As filed with the Securities and Exchange Commission on December 15, 1998
Securities Act Registration No. 333-65579
Investment Company Act Registration No. 811-9051
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. 1 [X]
Post-Effective Amendment No. ___ [ ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 1
LA CROSSE FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
311 Main Street
La Crosse, Wisconsin 54602
(Address of Principal Executive (Zip Code)
Offices)
Registrant's Telephone Number, including Area Code:
(608) 782-1148
Steven J. Hulme
La Crosse Funds, Inc.
311 Main Street
La Crosse, Wisconsin 54602
(Name and Address of Agent for Service)
Copies to:
Scott A. Moehrke
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
Approximate date of commencement of proposed
sale to the public: As soon as practicable
after this Registration Statement becomes
effective.
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 this Registration
Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may
determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
SUBJECT TO COMPLETION
December 15, 1998
[Logo]
La Crosse Funds, Inc.
La Crosse Large Cap Stock Fund
P.O. Box 717
Milwaukee, Wisconsin 53201-0717
Telephone: 1-888-661-7600
The investment objective of the La Crosse
Large Cap Stock Fund (the "Fund") is long-term
capital appreciation and income. The Fund invests
primarily in common stocks of large capitalization
companies. La Crosse Advisers, L.L.C. (the
"Adviser"), a subsidiary of North Central Trust
Company ("North Central"), is the investment
adviser to the Fund. The Fund is a long-term
investment, intended to complement your other
investments.
This Prospectus contains important
information you should consider before you invest
in the Fund, including information about risks.
Please read it carefully and keep it for future
reference.
____________________
Neither the Securities and Exchange
Commission (the "SEC") nor any state securities
commission has approved or disapproved of the
securities offered by this Prospectus, nor has the
SEC or any state securities commission passed upon
the adequacy of this Prospectus. Any
representation to the contrary is a criminal
offense.
<PAGE>
TABLE OF CONTENTS
HIGHLIGHTS 3
FEES AND EXPENSES OF THE FUND 4
INVESTMENT OBJECTIVE 5
HOW THE FUND INVESTS AND RELATED RISKS 5
FUND MANAGEMENT AND DISTRIBUTION 6
YOUR ACCOUNT 7
VALUATION OF FUND SHARES 12
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAX
TREATMENT 13
YEAR 2000 ISSUE 13
ADDITIONAL INFORMATION 14
In deciding whether to invest in the Fund, you
should rely only on information in this Prospectus or
the Statement of Additional Information ("SAI"). The
Fund has not authorized others to provide additional
information. The Fund does not authorize use of this
Prospectus in any state or jurisdiction where the
offering cannot legally be made.
<PAGE>
HIGHLIGHTS
What are the goals of the Fund?
The Fund's goal is long-term capital appreciation
and income. This goal is sometimes referred to as the
Fund's investment objective. You should consider the
Fund's current income goal as secondary to the Fund's
goal of capital appreciation. The Fund cannot
guarantee that it will achieve its goal. For more
information, see "Investment Objective" and "Investment
Strategies."
What are the Fund's Investment Strategies?
The Fund invests primarily in common stocks. The
Fund will emphasize investments in the common stocks of
U.S. large capitalization companies. In trying to
achieve its goal, the Fund's common stocks will be
those that the Adviser believes are under valued
relative to the company's future earnings potential and
future expected earnings growth. The Fund also tries
to choose investments that will pay current income,
usually dividends. For more information, see "How the
Fund Invests and Related Risks."
What are the main risks of investing in the Fund?
The main risks of investing in the Fund are:
Stock Market Risk. Stock funds like the Fund are
subject to stock market risks and significant
fluctuations in value. If the stock market declines in
value, the Fund is likely to decline in value.
Increases or decreases in value of stocks are generally
greater than for bonds or other income investments.
Stock Selection Risk. The stocks selected by the
Adviser for inclusion in the Fund's portfolio may
decline in value or not increase in value when the
stock market in general is rising. The Adviser has not
previously acted as an investment adviser to a mutual
fund.
Not Bank Insured. An investment in the Fund is
not a deposit of a bank and not insured or guaranteed
by the Federal Deposit Insurance Corporation or any
other government agency.
You should be aware that you may lose money by
investing in the Fund. The Fund may not be a complete
investment program for the equity portion of your
portfolio.
Is the Fund an appropriate investment for me?
The Fund is suitable for long-term investors only.
The Fund is not a short-term investment vehicle. An
investment in the Fund may be appropriate if:
your goal is long-term capital appreciation and
income;
you do not require significant current income from
this investment; and
you are willing to accept short-term to
intermediate-term fluctuations in investment value to
seek possible higher long-term returns.
Because the Fund has been in operation for less
than a full calendar year, it has no annual returns
history.
<PAGE>
FEES AND EXPENSES OF THE FUND
This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your
investment)
Maximum sales charge (load) imposed on purchases
(as a percentage of offering price) None
Maximum deferred sales charge (load) imposed
on redemptions (as a percentage of amount redeemed) None
Redemption fee (as a percentage of amount redeemed)(1) None
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets) (2)
Management fees 0.75%
Distribution and service (12b-1) fees None
Other expenses(3) 0.41%
Total annual Fund operating expenses(3) 1.16%
____________
(1)If you redeem shares by wire, you will be charged a
$15 service fee. See "Your Account_Redeeming
Shares."
(2)These expenses do not appear on your account
statement, but instead reduce the amount of total
return you receive.
(3)Based on estimated amounts for the current fiscal
year. The Adviser has agreed until December 31,
1999 to waive its management fee and/or reimburse
the Fund's operating expenses to the extent
necessary to ensure that the total annual operating
expenses for the Fund, which include management and
administration fees, but which exclude interest,
taxes, brokerage commissions and other costs
incurred in connection with the purchase and sale
of portfolio securities, and extraordinary items,
do not exceed 1.00%. "Other expenses" are
presented before any such waivers/reimbursements.
If "other expenses" were calculated based on such
waivers and/or reimbursements, other expenses and
total annual operating expenses for the Fund would
be .25% and 1.00%, respectively. The Adviser is
entitled to recoup amounts waived or reimbursed for
a period of up to three years from the date such
amounts were reimbursed or waived. For additional
information, see "Fund Management and
Distribution_Management."
<PAGE>
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year
and that the Fund's total annual operating expenses
remain the same each year. Although your actual costs
may be higher or lower, based on these assumptions,
your costs would be as follows:
1 Year 3 Years
$118 $368
INVESTMENT OBJECTIVE
The Fund's investment objective is to seek long-
term capital appreciation and income.
HOW THE FUND INVESTS AND RELATED RISKS
The Adviser will attempt to achieve the Fund's
investment objective by investing the Fund's assets in
U.S. companies that have a large market capitalization
("large-cap companies"). A large-cap company is one
with a market capitalization of at least $1 billion.
The Adviser currently intends to invest at least 70% of
the Fund's assets in companies with market
capitalizations of $5 billion or more. The Adviser's
strategy under normal market conditions is to be fully
invested, holding securities for their long-term total
return potential over a three- to five-year time frame.
When making purchase decisions for the Fund, the
Adviser uses a blend of value and growth investing.
The Adviser values each company in which it may invest
based on its future earnings potential and future
expected earnings growth. Using its own model, the
Adviser establishes this value by reviewing estimates
of a particular company's future earnings and
considering other information, including sales and
earnings data and risks associated with that particular
company and with the economy as a whole. The Adviser
reviews and may adjust its valuation in light of
valuations and fundamental research reports prepared by
others in the securities industry. The Adviser then
prepares a list of securities for inclusion in the
Fund's portfolio based upon these valuations and
purchases the securities when their prices fall within
a pre-determined range. Securities included on this
list as well as those securities which are purchased
for the Fund are monitored for variations from
expectations regarding capital growth or dividend
policy. The Adviser intends to maintain broad
diversification within industries and economic sectors,
including between 50 and 100 different stocks in the
Fund's portfolio at any given time.
The Adviser makes sell decisions for the Fund
based on a number of factors, including significant
deterioration in a company's underlying fundamentals,
strong price appreciation suggesting an overweighted
position or overvalued security, change in theme or
sector orientation, or better relative value in other
securities.
The Fund will invest primarily in common stocks.
Common stocks generally increase or decrease in value
based on the earnings of a company and on general
industry and market conditions. Because the Fund
invests a significant amount of its assets in common
stocks, it is likely to have greater fluctuations in
share price than a fund that invests a significant
portion of its assets in fixed-income securities.
Stock funds like the Fund are subject to stock market
risks and significant fluctuations in value. If the
stock market declines in value, the Fund is likely to
decline in value and such declines may not correspond
to the changes in value of the stock market overall.
For example, the Fund's decline in value may be greater
than of the market as a whole. Changes in the value of
stocks have generally been greater than for bonds or
other fixed income investments. The Fund's portfolio
itself is subject to the risk that the Adviser may
select stocks that decline in value or not increase in
value when the stock market in general is rising. In
addition, the Adviser may not or may not be able to
sell stocks at an optimal time or price. The Adviser
has not previously acted as an investment adviser to a
mutual fund.
<PAGE>
Temporary Strategies
Prior to investing the proceeds from sales of Fund
shares, to meet ordinary daily cash needs, and to
retain the flexibility to respond promptly to adverse
changes in market and economic conditions, the Fund may
hold cash and/or invest all or a portion of its assets
in money market instruments or other investment grade
short-term fixed-income securities issued by private
and governmental institutions. It is impossible to
predict when or for how long the Adviser may employ
these strategies for the Fund. To the extent the Fund
engages in any of these temporary strategies, the Fund
may not achieve its investment objective. Although not
part of its principal investment strategy, the Fund may
occasionally invest a limited portion of its assets in
foreign securities, illiquid securities and stock index
options. See the Fund's SAI for additional
information.
FUND MANAGEMENT AND DISTRIBUTION
Management
The Fund has entered into an Investment Advisory
Agreement with the Adviser under which the Adviser
manages the Fund's investments and business affairs,
subject to the supervision of the Fund's Board of
Directors.
Adviser. The Adviser was organized as a Wisconsin
limited liability company in June 1998 and is located
at 311 Main Street, La Crosse, Wisconsin 54602. Under
the Investment Advisory Agreement, the Fund pays the
Adviser an annual management fee of .75% of the Fund's
average daily net assets. The advisory fee is accrued
daily and paid monthly. The Adviser has agreed until
December 31, 1999 to waive its management fee and/or
reimburse Fund operating expenses to the extent
necessary to ensure that the total annual operating
expenses for the Fund will not exceed 1.00% of average
daily net assets. Any waivers or reimbursements will
have the effect of lowering the overall expense ratio
for the Fund and increasing its overall return to
investors at the time any such amounts were waived
and/or reimbursed. The Adviser is entitled to recoup
amounts waived or reimbursed for a period of up to
three years from the date such amounts were reimbursed
or waived.
