGREEMENTS RELATED TO THE PLAN
Any agreement relating to this Plan as described in Section IV, above,
must provide that the agreement can be terminated at any time, by any
Portfolio, without the payment of any penalty, on sixty (60) days'
written notice to the other party, by:
1. the vote of a majority of the Board; or
2. the vote of a majority of the members of the Board who are not
interested persons of the Fund as defined by the 1940 Act and who
have no direct or indirect financial interest in the operation of
the Plan or in any agreements related to the Plan; or
3. the vote of persons holding a majority of the outstanding voting
securities of the Portfolio as determined by rules and
regulations of the Securities and Exchange Commission.
Any such agreement must also provide that the agreement shall
automatically terminate in the event of its "assignment," as that term
is defined in the 1940 Act. The termination of a related agreement
with respect to any one Portfolio shall not affect the continuation of
such agreement with respect to other Portfolios.
VIII. REPORTS
During the term of this Plan, the officers of the Fund shall provide to the
Board, at least quarterly, reports containing the information provided by
parties entering into agreements with the Fund as described in Section IV of
this Plan. The reports may aggregate all amounts paid to all parties
pursuant to this Plan and all expenditures by those parties for providing the
services required by this Plan. The reports shall also include an analysis
and evaluation of the information for the purpose of determining whether the
Plan is benefiting the Portfolios and their shareholders.
IX. AMENDMENT
This Plan may be amended by a writing approved by the Board; provided,
however, all material amendments must be approved by a majority of the
directors of the Fund who are not interested persons of the Fund as defined
in the 1940 Act and who have no direct or indirect financial interest in the
operation of the Plan or in any agreements related to the Plan. Furthermore,
any amendments that increase materially the amount to be paid under the Plan
by any Portfolio for distribution services, must be approved by the vote of
persons holding a majority of the outstanding shares of the applicable
Portfolio as determined by rules and regulations of the Securities and
Exchange Commission.
X. NOMINATION OF DIRECTORS
During the term of this Plan, the Board shall establish a nominations
committee of the Board that shall have the sole responsibility for selecting
and nominating persons to be submitted for election as directors of the Fund
who are not interested persons of the Fund as defined by the
4
<PAGE> 5
1940 Act. All members of the nominations committee must be directors who are
not interested persons of the Fund.
XI. INTERPRETATION
This Plan shall be governed by the laws of the State of Missouri. Any term
or provision of this Plan which is the same as or derived from a term or
provision included in the 1940 Act shall be interpreted by referring to the
1940 Act and to interpretations of such Act by the United States Courts or by
rules, regulations or orders of the Securities and Exchange Commission. In
addition, any provision of this Plan that is included based on or as a result
of a requirement of the 1940 Act, shall be deemed amended or deleted to the
extent that the requirement on which the provision is based is amended or
rescinded in the future by rule, regulation or order of the Securities and
Exchange Commission.
IN WITNESS WHEREOF, FFP New Horizons Fund, Inc. hereby adopts this
Distribution Plan as of the date written in the first paragraph hereof.