Under the Investment Advisory Agreement, not only
is the Adviser responsible for management of the Fund's
assets, but also for portfolio transactions and
brokerage. Before the Fund commenced operations, the
Adviser had no prior experience advising mutual funds.
The Fund is the Adviser's only mutual fund client.
North Central. North Central, a Wisconsin trust
company, is the parent company of the Adviser. North
Central, prior to the date hereof, managed a collective
investment fund (the "Collective Fund") since April 1,
1971 and a common trust fund (the "Common Fund," and
together with the Collective Fund, the "Trust Funds")
since June 1, 1995. North Central decided to convert
the assets of the Trust Funds into shares of the Fund.
In connection with this conversion, North Central
decided to place its advisory operations into a
separate entity, and for that purpose established the
Adviser.
Portfolio Manager. Steven J. Hulme is the
President, Secretary, portfolio manager and a Director
of the Fund. Since 1993, Mr. Hulme has served as Vice
President and head of North Central's investment
division, during which time he has managed the Trust
Funds. He is also the President, a Director and a
Member of the Adviser. Mr. Hulme received his
undergraduate degree from the University of Nebraska
and his MBA from the University of Chicago. Mr. Hulme
is a Chartered Financial Analyst.
Service Providers
Certain administrative and other functions are
performed on behalf of the Fund by related and
unrelated service providers. North Central acts as
custodian of the Fund's assets. Sunstone Financial
Group, Inc. acts as the Fund's dividend-disbursing and
transfer agent (the "Transfer Agent") and as the Fund's
administrator and fund accountant. Sunstone
Distribution Services, LLC, a registered broker-dealer
and member of the National Association of Securities
Dealers, Inc. (the "NASD"), acts as distributor of the
Fund's shares.
<PAGE>
YOUR ACCOUNT
Net Asset Value
Shares of the Fund are offered and sold on a
continual basis at the net asset value per share which
is next computed after both a properly completed
purchase application and payment are received by the
Transfer Agent.
Investing in the Fund
To open an account and invest in Fund shares, you
should:
(1) Read this Prospectus carefully.
(2) Determine how much you would like to invest.
When you open an account with the Fund, you
must invest at least:
Non-retirement account: $2,000
Retirement account: $250
Automatic Investment Plan ("AIP"): $100
When you add to an account, you must invest
at least:
Non-retirement account: $100
Retirement account: $50
The Fund may change or waive these minimums
at any time; you will be given at least 60
days' notice of any increase in the minimum
dollar amount of purchases.
(3) Complete the appropriate parts of the
purchase application, carefully following the
instructions. If you have questions about
the purchase application, please contact the
Fund at 1-888-661-7600. Purchase
applications will be accepted by the Transfer
Agent. The Fund will not accept your account
if you are investing for another person as
attorney-in-fact. The Fund also will not
accept accounts with a "Power of Attorney" or
"POA" in the registration section of the
purchase application.
(4) Make your initial investment, and any
subsequent investments, following the
instructions set forth below. Purchase
applications are not binding on the Fund
until accepted. The Fund reserves the right
to accept or reject a purchase application in
whole or in part. The Fund also reserves the
right to limit or suspend, without prior
notice, the offering of its shares.
Purchasing Shares
Opening an Account by Mail. You may open an
account by mail as follows:
Please complete the purchase application. You
may duplicate any application or you can obtain
additional copies of the purchase application
from the Fund by calling 1-888-661-7600.
Write a check in an amount equal to the amount
that you would like to invest in the Fund.
Make the check payable to "La Crosse Large Cap
Stock Fund." You must make your purchase in
U.S. dollars. Your check must be drawn on a
U.S. bank, savings and loan institution or
credit union. You may not make your purchase
with cash, credit cards or third party checks.
<PAGE>
Mail your completed purchase application and
check to:
La Crosse Funds, Inc.
P.O. Box 717
Milwaukee, WI 53201-0717
OR
Send your completed purchase application and
check by overnight or express mail to:
La Crosse Funds, Inc.
c/o Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 315
Milwaukee, WI 53202-5712
Adding to an Account by Mail. You may make
additional investments by mail as follows:
Write a check in an amount equal to the
additional amount that you would like to invest
in the Fund. The amount of your check must be
equal to or greater than the minimum amount
listed in item 2, above. Make the check
payable to "La Crosse Large Cap Stock Fund."
You must make your additional purchase in U.S.
dollars. Your check must be drawn on a U.S.
bank, saving and loan institution or credit
union. You may not make an additional purchase
with cash, credit cards or third party checks.
Complete an additional investment slip from a
recent account statement. If you do not have
an additional investment slip, write a note
which gives the full name of your account and
the account number.
Send the check with the additional investment
slip or note to the Fund by mail or by
overnight courier or express mail to the
address indicated above.
Opening an Account by Wire. You may open an
account by wire transfer as follows:
Complete a purchase application.
Send the purchase application to the Fund by
mail or by overnight or express mail to the
address indicated above.
After the Transfer Agent has received a
properly completed purchase application, you
may call the Fund at 1-888-661-7600 for wire
instructions and to obtain an investor account
number.
Wire the funds through the Federal Reserve
System as follows:
UMB Bank n.a.
A.B.A. Number: 101000695
For credit to: La Crosse Funds, Inc.
Account Number: 9870964767
For further credit to:
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
Adding to an Account by Wire. You may make
additional investments by wire as follows:
Wire the funds through the Federal Reserve
System as indicated above.
<PAGE>
Opening an Account by Telephone. You may not open
an account by telephone.
Adding to an Account by Telephone. If you filled
out the "Telephone Redemption" section of your purchase
application which authorizes the Fund to withdraw the
payment for shares of the Fund from your bank account
by electronic funds transfer, then you may make
additional investments by telephone as follows:
Please call 1-888-661-7600 to place your
telephone purchase order.
You must purchase shares by telephone in
amounts equal to at least $100.
Payment for the shares purchased by telephone
will be withdrawn from the bank account listed
on your purchase application within
approximately 2-3 days after the purchase order
is placed.
Purchasing Shares Through Other Institutions. If
you purchase shares through a program of services
offered or administered by a broker-dealer, financial
institution, or other service provider, you should read
the program materials, including information relating
to fees, in addition to the Fund's Prospectus. Certain
services of the Fund may not be available or may be
modified in connection with the program of services
provided. The Fund may only accept requests from the
broker-dealer to purchase additional shares through a
broker-dealer street name account.
The Fund has authorized one or more broker-
dealers, financial institutions or other service
providers ("Brokers") to receive on its behalf purchase
and redemption orders for Fund shares. Such Brokers
may charge transaction fees on the purchase and/or sale
of Fund shares. Such Brokers are authorized to
designate other intermediaries to receive purchase and
redemption orders on the Fund's behalf. The Fund will
be deemed to have received a purchase or redemption
order when an authorized Broker, or, if applicable, the
Broker's authorized designee, receives the order.
Orders for the purchase or redemption of Fund shares
will be priced at the Fund's net asset value next
computed after the authorized Broker or its authorized
designee receives such orders. It is the
responsibility of the Broker to place the order with
the Fund on a timely basis. If payment is not received
within the time specified in the agreement, the Broker
could be held liable for any resulting fees or losses.
Additional Purchase Information.
The Fund will charge a $20 service fee against
your account for any check or electronic funds
transfer that is returned unpaid for any reason
and your purchase will be canceled. You will
also be responsible for any losses suffered by
the Fund as a result.
In order to relieve you of responsibility for
the safekeeping and delivery of stock
certificates, the Fund does not issue
certificates.
When a purchase is made by check and a
redemption is requested shortly thereafter, the
Fund may delay payment of redemption proceeds
for up to 10 calendar days. This delay allows
the Fund to verify that a check used to
purchase Fund shares will not be returned due
to insufficient funds. This delay also
protects the other Fund investors from loss.
By completing and submitting a purchase
application and providing bank account
information, you are automatically granted the
privilege to make purchases and request
redemptions by telephone. You may waive this
privilege by checking the appropriate box on
the purchase application. If you have any
questions as to how to waive this privilege, or
how to add or delete this privilege after you
open an account, please call the Fund at 1-888-
661-7600. Generally, after you open an
account, your request to waive, add or delete a
privilege must be in writing and signed by each
registered holder of the account with
signatures guaranteed by a U.S. commercial bank
or trust company, a member of the NASD or other
eligible guarantor institution. A notary
public is not an acceptable guarantor. For a
more detailed discussion of the rights,
responsibilities and risks of telephone
transactions, please refer to "Redeeming Shares
- Important Note About Wire and Telephone
Redemptions."
<PAGE>
Automatic Investment Plan. The Automatic
Investment Plan ("AIP") is a method of purchasing Fund
shares using dollar cost averaging, which is an
investment strategy that involves investing a fixed
amount of money at a regular time interval. By always
investing the same amount, you will be purchasing more
shares when the price is low and fewer shares when the
price is high. The AIP allows you to make regular,
systematic investments in shares of the Fund from your
bank account on the 5th, 10th, 15th, 20th, 25th or last
day of each month. If one of these dates falls on a
weekend, the investment will be made on the next
business day. The minimum initial investment for
investors using the AIP is $100. To maintain an AIP,
you must invest at least $50 per month in the Fund.
Please call 1-888-661-7600 for instructions as to how
you may establish an AIP for your account.
Redeeming Shares
You may redeem some or all of your shares of the
Fund at any time. The price at which your shares will
be redeemed is the net asset value per share next
determined after the Fund receives proper redemption
instructions from you. See "Valuation of Fund Shares."
You may redeem your shares of the Fund by mail, wire or
telephone, if you have not waived the right to make
telephone redemptions. The Fund may delay payment of
redemption proceeds until amounts for purchases which
you made by check, telephone or pursuant to the AIP
have been collected. Collection may take up to 10 days
from the date on which you made the purchase.
Depending upon the redemption price you receive, you
may realize a capital gain or loss for federal income
tax purposes.
Redeeming Shares by Mail. You may redeem your
shares by mail as follows:
Write a letter instructing the Fund to redeem your
shares. In your letter, indicate your account number,
the name(s) in which the account is registered, and the
dollar value or number of shares you wish to sell. If
the dollar amount requested to be redeemed is greater
than the current account value as determined by the net
asset value on the effective date of the redemption,
the entire account balance will be redeemed.
Include in your letter all required signatures.
The letter must be signed exactly as the shares are
registered. Enclose any additional documents that may
be required. See "Redeeming Shares_Special
Situations," below.
Send the letter, along with any required
additional documents, to the Transfer Agent at the
address listed above.