FFP NEW HORIZONS FUND, INC. on
behalf of its Portfolios:
FFP ODYSSEY VENUS PORTFOLIO
FFP CENTURY VENUS PORTFOLIO
FFP DISCOVERY VENUS PORTFOLIO
FFP MILLENNIUM MERCURY PORTFOLIO
FFP DISCOVERY MERCURY PORTFOLIO
By:---------------------------------
Roy M. Henry, President
ATTEST:-----------------------------
Robin H. Rodermund, Secretary
SEAL
5
<PAGE> 1
<TABLE>
EXHIBIT (n)(1) - FINANCIAL DATA SCHEDULE - FFP DISCOVERY MERCURY PORTFOLIO
<CAPTION>
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
<S> <C> <C>
6-03- Investments - cost 0
6-04-4 Investments 0
6-04-6 Receivables 0
6-04-8 Other assets 0
- -- Balancing amount to total assets 0
6-04-9 Total assets 0
6-04- Accounts payable for securities 0
6-04-13 Senior long-term debt 0
- -- Balancing amount to total liabilities 0
6-04-14 Total liabilities 0
6-04-16 Senior equity securities 0
6-04-16 Paid-in capital - common shareholders 0
6-04-16 Number of shares or units - current period 0
6-04-16 Number of shares or units - prior period 0
6-04-17(a) Accumulated undistributed net investment income 0
(current year)
- -- Overdistribution of net investment income 0
6-04-17(b) Accumulated undistributed net realized gains 0
(losses)
- -- Overdistribution of realized gains 0
6-04-17(c) Accumulated net unrealized appreciation 0
(depreciation)
6-04-19 Net assets 0
6-07-1(a) Dividend income 0
6-07-1(b) Interest income 0
6-07-1(c) Other income 0
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
6-07-2 Expenses - net 0
6-07-6 Net investment income (loss) 0
6-07-7(a) Realized gains (losses) on investments 0
6-07-7(d) Net increase (decrease) in appreciation (depreciation) 0
6-07-9 Net increase (decrease) in net assets resulting from 0
operations
6-09-2 Net equalization charges and credits 0
6-09-3(a) Distributions from net investment income 0
6-09-3(b) Distributions from realized gains 0
6-09-3(c) Distributions from other sources 0
6-09-4(b) Number of shares sold 0
6-09-4(b) Number of shares redeemed 0
6-09-4(b) Number of shares issued - reinvestment 0
1
<PAGE> 2
6-09-5 Total increase (decrease) 0
6-09-7 Accumulated undistributed net investment income 0
(prior year)
6-04-17(b) Accumulated undistributed net realized gains 0
(prior year)
- -- Overdistribution of net investment income (prior year) 0
- -- Overdistribution of net realized gains (prior year) 0
FORM N-1A
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
9 Net asset value per share -- beginning of period 0
9 Net investment income (loss) per share 0
9 Net realized and unrealized gain (loss) per share 0
9 Dividends per share from net investment income 0
9 Distributions per share from realized gains 0
9 Per share returns of capital and distributions from other sources 0
9 Net asset value per share -- end of period 0
9 Ratio of expenses to average net assets 0
</TABLE>
2
<PAGE> 1
<TABLE>
EXHIBIT (n)(2) - FINANCIAL DATA SCHEDULE - FFP DISCOVERY VENUS PORTFOLIO
<CAPTION>
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
<S> <C> <C>
Investments - cost 0
6-04-4 Investments 0
6-04-6 Receivables 0
6-04-8 Other assets 0
- -- Balancing amount to total assets 0
6-04-9 Total assets 0
6-04- Accounts payable for securities 0
6-04-13 Senior long-term debt 0
- -- Balancing amount to total liabilities 0
6-04-14 Total liabilities 0
6-04-16 Senior equity securities 0
6-04-16 Paid-in capital - common shareholders 0
6-04-16 Number of shares or units - current period 0
6-04-16 Number of shares or units - prior period 0
6-04-17(a) Accumulated undistributed net investment income 0
(current year)
- -- Overdistribution of net investment income 0
6-04-17(b) Accumulated undistributed net realized gains 0
(losses)
- -- Overdistribution of realized gains 0
6-04-17(c) Accumulated net unrealized appreciation 0
(depreciation)
6-04-19 Net assets 0
6-07-1(a) Dividend income 0
6-07-1(b) Interest income 0
6-07-1(c) Other income 0
6-07-2 Expenses - net 0
6-07-6 Net investment income (loss) 0
6-07-7(a) Realized gains (losses) on investments 0
6-07-7(d) Net increase (decrease) in appreciation (depreciation) 0
6-07-9 Net increase (decrease) in net assets resulting from 0
operations
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
6-09-2 Net equalization charges and credits 0
6-09-3(a) Distributions from net investment income 0
6-09-3(b) Distributions from realized gains 0
6-09-3(c) Distributions from other sources 0
6-09-4(b) Number of shares sold 0
6-09-4(b) Number of shares redeemed 0
6-09-4(b) Number of shares issued - reinvestment 0
6-09-5 Total increase (decrease) 0
3
<PAGE> 2
6-09-7 Accumulated undistributed net investment income 0
(prior year)
6-04-17(b) Accumulated undistributed net realized gains 0
(prior year)
- -- Overdistribution of net investment income (prior year) 0
- -- Overdistribution of net realized gains (prior year) 0
FORM N-1A
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
9 Net asset value per share -- beginning of period 0
9 Net investment income (loss) per share 0
9 Net realized and unrealized gain (loss) per share 0
9 Dividends per share from net investment income 0
9 Distributions per share from realized gains 0
9 Per share returns of capital and distributions from other sources 0
9 Net asset value per share -- end of period 0
9 Ratio of expenses to average net assets 0
</TABLE>
4
<PAGE> 1
<TABLE>
EXHIBIT (n)(3) - FINANCIAL DATA SCHEDULE - FFP ODYSSEY VENUS PORTFOLIO
<CAPTION>
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
<S> <C> <C>
Investments - cost 0
6-04-4 Investments 0
6-04-6 Receivables 0
6-04-8 Other assets 0
- -- Balancing amount to total assets 0
6-04-9 Total assets 0
6-04- Accounts payable for securities 0
6-04-13 Senior long-term debt 0
- -- Balancing amount to total liabilities 0
6-04-14 Total liabilities 0
6-04-16 Senior equity securities 0
6-04-16 Paid-in capital - common shareholders 0
6-04-16 Number of shares or units - current period 0
6-04-16 Number of shares or units - prior period 0
6-04-17(a) Accumulated undistributed net investment income 0
(current year)
- -- Overdistribution of net investment income 0
6-04-17(b) Accumulated undistributed net realized gains 0
(losses)
- -- Overdistribution of realized gains 0
6-04-17(c) Accumulated net unrealized appreciation 0
(depreciation)
6-04-19 Net assets 0
6-07-1(a) Dividend income 0
6-07-1(b) Interest income 0
6-07-1(c) Other income 0
6-07-2 Expenses - net 0
6-07-6 Net investment income (loss) 0
6-07-7(a) Realized gains (losses) on investments 0
6-07-7(d) Net increase (decrease) in appreciation (depreciation) 0
6-07-9 Net increase (decrease) in net assets resulting from 0
operations
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
6-09-2 Net equalization charges and credits 0
6-09-3(a) Distributions from net investment income 0
6-09-3(b) Distributions from realized gains 0
6-09-3(c) Distributions from other sources 0
6-09-4(b) Number of shares sold 0
6-09-4(b) Number of shares redeemed 0
6-09-4(b) Number of shares issued - reinvestment 0
6-09-5 Total increase (decrease) 0
6-09-7 Accumulated undistributed net investment income 0
(prior year)
5
<PAGE> 2
6-04-17(b) Accumulated undistributed net realized gains 0
(prior year)
- -- Overdistribution of net investment income (prior year) 0
- -- Overdistribution of net realized gains (prior year) 0
FORM N-1A
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
9 Net asset value per share -- beginning of period 0
9 Net investment income (loss) per share 0
9 Net realized and unrealized gain (loss) per share 0
9 Dividends per share from net investment income 0
9 Distributions per share from realized gains 0
9 Per share returns of capital and distributions from other sources 0
9 Net asset value per share -- end of period 0
9 Ratio of expenses to average net assets 0
</TABLE>
6
<PAGE> 1
<TABLE>
EXHIBIT (n)(4) - FINANCIAL DATA SCHEDULE - FFP CENTURY VENUS PORTFOLIO
<CAPTION>
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
<S> <C> <C>
Investments - cost 0
6-04-4 Investments 0
6-04-6 Receivables 0
6-04-8 Other assets 0
- -- Balancing amount to total assets 0
6-04-9 Total assets 0
6-04- Accounts payable for securities 0
6-04-13 Senior long-term debt 0
- -- Balancing amount to total liabilities 0
6-04-14 Total liabilities 0
6-04-16 Senior equity securities 0
6-04-16 Paid-in capital - common shareholders 0
6-04-16 Number of shares or units - current period 0
6-04-16 Number of shares or units - prior period 0
6-04-17(a) Accumulated undistributed net investment income 0