The Transfer Agent will mail a check in the amount
of the redemption proceeds to the address of the person
in whose name(s) the account is registered. If the
amount requested is greater than $10,000, or if the
proceeds are to be sent to a person other than the
shareholder(s) of record or to an address other than
the address of record, or if the redemption request is
made within 30 days of an address change, then each
required signature on the letter of instruction must be
guaranteed by a U.S. commercial bank or trust company,
a member firm of the NASD or other eligible guarantor
institution. A notary public is not an acceptable
guarantor. Additional documentation may be required
for the redemption of shares held in corporate,
partnership or fiduciary accounts. See "Redeeming
Shares - Special Situations - Corporate Accounts" for
instructions on redeeming shares in corporate accounts.
Additional documentation is required for the redemption
of shares held by persons acting pursuant to a power of
attorney. If you have any questions about redemptions
by mail, call the Fund in advance of making the
redemption request.
The Fund will mail payment for redemption proceeds
within seven days after it receives proper instructions
for redemption.
Important Note About Wire and Telephone
Redemptions. In order to redeem your shares by wire or
telephone, you must have filled out the "Telephone
Redemption" section of your purchase application when
you first opened your account. To verify that you have
telephone redemption privileges, call the transfer
agent at 1-888-661-7600. If you do not have telephone
privileges and you now want to arrange for wire or
telephone
<PAGE>
redemptions, or if you do have telephone
privileges and you now want to change the bank, the
account or the address designated to receive redemption
proceeds, then you must send a letter making this
request to the Transfer Agent. The letter must be
signed by each person who is listed on the account.
The signatures must be guaranteed. The Transfer Agent
may request additional documents from corporations,
executors, administrators, trustees and guardians. See
"Redeeming Shares - Special Situations - Corporate
Accounts," below.
The Fund reserves the right to refuse any wire or
telephone redemption request. The Fund may further
limit the dollar amount or number of shares that you
may redeem. You may not cancel or modify a telephone
or wire redemption request after you make the request.
Neither the Fund nor the Transfer Agent will be
responsible for the authenticity of redemption
instructions received by telephone. Accordingly, you
bear the risk of loss. However, the Fund will use
reasonable procedures to ensure that instructions
received by telephone are genuine, including recording
telephonic transactions and sending written
confirmation of redemptions to you. You may experience
difficulty in implementing a telephone redemption
during periods of drastic economic or market changes.
If you are unable to contact the Transfer Agent by
telephone, you may also redeem shares by written
request, as described above.
Redeeming Shares by Wire. You may redeem your
shares by wire as follows:
Please call 1-888-661-7600 to place your wire
redemption request.
You may request redemptions by wire in amounts
equal to at least $1,000 but not more than $10,000.
You must make redemption requests for less than $1,000
or more than $10,000 in writing.
Funds will be wired on the next business day. A
$15 fee will be deducted from your redemption proceeds.
Redeeming Shares by Telephone. You may redeem
your shares by telephone as follows:
Please call 1-888-661-7600 to place your telephone
redemption request.
You may request redemptions by telephone in
amounts equal to at least $1,000 but not more than
$10,000. You must make redemption requests for less
than $1,000 or more than $10,000 in writing.
Proceeds redeemed by telephone will be mailed or
transferred only to your address or bank of record as
shown on the records of the Transfer Agent.
Special Situations
Attorney-in-Fact. If you are acting as an
attorney-in-fact for another person, or as a trustee or
on behalf of a corporation, additional documentation
may be required in order to effect a redemption.
Questions regarding such circumstances may be directed
to the Transfer Agent by calling 1-888-661-7600.
Signature Guarantees. The Fund requires a
signature guarantee for all authorized owners of an
account: (i) when you submit a written redemption
request for more than $10,000, (ii) when you add the
telephone redemption option to your existing account,
(iii) if you transfer ownership of your account to
another individual or entity, or (iv) if you request
redemption proceeds to be sent to an address or bank
other than the address or bank that appears on your
account. A signature guarantee may be obtained from
any eligible guarantor institution. These institutions
include U.S. banks, saving associations, credit unions,
brokerage firms, and others. A notary public stamp or
seal is not acceptable.
Corporate Accounts. You must send the following
documents, in addition to any other required documents,
to the Transfer Agent if you request any redemptions or
transfer of ownership for a corporate account:
<PAGE>
1. A written letter of instruction signed by the
required number of authorized officers, along
with their respective positions. For
redemption requests in excess of $10,000, the
written request must be signature guaranteed.
2. A certified corporate resolution that states
the date the resolution was adopted and who is
empowered to act, transfer or sell assets on
behalf of the corporation.
3. If the corporate resolution is more than 60
days old from the date of the transaction
request, a certificate of incumbency from the
corporate secretary which specifically states
that the officer or officers named in the
resolution have the authority to act on the
account. The certificate of incumbency must
be dated within 60 days of the requested
transaction. If the corporate resolution
confers authority on officers by title and not
by name, the certificate of incumbency must
name the officer(s) and their title(s).
Suspension of Redemptions. The Fund reserves the
right to suspend or postpone redemptions during any
period when: trading on the New York Stock Exchange
(the "NYSE") is restricted, as determined by the SEC,
or the NYSE is closed for other than customary weekend
and holiday closing; the SEC has by order permitted
such suspension; or an emergency, as determined by the
SEC, exists, making disposal of portfolio securities or
valuation of net assets of the Fund not reasonably
practicable.
IRAs. Shareholders who have an Individual
Retirement Account must indicate on their redemption
requests whether or not to withhold federal income
taxes. Redemption requests failing to indicate an
election will be subject to withholding for taxes.
Termination of Accounts. Upon 60 days' written
notice, your account may be terminated by the Fund if,
at the time of any redemption of shares in your
account, the value of the remaining shares in your
account falls below $1,000. A check for the proceeds
of redeeming the remaining shares in your account will
be sent to you within seven days of the redemption.
VALUATION OF FUND SHARES
The price of Fund shares is based on the Fund's
net asset value, which is calculated by subtracting the
Fund's liabilities from the value of the Fund's total
assets, including interests or dividends accrued, but
not yet collected and is determined as of the close of
trading (generally 4:00 p.m., Eastern Time) on each day
the NYSE is open for business. In determining net
asset value, expenses are accrued and applied daily and
investments for which market quotations are readily
available are valued at market value. Any investments
for which market quotations are not readily available
are valued at fair value as determined in good faith by
the Board of Directors of the Fund. The Fund does not
determine net asset value on days the NYSE is closed.
The current policy of the NYSE is to close on New
Year's Day, Martin Luther King Day, President's Day,
Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. In addition, if
any of these holidays falls on a Saturday, the NYSE
will not be open for trading on the preceding Friday,
and when such holiday falls on a Sunday, the NYSE will
not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the
ending of a monthly or yearly accounting period. The
price at which a purchase order or redemption request
is effected is based on the next calculation of net
asset value after the order or request is accepted.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND TAX
TREATMENT
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
you receive from the Fund are taxable as ordinary
income, whether reinvested in additional shares or
received in cash. Distributions of net realized long-
term capital gains you receive from the Fund, whether
reinvested in additional shares or received in cash,
are taxable as a capital gain. The capital gain
holding period (and the applicable tax rate) is
determined by the length of time the Fund has held the
security and not the length of time you have held
shares
<PAGE>
in the Fund. You will be informed annually as
to the amount and nature of all dividends and capital
gains paid during the prior year. Such capital gains
and dividends may also be subject to state or local
taxes. If you are not required to pay taxes on your
income, you are generally not required to pay federal
income taxes on the amounts distributed to you.
Dividends, if any, are usually distributed
quarterly and capital gains, if any, are usually
distributed at least annually in December. The Fund
expects that, because of its investment objective, its
distributions will consist primarily of long-term
capital gains and dividends. You should measure the
success of your investment by both the value of your
investment at any given time and the distributions you
receive.
The Fund anticipates issuing some of its shares to
the Trust Funds in exchange for securities owned by the
Trust Funds and which are permitted investments in
transactions which are tax-free under the Internal
Revenue Code of 1986, as amended. In such
transactions, the Fund may acquire securities having
unrealized appreciation that may result in a taxable
gain when the securities are sold by the Fund.
All dividends and capital gains distributions will
automatically be reinvested in additional Fund shares
at the then prevailing net asset value unless you
specifically request that dividends or capital gains or
both of $10 or more be paid in cash. The election to
receive dividends in cash or reinvest them in shares
may be changed by writing to the Fund at La Crosse
Funds, Inc., c/o Sunstone Financial Group, Inc., 207
East Buffalo Street, Suite 315, Milwaukee, Wisconsin
53202. Such notice must be received at least ten days
prior to the record date of any dividend or capital
gain distribution.
YEAR 2000 ISSUE
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of the Adviser and
the Transfer Agent. Many computer software systems in
use today cannot properly process date-related
information after December 31, 1999 because of the
method by which dates are encoded and calculated. This
failure, commonly referred to as the "Year 2000
Problem," could adversely affect the handling of
security trades, pricing, and account servicing for the
Fund.
The Adviser has made compliance with the Year 2000
Problem a high priority and is taking steps that it
believes are reasonably designed to address the Year
2000 Problem with respect to its computer systems. The
Adviser has also been informed that comparable steps
are being taken by the Fund's other major service
providers. The Adviser does not currently anticipate
that the Year 2000 Problem will have a material impact
on its ability to continue to fulfill its duties as
investment adviser to the Fund.
<PAGE>
ADDITIONAL INFORMATION
DIRECTORS CUSTODIAN
Steven J. Hulme North Central Trust Company
Darwin F. Isaacson 311 Main Street
Ralph A. La Point La Crosse, WI 54602
Joseph T. Kostantin
OFFICERS INDEPENDENT ACCOUNTANTS
Steven J. Hulme Arthur Andersen, LLP
Darwin F. Isaacson 100 East Wisconsin Avenue
Milwaukee, WI 53202
INVESTMENT ADVISER LEGAL COUNSEL
La Crosse Advisers, L.L .C. Godfrey & Kahn, S.C.
311 Main Street 780 North Water Street
La Crosse, WI 54602 Milwaukee, WI 53202
ADMINISTRATOR AND FUND ACCOUNTANT DISTRIBUTOR
Sunstone Financial Group, Inc. Sunstone Distribution Services, LLC
207 East Buffalo Street, Suite 315 207 East Buffalo Street, Suite 315
Milwaukee, WI 53202 Milwaukee, WI 53202
DIVIDEND-DISBURSING AND TRANSFER AGENT
Sunstone Financial Group, Inc.
For overnight deliveries, use: For regular mail deliveries, use:
La Crosse Funds, Inc. La Crosse Funds, Inc.
c/o Sunstone Financial Group, Inc. c/o Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 315 P.O. Box 717
Milwaukee, WI 53202 Milwaukee, WI 53201-0717
The SAI for the Fund contains additional information
about the Fund. The Fund's SAI, which is incorporated
by reference into this Prospectus, is available without
charge upon request to the address or toll-free
telephone number noted on the cover page of this
Prospectus. To request other information about the
Fund or to make shareholder inquiries you may call the
toll-free telephone number on the cover page of this
Prospectus.
Information about the Fund (including the SAI) may be
reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Please call the SEC at 1-888-SEC-
0330 for information relating to the operation of the
Public Reference Room. Reports and other information
about the Fund are also available on the SEC's Internet
Website located at http//www.sec.gov. Alternatively,
copies of this information may be obtained, upon
payment of a duplicating fee, by writing the Public
Reference Section of the SEC, Washington, D.C. 20549-
6009.
The Fund's 1940 Act File Number is 811-9051.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
[Logo]
La Crosse Funds, Inc.
La Crosse Large Cap Stock Fund
P.O. Box 717
Milwaukee, Wisconsin 53201-0717
Telephone: 1-888-661-7600
This Statement of Additional Information ("SAI")
is not a prospectus and should be read together with
the Prospectus of the La Crosse Large Cap Stock Fund
(the "Fund"), dated December ___, 1998. The Fund's
prospectus may be obtained by calling the telephone
number indicated above. The Fund is a series of
La Crosse Funds, Inc. (the "Corporation").
This Statement of Additional Information is dated December ___, 1998.
<PAGE>
TABLE OF CONTENTS
FUND ORGANIZATION 1
FUND POLICIES: FUNDAMENTAL AND NON-FUNDAMENTAL 1
IMPLEMENTATION OF INVESTMENT OBJECTIVE 3
Temporary Strategies 3
Convertible Securities 4
Illiquid Securities 4
Reverse Repurchase Agreements 5
Derivative Instruments 5
Depositary Receipts and Foreign Securities 14
Warrants 15
Short Sales Against the Box 15
Borrowing 15
Lending Portfolio Securities 15
Concentration 15
DIRECTORS AND OFFICERS 16
PRINCIPAL SHAREHOLDERS 17
INVESTMENT ADVISER 17
FUND TRANSACTIONS AND BROKERAGE 18
CUSTODIAN 19
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 19
ADMINISTRATOR AND FUND ACCOUNTANT 19
DISTRIBUTOR 20
FINANCIAL INTERMEDIARIES 20
PURCHASE AND PRICING OF SHARES 20
TAXATION OF THE FUND 21
PERFORMANCE INFORMATION 21
Total Return 21
Comparisons 22
INDEPENDENT ACCOUNTANTS 22
FINANCIAL STATEMENTS 22
No person has been authorized to give any
information or to make any representations other than
those contained in this SAI and related Prospectus, and
if given or made, such information or representations
may not be relied upon as having been authorized by the
Fund. This SAI does not constitute an offer to sell
securities in any state or jurisdiction in which such
offering may not lawfully be made.
<PAGE>
FUND ORGANIZATION
The Corporation is a diversified, open-end
management investment company, commonly referred to as
a mutual fund. The Corporation is organized as a
Wisconsin company and was incorporated on September 4,
1998.
The Corporation is authorized to issue shares of
common stock in series and classes. The Corporation
currently offers one series of shares: the La Crosse
Large Cap Stock Fund (the "Fund"). La Crosse Advisers,
L.L.C. (the "Adviser") is the investment adviser to the
Fund. Each share of common stock of the Fund is
entitled to one vote, and each share is entitled to
participate equally in dividends and capital gains
distributions and in the residual assets of the Fund in
the event of liquidation.
No certificates will be issued for shares held in
your account. You will, however, have full shareholder
rights.
Generally, the Fund will not hold annual
shareholders' meetings unless required by the
Investment Company Act of 1940, as amended (the "1940
Act"), or Wisconsin law.
FUND POLICIES: FUNDAMENTAL AND NON-FUNDAMENTAL
The following are the Fund's fundamental
investment policies which cannot be changed without the
approval of a majority of the Fund's outstanding voting
securities. As used herein, a "majority of the Fund's
outstanding voting securities" means the lesser of (i)
67% of the shares of common stock of the Fund
represented at a meeting at which more than 50% of the
outstanding shares are present, or (ii) more than 50%
of the outstanding shares of common stock of the Fund.
The Fund:
1. May not, with respect to 75% of its total
assets, purchase the securities of any issuer
(except securities issued or guaranteed by
the U.S. government or its agencies or
instrumentalities) if, as a result, (i) more
than 5% of the Fund's total assets would be
invested in the securities of that issuer or
(ii) the Fund would hold more than 10% of the
outstanding voting securities of that issuer.
2. May not issue senior securities, except as
permitted under the 1940 Act.
3. May (i) borrow money from banks for temporary
or emergency purposes (but not for leveraging
or the purchase of investments), and (ii)
make other investments or engage in other
transactions permissible under the 1940 Act
which may involve a borrowing, including
borrowing through reverse repurchase
agreements, provided that the combination of
(i) and (ii) shall not exceed 33 1/3% of the
value of the Fund's assets (including the
amount borrowed), less the Fund's liabilities
(other than borrowings). If the amount
borrowed at any time exceeds 33 1/3% of the
Fund's total assets, the Fund will, within
three days thereafter (not including Sundays,
holidays and any longer permissible period),
reduce the amount of the borrowings such that
the borrowings do not exceed 33 1/3% of the
Fund's total assets. The Fund may also
borrow money from other persons to the extent
permitted by applicable law.
4. May not act as an underwriter of another
issuer's securities, except to the extent
that the Fund may be deemed to be an
underwriter within the meaning of the
Securities Act of 1933, as amended (the
"Securities Act"), in connection with the
purchase and sale of portfolio securities.
5. May not purchase the securities of any issuer
if, as a result, more than 25% of the Fund's
total assets would be invested in the
securities of issuers, the principal business
activities of which are in the same industry.
<PAGE>
6. May not purchase or sell real estate unless
acquired as a result of ownership of
securities or other instruments (but this
shall not prohibit the Fund from purchasing
or selling securities or other instruments
backed by real estate or of issuers engaged
in real estate activities).
7. May not make loans if, as a result, more than
33 1/3% of the Fund's total assets would be
lent to other persons, except through (i)
purchases of debt securities or other debt
instruments, or (ii) engaging in repurchase
agreements.
8. May not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments (but this
shall not prevent the Fund from purchasing or
selling options, futures contracts, or other
derivative instruments, or from investing in
securities or other instruments backed by
physical commodities).
9. Notwithstanding any other fundamental
investment policy or restriction, may invest
all of its assets in the securities of a
single open-end management investment company
with substantially the same fundamental
investment objective, policies, and
restrictions as the Fund.
The Fund's investment objective, which is to seek
capital appreciation and income, is also a fundamental
investment policy which cannot be changed without the
approval of a majority of the Fund's outstanding voting
securities.
The following are the Fund's non-fundamental
investment policies which may be changed by the Board
of Directors of the Corporation without shareholder
approval.
The Fund may not:
1. Sell securities short, unless the Fund owns
or has the right to obtain securities
equivalent in kind and amount to the
securities sold short, or unless it covers
such short sale as required by the current
rules and positions of the Securities and
Exchange Commission (the "SEC") or its staff,
and provided that transactions in options,
futures contracts, options on futures
contracts, or other derivative instruments
are not deemed to constitute selling
securities short.
2. Purchase securities on margin, except that
the Fund may obtain such short-term credits
as are necessary for the clearance of
transactions; and provided that margin
deposits in connection with futures
contracts, options on futures contracts, or
other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result
of such investment, more than 15% of its net
assets would be invested in illiquid
securities.
4. Purchase securities of other investment
companies except in compliance with the 1940
Act and applicable state law.
5. Engage in futures or options on futures
transactions which are impermissible pursuant
to Rule 4.5 under the Commodity Exchange Act
(the "CEA") and, in accordance with Rule 4.5,
will use futures or options on futures
transactions solely for bona fide hedging
transactions (within the meaning of the CEA);
provided, however, that the Fund may, in
addition to bona fide hedging transactions,
use futures and options on futures
transactions if the aggregate initial margin
and premiums required to establish such
positions, less the amount by which any such
options positions are in the money (within
the meaning of the CEA), do not exceed 5% of
the Fund's net assets.
6. Make any loans, except through (i) purchases
of debt securities or other debt instruments,
or (ii) engaging in repurchase agreements.
<PAGE>
7. Borrow money except from banks or through
reverse repurchase agreements, and will not
purchase securities when bank borrowings
exceed 5% of its total assets.
8. Under normal circumstances, invest less than
70% of the value of its total assets in the
stock of companies with market
capitalizations of at least $5 billion.
Except for the fundamental investment limitations
listed above and the Fund's investment objective, the
other investment policies described in the Prospectus
and this SAI are not fundamental and may be changed
with approval of the Corporation's Board of Directors.
Unless noted otherwise, if a percentage restriction is
adhered to at the time of investment, a later increase
or decrease in percentage resulting from a change in
the Fund's assets (i.e., due to cash inflows or
redemptions) or in the market value of the investment
or the Fund's assets will not constitute a violation of
that restriction.
IMPLEMENTATION OF INVESTMENT OBJECTIVE
The following information supplements the
discussion of the Fund's investment objective and
strategy described in the Prospectus under the headings
"Investment Objective" and "Investment Strategies."
The following represent strategies that are not
principal strategies of the Fund, but may be used from
time to time.
Temporary Strategies
As described in the Prospectus under the heading
"Implementation of Investment Objective," prior to
investing proceeds from sales of Fund shares, to meet
ordinary daily cash needs, and to retain the
flexibility to respond promptly to changes in market
and economic conditions, the Fund may hold cash and/or
invest all or a portion of its assets in money market
instruments which are "investment grade" as determined
by Standard & Poor's Corporation ("S&P"), Moody's
Investors Service, Inc. ("Moody's"), a comparable
rating agency or the Adviser. The investment grade
money market instruments which the Fund may purchase
may include:
U.S. Government Securities. Obligations issued or
guaranteed as to principal and interest by the United
States or its agencies (such as the Export-Import Bank
of the United States, Federal Housing Administration
and Government National Mortgage Association) or its
instrumentalities (such as the Federal Home Loan Bank),
including Treasury bills, notes, and bonds;
Bank Obligations. Obligations (including
certificates of deposit, bankers' acceptances,
commercial paper (see below) and other debt
obligations) of banks subject to regulation by the U.S.
Government and instruments secured by such obligations,
not including obligations of foreign branches of
domestic banks;
Obligations of Savings Institutions. Certificates
of deposit of savings banks and savings and loan
associations;
Fully Insured Certificates of Deposit.