(current year)
- -- Overdistribution of net investment income 0
6-04-17(b) Accumulated undistributed net realized gains 0
(losses)
- -- Overdistribution of realized gains 0
6-04-17(c) Accumulated net unrealized appreciation 0
(depreciation)
6-04-19 Net assets 0
6-07-1(a) Dividend income 0
6-07-1(b) Interest income 0
6-07-1(c) Other income 0
6-07-2 Expenses - net 0
6-07-6 Net investment income (loss) 0
6-07-7(a) Realized gains (losses) on investments 0
6-07-7(d) Net increase (decrease) in appreciation (depreciation) 0
6-07-9 Net increase (decrease) in net assets resulting from 0
operations
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
6-09-2 Net equalization charges and credits 0
6-09-3(a) Distributions from net investment income 0
6-09-3(b) Distributions from realized gains 0
6-09-3(c) Distributions from other sources 0
6-09-4(b) Number of shares sold 0
6-09-4(b) Number of shares redeemed 0
6-09-4(b) Number of shares issued - reinvestment 0
6-09-5 Total increase (decrease) 0
6-09-7 Accumulated undistributed net investment income 0
(prior year)
7
<PAGE> 2
6-04-17(b) Accumulated undistributed net realized gains 0
(prior year)
- -- Overdistribution of net investment income (prior year) 0
- -- Overdistribution of net realized gains (prior year) 0
FORM N-1A
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
9 Net asset value per share -- beginning of period 0
9 Net investment income (loss) per share 0
9 Net realized and unrealized gain (loss) per share 0
9 Dividends per share from net investment income 0
9 Distributions per share from realized gains 0
9 Per share returns of capital and distributions from other sources 0
9 Net asset value per share -- end of period 0
9 Ratio of expenses to average net assets 0
</TABLE>
8
<PAGE> 1
<TABLE>
EXHIBIT (n)(5) - FINANCIAL DATA SCHEDULE - FFP MILLENNIUM MERCURY PORTFOLIO
<CAPTION>
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
<S> <C> <C>
Investments - cost 0
6-04-4 Investments 0
6-04-6 Receivables 0
6-04-8 Other assets 0
- -- Balancing amount to total assets 0
6-04-9 Total assets 0
6-04- Accounts payable for securities 0
6-04-13 Senior long-term debt 0
- -- Balancing amount to total liabilities 0
6-04-14 Total liabilities 0
6-04-16 Senior equity securities 0
6-04-16 Paid-in capital - common shareholders 0
6-04-16 Number of shares or units - current period 0
6-04-16 Number of shares or units - prior period 0
6-04-17(a) Accumulated undistributed net investment income 0
(current year)
- -- Overdistribution of net investment income 0
6-04-17(b) Accumulated undistributed net realized gains 0
(losses)
- -- Overdistribution of realized gains 0
6-04-17(c) Accumulated net unrealized appreciation 0
(depreciation)
6-04-19 Net assets 0
6-07-1(a) Dividend income 0
6-07-1(b) Interest income 0
6-07-1(c) Other income 0
6-07-2 Expenses - net 0
6-07-6 Net investment income (loss) 0
6-07-7(a) Realized gains (losses) on investments 0
6-07-7(d) Net increase (decrease) in appreciation (depreciation) 0
6-07-9 Net increase (decrease) in net assets resulting from 0
operations
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
6-09-2 Net equalization charges and credits 0
6-09-3(a) Distributions from net investment income 0
6-09-3(b) Distributions from realized gains 0
6-09-3(c) Distributions from other sources 0
6-09-4(b) Number of shares sold 0
6-09-4(b) Number of shares redeemed 0
6-09-4(b) Number of shares issued - reinvestment 0
6-09-5 Total increase (decrease) 0
6-09-7 Accumulated undistributed net investment income 0
(prior year)
9
<PAGE> 2
6-04-17(b) Accumulated undistributed net realized gains 0
(prior year)
- -- Overdistribution of net investment income (prior year) 0
- -- Overdistribution of net realized gains (prior year) 0
FORM N-1A
ITEM
NUMBER ITEM DESCRIPTION AMOUNT
9 Net asset value per share -- beginning of period 0
9 Net investment income (loss) per share 0
9 Net realized and unrealized gain (loss) per share 0
9 Dividends per share from net investment income 0
9 Distributions per share from realized gains 0
9 Per share returns of capital and distributions from other sources 0
9 Net asset value per share -- end of period 0
9 Ratio of expenses to average net assets 0
</TABLE>
10