Certificates of deposit of banks and savings
institutions, if the principal amount of the obligation
is insured by the Bank Insurance Fund or the Savings
Association Insurance Fund (each of which is
administered by the Federal Deposit Insurance
Corporation), limited to $100,000 principal amount per
certificate and to 15% or less of the Fund's total
assets in all such obligations and in all illiquid
assets, in the aggregate;
Commercial Paper. Commercial paper rated within
the two highest grades by Moody's, S&P or, if not
rated, issued by a company having an outstanding debt
issue rated at least Aaa by Moody's or AAA by S&P; and
Money Market Funds. Securities issued by
registered investment companies holding themselves out
as money market funds ("Money Market Funds") which
attempt to maintain a stable net asset value of $1.00
per share. The Fund shall not purchase securities
issued by a Money Market Fund if, after such purchase,
the Fund would own (i) more than 3% of the outstanding
voting stock of the Money Market Fund, (ii) securities
of the Money Market
<PAGE>
Funds having an aggregate value in
excess of 5% of the total value of the Fund, or (iii)
securities issued by the Money Market Fund and all
other investment companies having an aggregate value in
excess of 10% of the value of the total assets of the
Fund.
Convertible Securities
The Fund may invest in convertible securities,
which are bonds, debentures, notes, preferred stocks,
or other securities that may be converted into or
exchanged for a specified amount of common stock or
warrants of the same or a different company within a
particular period of time at a specified price or
formula. A convertible security entitles the holder to
receive interest normally paid or accrued on debt or
the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted,
or exchanged. Convertible securities have unique
investment characteristics in that they generally (i)
have higher yields than common stocks, but lower yields
than comparable non-convertible securities, (ii) are
less subject to fluctuation in value than the
underlying stock (or warrant) since they have fixed
income characteristics, and (iii) provide the potential
for capital appreciation if the market price of the
underlying common stock (or warrant) increases. A
convertible security may be subject to redemption at
the option of the issuer at a price established in the
convertible security's governing instrument. If a
convertible security held by the Fund is called for
redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the
underlying common stock (or warrant), or sell it to a
third party.
Illiquid Securities
The Fund may invest up to 15% of its net assets in
illiquid securities (i.e., securities that are not
readily marketable). For purposes of this restriction,
illiquid securities include, but are not limited to,
restricted securities (securities the disposition of
which is restricted under the federal securities laws),
repurchase agreements with maturities in excess of
seven days, and other securities that are not readily
marketable. The Board of Directors of the Corporation,
or its delegate, has the ultimate authority to
determine, to the extent permissible under the federal
securities laws, which securities are liquid or
illiquid for purposes of this 15% limitation. Certain
securities exempt from registration or issued in
transactions exempt from registration under the
Securities Act, such as securities that may be resold
to institutional investors under Rule 144A under the
Securities Act, may be considered liquid under
guidelines adopted by the Board of Directors. However,
investing in securities which may be resold pursuant to
Rule 144A under the Securities Act could have the
effect of increasing the level of the Fund's
illiquidity to the extent that institutional investors
become, for a time, uninterested in purchasing such
securities.
The Board of Directors has delegated to the
Adviser the day-to-day determination of the liquidity
of any security, although it has retained oversight and
ultimate responsibility for such determinations.
Although no definitive liquidity criteria are used, the
Board of Directors has directed the Adviser to look to
such factors as (i) the nature of the market for a
security (including the institutional private resale
market), (ii) the terms of certain securities or other
instruments allowing for the disposition to a third
party or the issuer thereof (e.g., certain repurchase
obligations and demand instruments), (iii) the
availability of market quotations (e.g., for securities
quoted in the PORTAL system), and (iv) other
permissible relevant factors.
Restricted securities may be sold only in
privately negotiated transactions or in a public
offering with respect to which a registration statement
is in effect under the Securities Act. Where
registration is required, the Fund may be obligated to
pay all or part of the registration expenses and a
considerable period may elapse between the time of the
decision to sell and the time the Fund may be permitted
to sell a security under an effective registration
statement. If, during such a period, adverse market
conditions were to develop, the Fund might obtain a
less favorable price than that which prevailed when it
decided to sell. Restricted securities will be priced
at fair value as determined in good faith by the Board
of Directors. If, through the appreciation of
restricted securities or the depreciation of
unrestricted securities, the Fund should be in a
position where more than 15% of the value of its net
assets are invested in illiquid securities, including
restricted securities which are not readily marketable
(except for Rule 144A securities deemed to be liquid by
the Adviser), the affected Fund will take such steps as
is deemed advisable, if any, to protect liquidity.
<PAGE>
Reverse Repurchase Agreements
The Fund may, with respect to up to 5% of its net
assets, engage in reverse repurchase agreements. In a
reverse repurchase agreement, the Fund would sell a
security and enter into an agreement to repurchase the
security at a specified future date and price. The
Fund generally retains the right to interest and
principal payments on the security. Since the Fund
receives cash upon entering into a reverse repurchase
agreement, it may be considered a borrowing. When
required by guidelines of the SEC, the Fund will set
aside permissible liquid assets in a segregated account
to secure its obligations to repurchase the security.
Derivative Instruments
In General. Although it does not currently intend
to engage in derivative transactions, the Fund may
invest up to 5% of its respective net assets in
derivative instruments. Derivative instruments may be
used for any lawful purpose consistent with the Fund's
investment objective such as hedging or managing risk,
but not for speculation. Derivative instruments are
commonly defined to include securities or contracts
whose value depend on (or "derive" from) the value of
one or more other assets, such as securities,
currencies, or commodities. These "other assets" are
commonly referred to as "underlying assets."
A derivative instrument generally consists of, is
based upon, or exhibits characteristics similar to
options or forward contracts. Options and forward
contracts are considered to be the basic "building
blocks" of derivatives. For example, forward-based
derivatives include forward contracts, swap contracts,
as well as exchange-traded futures. Option-based
derivatives include privately negotiated, over-the-
counter (OTC) options (including caps, floors, collars,
and options on forward and swap contracts) and exchange-
traded options on futures. Diverse types of
derivatives may be created by combining options or
forward contracts in different ways, and by applying
these structures to a wide range of underlying assets.
An option is a contract in which the "holder" (the
buyer) pays a certain amount (the "premium") to the
"writer" (the seller) to obtain the right, but not the
obligation, to buy from the writer (in a "call") or
sell to the writer (in a "put") a specific asset at an
agreed upon price at or before a certain time. The
holder pays the premium at inception and has no further
financial obligation. The holder of an option-based
derivative generally will benefit from favorable
movements in the price of the underlying asset but is
not exposed to corresponding losses due to adverse
movements in the value of the underlying asset. The
writer of an option-based derivative generally will
receive fees or premiums but generally is exposed to
losses due to changes in the value of the underlying
asset.
A forward contract is a sales contract between a
buyer (holding the "long" position) and a seller
(holding the "short" position) for an asset with
delivery deferred until a future date. The buyer
agrees to pay a fixed price at the agreed future date
and the seller agrees to deliver the asset. The seller
hopes that the market price on the delivery date is
less than the agreed upon price, while the buyer hopes
for the contrary. The change in value of a forward-
based derivative generally is roughly proportional to
the change in value of the underlying asset.
Hedging. The Fund may use derivative instruments
to protect against possible adverse changes in the
market value of securities held in, or are anticipated
to be held in, the Fund's portfolio. Derivatives may
also be used by the Fund to "lock-in" its realized but
unrecognized gains in the value of its portfolio
securities. Hedging strategies, if successful, can
reduce the risk of loss by wholly or partially
offsetting the negative effect of unfavorable price
movements in the investments being hedged. However,
hedging strategies can also reduce the opportunity for
gain by offsetting the positive effect of favorable
price movements in the hedged investments.
Managing Risk. The Fund may also use derivative
instruments to manage the risks of the Fund's
portfolio. Risk management strategies include, but are
not limited to, facilitating the sale of portfolio
securities, managing the effective maturity or duration
of debt obligations in the Fund's portfolio,
establishing a position in the derivatives markets as a
substitute for buying or selling certain securities, or
creating or altering exposure to certain asset classes,
such as equity, debt, and foreign securities. The use
of derivative instruments may provide a less expensive,
more expedient or more specifically focused way for the
Fund to invest than "traditional" securities (i.e.,
stocks or bonds) would.
<PAGE>
Exchange or OTC Derivatives. Derivative
instruments may be exchange-traded or traded in OTC
transactions between private parties. Exchange-traded
derivatives are standardized options and futures
contracts traded in an auction on the floor of a
regulated exchange. Exchange contracts are generally
liquid. The exchange clearinghouse is the counterparty
of every contract. Thus, each holder of an exchange
contract bears the credit risk of the clearinghouse
(and has the benefit of its financial strength) rather
than that of a particular counterparty. OTC
transactions are subject to additional risks, such as
the credit risk of the counterparty to the instrument,
and are less liquid than exchange-traded derivatives
since they often can only be closed out with the other
party to the transaction.
Risks and Special Considerations. The use of
derivative instruments involves risks and special
considerations as described below. Risks pertaining to
particular derivative instruments are described in the
sections that follow.
(1) Market Risk. The primary risk of derivatives
is the same as the risk of the underlying assets;
namely, that the value of the underlying asset may go
up or down. Adverse movements in the value of an
underlying asset can expose the Fund to losses.
Derivative instruments may include elements of leverage
and, accordingly, the fluctuation of the value of the
derivative instrument in relation to the underlying
asset may be magnified. The successful use of
derivative instruments depends upon a variety of
factors, particularly the Adviser's ability to predict
movements of the securities, currencies, and
commodities markets, which requires different skills
than predicting changes in the prices of individual
securities. There can be no assurance that any
particular strategy adopted will succeed. A decision
to engage in a derivative transaction will reflect the
Adviser's judgment that the derivative transaction will
provide value to the Fund and its shareholders and is
consistent with the Fund's objectives, investment
limitations, and operating policies. In making such a
judgment, the Adviser will analyze the benefits and
risks of the derivative transaction and weigh them in
the context of the Fund's entire portfolio and
investment objective.
(2) Credit Risk. The Fund will be subject to the
risk that a loss may be sustained by the Fund as a
result of the failure of a counterparty to comply with
the terms of a derivative instrument. The counterparty
risk for exchange-traded derivative instruments is
generally less than for privately-negotiated or OTC
derivative instruments, since generally a clearing
agency, which is the issuer or counterparty to each
exchange-traded instrument, provides a guarantee of
performance. For privately-negotiated instruments,
there is no similar clearing agency guarantee. In all
transactions, the Fund will bear the risk that the
counterparty will default, and this could result in a
loss of the expected benefit of the derivative
transaction and possibly other losses to the Fund. The
Fund will enter into transactions in derivative
instruments only with counterparties that the Adviser
reasonably believes are capable of performing under the
contract.
(3) Correlation Risk. When a derivative
transaction is used to completely hedge another
position, changes in the market value of the combined
position (the derivative instrument plus the position
being hedged) result from an imperfect correlation
between the price movements of the two instruments.
With a perfect hedge, the value of the combined
position remains unchanged for any change in the price
of the underlying asset. With an imperfect hedge, the
value of the derivative instrument and its hedge are
not perfectly correlated. Correlation risk is the risk
that there might be imperfect correlation, or even no
correlation, between price movements of an instrument
and price movements of investments being hedged. For
example, if the value of a derivative instrument used
in a short hedge (such as writing a call option, buying
a put option, or selling a futures contract) increased
by less than the decline in value of the hedged
investments, the hedge would not be perfectly
correlated. Such a lack of correlation might occur due
to factors unrelated to the value of the investments
being hedged, such as speculative or other pressures on
the markets in which these instruments are traded. The
effectiveness of hedges using instruments on indices
will depend, in part, on the degree of correlation
between price movements in the index and price
movements in the investments being hedged.
(4) Liquidity Risk. Derivatives are also subject
to liquidity risk. Liquidity risk is the risk that a
derivative instrument cannot be sold, closed out, or
replaced quickly at or very close to its fundamental
value. Generally, exchange contracts are very liquid
because the exchange clearinghouse is the counterparty
of every contract. OTC transactions are less liquid
than exchange-traded derivatives since they often can
only be closed out with the other party to the
transaction. The Fund might be required by applicable
regulatory requirement to maintain assets as "cover,"
maintain segregated accounts, and/or make margin
payments when it takes positions in derivative
<PAGE>
instruments involving obligations to third parties
(i.e., instruments other than purchased options). If
the Fund is unable to close out its positions in such
instruments, it might be required to continue to
maintain such assets or accounts or make such payments
until the position expired, matured, or is closed out.
The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a
time when it would otherwise be favorable to do so, or
require that the Fund sell a portfolio security at a
disadvantageous time. The Fund's ability to sell or
close out a position in an instrument prior to
expiration or maturity depends on the existence of a
liquid secondary market or, in the absence of such a
market, the ability and willingness of the counterparty
to enter into a transaction closing out the position.
Therefore, there is no assurance that any derivatives
position can be sold or closed out at a time and price
that is favorable to the Fund.
(5) Legal Risk. Legal risk is the risk of loss
caused by the legal unenforceability of a party's
obligations under the derivative. While a party
seeking price certainty agrees to surrender the
potential upside in exchange for downside protection,
the party taking the risk is looking for a positive
payoff. Despite this voluntary assumption of risk, a
counterparty that has lost money in a derivative
transaction may try to avoid payment by exploiting
various legal uncertainties about certain derivative
products.
(6) Systemic or "Interconnection" Risk.
Interconnection risk is the risk that a disruption in
the financial markets will cause difficulties for all
market participants. In other words, a disruption in
one market will spill over into other markets, perhaps
creating a chain reaction. Much of the OTC derivatives
market takes place among the OTC dealers themselves,
thus creating a large interconnected web of financial
obligations. This interconnectedness raises the
possibility that a default by one large dealer could
create losses for other dealers and destabilize the
entire market for OTC derivative instruments.
General Limitations. The use of derivative
instruments is subject to applicable regulations of the
SEC, the several options and futures exchanges upon
which they may be traded, and the Commodity Futures
Trading Commission ("CFTC").
The Corporation has filed a notice of eligibility
for exclusion from the definition of the term
"commodity pool operator" with the CFTC and the
National Futures Association, which regulate trading in
the futures markets. In accordance with Rule 4.5 of
the regulations under the CEA, the notice of
eligibility for the Fund includes representations that
the Fund will use futures contracts and related options
solely for bona fide hedging purposes within the
meaning of CFTC regulations, provided that the Fund may
hold other positions in futures contracts and related
options that do not qualify as a bona fide hedging
position if the aggregate initial margin deposits and
premiums required to establish these positions, less
the amount by which any such futures contracts and
related options positions are "in the money," do not
exceed 5% of the Fund's net assets. To the extent the
Fund were to engage in derivative transactions, it will
limit such transactions to no more than 5% of its net
assets.
The SEC has identified certain trading practices
involving derivative instruments that involve the
potential for leveraging the Fund's assets in a manner
that raises issues under the 1940 Act. In order to
limit the potential for the leveraging of the Fund's
assets, as defined under the 1940 Act, the SEC has
stated that the Fund may use coverage or the
segregation of the Fund's assets. The Fund will also
set aside permissible liquid assets in a segregated
custodial account if required to do so by SEC and CFTC
regulations. Assets used as cover or held in a
segregated account cannot be sold while the derivative
position is open, unless they are replaced with similar
assets. As a result, the commitment of a large portion
of the Fund's assets to segregated accounts could
impede portfolio management or the Fund's ability to
meet redemption requests or other current obligations.
In some cases the Fund may be required to maintain
or limit exposure to a specified percentage of its
assets to a particular asset class. In such cases,
when the Fund uses a derivative instrument to increase
or decrease exposure to an asset class and is required
by applicable SEC guidelines to set aside liquid assets
in a segregated account to secure its obligations under
the derivative instruments, the Adviser may, where
reasonable in light of the circumstances, measure
compliance with the applicable percentage by reference
to the nature of the economic exposure created through
the use of the derivative instrument and not by
reference to the nature of the exposure arising from
the assets set aside in the segregated account (unless
another interpretation is specified by applicable
regulatory requirements).
<PAGE>
Options. The Fund may use options for any lawful
purpose consistent with the Fund's investment objective
such as hedging or managing risk but not for
speculation. An option is a contract in which the
"holder" (the buyer) pays a certain amount (the
"premium") to the "writer" (the seller) to obtain the
right, but not the obligation, to buy from the writer
(in a "call") or sell to the writer (in a "put") a
specific asset at an agreed upon price (the "strike
price" or "exercise price") at or before a certain time
(the "expiration date"). The holder pays the premium
at inception and has no further financial obligation.
The holder of an option will benefit from favorable
movements in the price of the underlying asset but is
not exposed to corresponding losses due to adverse
movements in the value of the underlying asset. The
writer of an option will receive fees or premiums but
is exposed to losses due to changes in the value of the
underlying asset. The Fund may purchase (buy) or write
(sell) put and call options on assets, such as
securities, currencies, commodities, and indices of
debt and equity securities ("underlying assets") and
enter into closing transactions with respect to such
options to terminate an existing position. Options
used by the Fund may include European, American, and
Bermuda style options. If an option is exercisable
only at maturity, it is a "European" option; if it is
also exercisable prior to maturity, it is an "American"
option. If it is exercisable only at certain times, it
is a "Bermuda" option.
The Fund may purchase (buy) and write (sell) put
and call options and enter into closing transactions
with respect to such options to terminate an existing
position. The purchase of call options serves as a
long hedge, and the purchase of put options serves as a
short hedge. Writing put or call options can enable
the Fund to enhance income by reason of the premiums
paid by the purchaser of such options. Writing call
options serves as a limited short hedge because
declines in the value of the hedged investment would be
offset to the extent of the premium received for
writing the option. However, if the security
appreciates to a price higher than the exercise price
of the call option, it can be expected that the option
will be exercised and the Fund will be obligated to
sell the security at less than its market value or will
be obligated to purchase the security at a price
greater than that at which the security must be sold
under the option. All or a portion of any assets used
as cover for OTC options written by the Fund would be
considered illiquid to the extent described under
"Investment Policies and Techniques Illiquid
Securities." Writing put options serves as a limited
long hedge because increases in the value of the hedged
investment would be offset to the extent of the premium
received for writing the option. However, if the
security depreciates to a price lower than the exercise
price of the put option, it can be expected that the
put option will be exercised and the Fund will be
obligated to purchase the security at more than its
market value.
The value of an option position will reflect,
among other things, the historical price volatility of
the underlying investment, the current market value of
the underlying investment, the time remaining until
expiration, the relationship of the exercise price to
the market price of the underlying investment, and
general market conditions.
The Fund may effectively terminate its right or
obligation under an option by entering into a closing
transaction. For example, the Fund may terminate its
obligation under a call or put option that it had
written by purchasing an identical call or put option;
this is known as a closing purchase transaction.
Conversely, the Fund may terminate a position in a put
or call option it had purchased by writing an identical
put or call option; this is known as a closing sale
transaction. Closing transactions permit the Fund to
realize the profit or limit the loss on an option
position prior to its exercise or expiration.
The Fund may purchase or write both exchange-
traded and OTC options. Exchange-traded options are
issued by a clearing organization affiliated with the
exchange on which the option is listed that, in effect,
guarantees completion of every exchange-traded option
transaction. In contrast, OTC options are contracts
between the Fund and the other party to the transaction
("counterparty") (usually a securities dealer or a
bank) with no clearing organization guarantee. Thus,
when the Fund purchases or writes an OTC option, it
relies on the counterparty to make or take delivery of
the underlying investment upon exercise of the option.
Failure by the counterparty to do so would result in
the loss of any premium paid by the Fund as well as the
loss of any expected benefit of the transaction.
The Fund's ability to establish and close out
positions in exchange-listed options depends on the
existence of a liquid market. The Fund intends to
purchase or write only those exchange-traded options
for which there appears to be a liquid secondary
market. However, there can be no assurance that such a
market will exist at any particular time. Closing
transactions can be made for OTC options only by
negotiating directly with the counterparty, or by a
transaction in the secondary market if any such market
exists. Although the Fund will enter into OTC options
only
<PAGE>
with counterparties that are expected to be
capable of entering into closing transactions with the
Fund, there is no assurance that the Fund will in fact
be able to close out an OTC option at a favorable price
prior to expiration. In the event of insolvency of the
counterparty, the Fund might be unable to close out an
OTC option position at any time prior to its
expiration. If the Fund were unable to effect a
closing transaction for an option it had purchased, it
would have to exercise the option to realize any
profit.
The Fund may engage in options transactions on
indices in much the same manner as the options on
securities discussed above, except the index options
may serve as a hedge against overall fluctuations in
the securities market in general.
The writing and purchasing of options is a highly
specialized activity that involves investment
techniques and risks different from those associated
with ordinary portfolio securities transactions.
Imperfect correlation between the options and
securities markets may detract from the effectiveness
of attempted hedging.
Spread Transactions. The Fund may use spread
transactions for any lawful purpose consistent with the
Fund's investment objective such as hedging or managing
risk, but not for speculation. The Fund may purchase
covered spread options from securities dealers. Such
covered spread options are not presently exchange-
listed or exchange-traded. The purchase of a spread
option gives the Fund the right to put, or sell, a
security that it owns at a fixed dollar spread or fixed
yield spread in relationship to another security that
the Fund does not own, but which is used as a
benchmark. The risk to the Fund in purchasing covered
spread options is the cost of the premium paid for the
spread option and any transaction costs. In addition,
there is no assurance that closing transactions will be
available. The purchase of spread options will be used
to protect the Fund against adverse changes in
prevailing credit quality spreads, i.e., the yield
spread between high quality and lower quality
securities. Such protection is only provided during
the life of the spread option.
Futures Contracts. The Fund may use futures
contracts for any lawful purpose consistent with the
Fund's investment objective such as hedging and
managing risk but not for speculation. The Fund may
enter into futures contracts, including interest rate,
index, and currency futures. The Fund may also
purchase put and call options, and write covered put
and call options, on futures in which it is allowed to
invest. The purchase of futures or call options
thereon can serve as a long hedge, and the sale of
futures or the purchase of put options thereon can
serve as a short hedge. Writing covered call options
on futures contracts can serve as a limited short
hedge, and writing covered put options on futures
contracts can serve as a limited long hedge, using a
strategy similar to that used for writing covered
options in securities. The Fund's hedging may include
purchases of futures as an offset against the effect of
expected increases in currency exchange rates and
securities prices and sales of futures as an offset
against the effect of expected declines in currency
exchange rates and securities prices.
To the extent required by regulatory authorities,
the Fund may enter into futures contracts that are
traded on national futures exchanges and are
standardized as to maturity date and underlying
financial instrument. Futures exchanges and trading
are regulated under the CEA by the CFTC. Although
techniques other than sales and purchases of futures
contracts could be used to reduce the Fund's exposure
to market, currency, or interest rate fluctuations, the
Fund may be able to hedge its exposure more effectively
and perhaps at a lower cost through using futures
contracts.
An interest rate futures contract provides for the
future sale by one party and purchase by another party
of a specified amount of a specific financial
instrument (e.g., debt security) or currency for a
specified price at a designated date, time, and place.
An index futures contract is an agreement pursuant to
which the parties agree to take or make delivery of an
amount of cash equal to the difference between the
value of the index at the close of the last trading day
of the contract and the price at which the index
futures contract was originally written. Transaction
costs are incurred when a futures contract is bought or
sold and margin deposits must be maintained. A futures
contract may be satisfied by delivery or purchase, as
the case may be, of the instrument or the currency or
by payment of the change in the cash value of the
index. More commonly, futures contracts are closed out
prior to delivery by entering into an offsetting
transaction in a matching futures contract. Although
the value of an index might be a function of the value
of certain specified securities, no physical delivery
of those securities is made. If the offsetting
purchase price is less than the original sale price,
the Fund realizes a gain; if it is more, the Fund
realizes a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the
Fund realizes a gain; if it is
<PAGE>
less, the Fund realizes
a loss. The transaction costs must also be included in
these calculations. There can be no assurance,
however, that the Fund will be able to enter into an
offsetting transaction with respect to a particular
futures contract at a particular time. If the Fund is
not able to enter into an offsetting transaction, the
Fund will continue to be required to maintain the
margin deposits on the futures contract.
No price is paid by the Fund upon entering into a
futures contract. Instead, at the inception of a
futures contract, the Fund is required to deposit in a
segregated account with its custodian, in the name of
the futures broker through whom the transaction was
effected, "initial margin," consisting of cash, U.S.
government securities or other liquid, high-grade debt
obligations, in an amount generally equal to 10% or
less of the contract value. Margin must also be
deposited when writing a call or put option on a
futures contract, in accordance with applicable
exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does
not represent a borrowing, but rather is in the nature
of a performance bond or good-faith deposit that is
returned to the Fund at the termination of the
transaction if all contractual obligations have been
satisfied. Under certain circumstances, such as
periods of high volatility, the Fund may be required by
an exchange to increase the level of its initial margin
payment, and initial margin requirements might be
increased generally in the future by regulatory action.
Subsequent "variation margin" payments are made to
and from the futures broker daily as the value of the
futures position varies, a process known as "marking to
market." Variation margin does not involve borrowing,
but rather represents a daily settlement of the Fund's
obligations to or from a futures broker. When the Fund
purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast,
when the Fund purchases or sells a futures contract or
writes a call or put option thereon, it is subject to
daily variation margin calls that could be substantial
in the event of adverse price movements. If the Fund
has insufficient cash to meet daily variation margin
requirements, it might need to sell securities at a
time when such sales are disadvantageous. Purchasers
and sellers of futures positions and options on futures
can enter into offsetting closing transactions by
selling or purchasing, respectively, an instrument
identical to the instrument held or written. Positions
in futures and options on futures may be closed only on
an exchange or board of trade that provides a secondary
market. The Fund intends to enter into futures
transactions only on exchanges or boards of trade where
there appears to be a liquid secondary market.
However, there can be no assurance that such a market
will exist for a particular contract at a particular
time.
Under certain circumstances, futures exchanges may
establish daily limits on the amount that the price of
a future or option on a futures contract can vary from
the previous day's settlement price; once that limit is
reached, no trades may be made that day at a price
beyond the limit. Daily price limits do not limit
potential losses because prices could move to the daily
limit for several consecutive days with little or no
trading, thereby preventing liquidation of unfavorable
positions.
If the Fund were unable to liquidate a futures or
option on a futures contract position due to the
absence of a liquid secondary market or the imposition
of price limits, it could incur substantial losses.
The Fund would continue to be subject to market risk
with respect to the position. In addition, except in
the case of purchased options, the Fund would continue
to be required to make daily variation margin payments
and might be required to maintain the position being
hedged by the future or option or to maintain certain
liquid securities in a segregated account.
Certain characteristics of the futures market
might increase the risk that movements in the prices of
futures contracts or options on futures contracts might
not correlate perfectly with movements in the prices of
the investments being hedged. For example, all
participants in the futures and options on futures
contracts markets are subject to daily variation margin
calls and might be compelled to liquidate futures or
options on futures contracts positions whose prices are
moving unfavorably to avoid being subject to further
calls. These liquidations could increase the price
volatility of the instruments and distort the normal
price relationship between the futures or options and
the investments being hedged. Also, because initial
margin deposit requirements in the futures markets are
less onerous than margin requirements in the securities
markets, there might be increased participation by
speculators in the future markets. This participation
also might cause temporary price distortions. In
addition, activities of large traders in both the
futures and securities markets involving arbitrage,
"program trading," and other investment strategies
might result in temporary price distortions.
<PAGE>
Foreign Currencies. The Fund may purchase and
sell foreign currency on a spot basis, and may use
currency-related derivatives instruments such as
options on foreign currencies, futures on foreign
currencies, options on futures on foreign currencies
and forward currency contracts (i.e., an obligation to
purchase or sell a specific currency at a specified
future date, which may be any fixed number of days from
the contract date agreed upon by the parties, at a
price set at the time the contract is entered into).
The Fund may use these instruments for hedging or any
other lawful purpose consistent with its investment
objective, including transaction hedging, anticipatory
hedging, cross hedging, proxy hedging, and position
hedging. The Fund's use of currency-related derivative
instruments will be directly related to the Fund's
current or anticipated portfolio securities, and the
Fund may engage in transactions in currency-related
derivative instruments as a means to protect against
some or all of the effects of adverse changes in
foreign currency exchange rates on its portfolio
investments. In general, if the currency in which a
portfolio investment is denominated appreciates against
the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate
of the currency would adversely effect the value of the
portfolio investment expressed in U.S. dollars.
For example, the Fund might use currency-related
derivative instruments to "lock in" a U.S. dollar price
for a portfolio investment, thereby enabling the Fund
to protect itself against a possible loss resulting
from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the
period between the date the security is purchased or
sold and the date on which payment is made or received.
The Fund also might use currency-related derivative
instruments when the Adviser believes that one currency
may experience a substantial movement against another
currency, including the U.S. dollar, and it may use
currency-related derivative instruments to sell or buy
the amount of the former foreign currency,
approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign
currency. Alternatively, where appropriate, the Fund
may use currency-related derivative instruments to
hedge all or part of its foreign currency exposure
through the use of a basket of currencies or a proxy
currency where such currency or currencies act as an
effective proxy for other currencies. The use of this
basket hedging technique may be more efficient and
economical than using separate currency-related
derivative instruments for each currency exposure held
by the Fund. Furthermore, currency-related derivative
instruments may be used for short hedges - for example,
the Fund may sell a forward currency contract to lock
in the U.S. dollar equivalent of the proceeds from the
anticipated sale of a security denominated in a foreign
currency.
In addition, the Fund may use a currency-related
derivative instrument to shift exposure to foreign
currency fluctuations from one foreign country to
another foreign country where the Adviser believes that
the foreign currency exposure purchased will appreciate
relative to the U.S. dollar and thus better protect the
Fund against the expected decline in the foreign
currency exposure sold. For example, if the Fund owns
securities denominated in a foreign currency and the
Adviser believes that currency will decline, it might
enter into a forward contract to sell an appropriate
amount of the first foreign currency, with payment to
be made in a second foreign currency that the Adviser
believes would better protect the Fund against the
decline in the first security than would a U.S. dollar
exposure. Hedging transactions that use two foreign
currencies are sometimes referred to as "cross hedges."
The effective use of currency-related derivative
instruments by the Fund in a cross hedge is dependent
upon a correlation between price movements of the two
currency instruments and the underlying security
involved, and the use of two currencies magnifies the
risk that movements in the price of one instrument may
not correlate or may correlate unfavorably with the
foreign currency being hedged. Such a lack of
correlation might occur due to factors unrelated to the
value of the currency instruments used or investments
being hedged, such as speculative or other pressures on
the markets in which these instruments are traded.
The Fund also might seek to hedge against changes
in the value of a particular currency when no hedging
instruments on that currency are available or such
hedging instruments are more expensive than certain
other hedging instruments. In such cases, the Fund may
hedge against price movements in that currency by
entering into transactions using currency-related
derivative instruments on another foreign currency or a
basket of currencies, the values of which the Adviser
believes will have a high degree of positive
correlation to the value of the currency being hedged.
The risk that movements in the price of the hedging
instrument will not correlate perfectly with movements
in the price of the currency being hedged is magnified
when this strategy is used.
The use of currency-related derivative instruments
by the Fund involves a number of risks. The value of
currency-related derivative instruments depends on the
value of the underlying currency relative to the U.S.
dollar.
<PAGE>
Because foreign currency transactions
occurring in the interbank market might involve
substantially larger amounts than those involved in the
use of such derivative instruments, the Fund could be
disadvantaged by having to deal in the odd lot market
(generally consisting of transactions of less than $1
million) for the underlying foreign currencies at
prices that are less favorable than for round lots
(generally consisting of transactions of greater than
$1 million).
There is no systematic reporting of last sale
information for currencies or any regulatory
requirement that quotations available through dealers
or other market sources be firm or revised on a timely
basis. Quotation information generally is
representative of very large transactions in the
interbank market and thus might not reflect odd-lot
transactions where rates might be less favorable. The
interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options
or futures markets are closed while the markets for the
underlying currencies remain open, significant price
and rate movements might take place in the underlying
markets that cannot be reflected in the markets for the
derivative instruments until they re-open.
Settlement of transactions in currency-related
derivative instruments might be required to take place
within the country issuing the underlying currency.
Thus, the Fund might be required to accept or make
delivery of the underlying foreign currency in
accordance with any U.S. or foreign regulations
regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to
pay any fees, taxes and charges associated with such
delivery assessed in the issuing country.
When the Fund engages in a transaction in a
currency-related derivative instrument, it relies on
the counterparty to make or take delivery of the
underlying currency at the maturity of the contract or
otherwise complete the contract. In other words, the
Fund will be subject to the risk that it may sustain a
loss as a result of the failure of the counterparty to
comply with the terms of the transaction. The
counterparty risk for exchange-traded instruments is
generally less than for privately-negotiated or OTC
currency instruments, since generally a clearing
agency, which is the issuer or counterparty to each
instrument, provides a guarantee of performance. For
privately-negotiated instruments, there is no similar
clearing agency guarantee. In all transactions, the
Fund will bear the risk that the counterparty will
default, and this could result in a loss of the
expected benefit of the transaction and possibly other
losses to the Fund. The Fund will enter into
transactions in currency-related derivative instruments
only with counterparties that the Adviser reasonably
believes are capable of performing under the contract.
Purchasers and sellers of currency-related
derivative instruments may enter into offsetting
closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument
purchased or sold. Secondary markets generally do not
exist for forward currency contracts, with the result
that closing transactions generally can be made for
forward currency contracts only by negotiating directly
with the counterparty. Thus, there can be no assurance
that the Fund will, in fact, be able to close out a
forward currency contract (or any other currency-
related derivative instrument) at a time and price
favorable to the Fund. In addition, in the event of
insolvency of the counterparty, the Fund might be
unable to close out a forward currency contract at any
time prior to maturity. In the case of an exchange-
traded instrument, the Fund will be able to close the
position out only on an exchange which provides a
market for the instruments. The ability to establish
and close out positions on an exchange is subject to
the maintenance of a liquid market, and there can be no
assurance that a liquid market will exist for any
instrument at any specific time. In the case of a
privately-negotiated instrument, the Fund will be able
to realize the value of the instrument only by entering
into a closing transaction with the issuer or finding a
third party buyer for the instrument. While the Fund
will enter into privately-negotiated transactions only
with entities who are expected to be capable of
entering into a closing transaction, there can be no
assurance that the Fund will, in fact, be able to enter
into such closing transactions.
The precise matching of currency-related
derivative instrument amounts and the value of the
portfolio securities involved generally will not be
possible because the value of such securities, measured
in the foreign currency, will change after the currency-
related derivative instrument position has been
established. Thus, the Fund might need to purchase or
sell foreign currencies in the spot (cash) market. The
projection of short-term currency market movements is
extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain.
Permissible foreign currency options will include
options traded primarily in the OTC market. Although
options on foreign currencies are traded primarily in
the OTC market, the Fund will normally purchase or sell
OTC
<PAGE>
options on foreign currency only when the Adviser
reasonably believes a liquid secondary market will
exist for a particular option at any specific time.
There will be a cost to the Fund of engaging in
transactions in currency-related derivative instruments
that will vary with factors such as the contract or
currency involved, the length of the contract period
and the market conditions then prevailing. In using
these instruments, the Fund may have to pay a fee or
commission or, in cases where the instruments are
entered into on a principal basis, foreign exchange
dealers or other counterparties will realize a profit
based on the difference ("spread") between the prices
at which they are buying and selling various
currencies. Thus, for example, a dealer may offer to
sell a foreign currency to the Fund at one rate, while
offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
When required by the SEC guidelines, the Fund will
set aside permissible liquid assets in segregated
accounts or otherwise cover its potential obligations
under currency-related derivatives instruments. To the
extent the Fund's assets are so set aside, they cannot
be sold while the corresponding currency position is
open, unless they are replaced with similar assets. As
a result, if a large portion of the Fund's assets are
so set aside, this could impede portfolio management or
the Fund's ability to meet redemption requests or other
current obligations.
The Adviser's decision to engage in a transaction
in a particular currency-related derivative instrument
will reflect the Adviser's judgment that the
transaction will provide value to the Fund and its
shareholders and is consistent with the Fund's
objectives and policies. In making such a judgment,
the Adviser will analyze the benefits and risks of the
transaction and weigh them in the context of the Fund's
entire portfolio and objectives. The effectiveness of
any transaction in a currency-related derivative
instrument is dependent on a variety of factors,
including the Adviser's skill in analyzing and
predicting currency values and upon a correlation
between price movements of the currency instrument and
the underlying security. There might be imperfect
correlation, or even no correlation, between price
movements of an instrument and price movements of
investments being hedged. Such a lack of correlation
might occur due to factors unrelated to the value of
the investments being hedged, such as speculative or
other pressures on the markets in which these
instruments are traded. In addition, the Fund's use of
currency-related derivative instruments is always
subject to the risk that the currency in question could
be devalued by the foreign government. In such a case,
any long currency positions would decline in value and
could adversely affect any hedging position maintained
by the Fund.
The Fund's dealing in currency-related derivative
instruments will generally be limited to the
transactions described above. However, the Fund
reserves the right to use currency-related derivatives
instruments for different purposes and under different
circumstances. Of course, the Fund is not required to
use currency-related derivatives instruments and will
not do so unless deemed appropriate by the Adviser. It
should also be realized that use of these instruments
does not eliminate, or protect against, price movements
in the Fund's securities that are attributable to other
(i.e., non-currency related) causes. Moreover, while
the use of currency-related derivatives instruments may
reduce the risk of loss due to a decline in the value
of a hedged currency, at the same time the use of these
instruments tends to limit any potential gain which may
result from an increase in the value of that currency.
Additional Derivative Instruments and Strategies.
In addition to the derivative instruments and
strategies described above, the Adviser expects to
discover additional derivative instruments and other
hedging or risk management techniques. The Adviser may
utilize these new derivative instruments and techniques
to the extent that they are consistent with the Fund's
investment objective and permitted by the Fund's
investment limitations, operating policies, and
applicable regulatory authorities.
Depositary Receipts and Foreign Securities
The Fund may invest up to 20% of its net assets in
foreign securities directly or by purchasing depositary
receipts, including American Depositary Receipts
("ADRs") and European Depositary Receipts ("EDRs") or
other securities convertible into securities or issuers
based in foreign countries. These securities may not
necessarily be denominated in the same currency as the
securities into which they may be converted.
Generally, ADRs, in registered form, are denominated in
U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be
denominated in other currencies and are designed for
use in European securities markets. ADRs are receipts
typically issued by a U.S. Bank or trust company
evidencing ownership of the
<PAGE>
underlying securities.
EDRs are European receipts evidencing a similar
arrangement. For purposes of the Fund's investment
objectives, ADRs and EDRs are deemed to have the same
classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership
of common stock will be treated as common stock.
ADR facilities may be established as either
"unsponsored" or "sponsored." While ADRs issued under
these two types of facilities are in some respects
similar, there are distinctions between them relating
to the rights and obligations of ADR holders and the
practices of market participants. For example, a non-
sponsored depositary may not provide the same
shareholder information that a sponsored depositary is
required to provide under its contractual arrangements
with the issuer, including reliable financial
statements. Under the terms of most sponsored
arrangements, depositories agree to distribute notices
of shareholder meetings and voting instructions, and to
provide shareholder communications and other
information to the ADR holders at the request of the
issuer of the deposited securities.
Investments in securities of foreign issuers
involve risks which are in addition to the usual risks
inherent in domestic investments. In many countries
there is less publicly available information about
issuers than is available in the reports and ratings
published about companies in the United States.
Additionally, foreign countries are not subject to
uniform accounting, auditing and financial reporting
standards. Other risks inherent in foreign investments
include expropriation; confiscatory taxation;
withholding taxes on dividends or interest; less
extensive regulation of foreign brokers, securities
markets, and issuers; costs incurred in conversions
between currencies; possible delays in settlement in
foreign securities markets; limitations on the use or
transfer of assets (including suspension of the ability
to transfer currency from a given country); the
difficulty of enforcing obligations in other countries;
diplomatic developments; and political or social
instability. Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects
and many foreign securities are less liquid and their
prices are more volatile than comparable U.S.
securities. From time to time foreign securities may
be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign
investing, such as custody charges and brokerage costs,
may be higher than those attributable to domestic
investment. The value of the Fund's assets denominated
in foreign currencies will increase or decrease in
response to fluctuations in the value of those foreign
currencies relative to the U.S. dollar. Currency
exchange rates can be volatile at times in response to
supply and demand in the currency exchange markets,
international balances of payments, governmental
intervention, speculation and other political and
economic conditions. In addition, a number of European
countries have entered into the European Monetary Union
("EMU"), an economic and monetary union which will
result in a single currency and a single monetary
policy for all EMU countries beginning January 1, 1999.
The EMU may have adverse effects on foreign securities
if it is not implemented as planned or if one or more
countries withdraws from the EMU. The EMU may also
have adverse effects on foreign securities if portfolio
management software used by the Adviser or the
accounting and trading systems used by the Fund do not
recognize the Euro, the new currency adopted by the
EMU. In the Euro's infancy, investment advisers, like
the Adviser, will be unfamiliar with new indices and
benchmarks for EMU countries and companies.
Warrants
The Fund may invest in warrants, valued at the
lower of cost or market value, if, after giving effect
thereto, not more than 5% of its net assets will be
invested in warrants other than warrants acquired in
units or attached to other securities. Warrants are
options to purchase equity securities at a specific
price for a specific period of time. They do not
represent ownership of the securities but only the
right to buy them. Investing in warrants is purely
speculative in that they have no voting rights, pay no
dividends and have no rights with respect to the assets
of the corporation issuing them. In addition, the
value of a warrant does not necessarily change with the
value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to
its expiration date.
Short Sales Against the Box
The Fund may sell securities short against the box
to hedge unrealized gains on portfolio securities.
Selling securities short against the box involves
selling a security that the Fund owns or has the right
to acquire, for delivery at a specified date in the
future. If the Fund sells securities short against the
box, it may protect unrealized gains, but will lose the
opportunity to profit on such securities if the price
rises.
<PAGE>
Borrowing
The Fund is authorized to borrow money from banks
and make other investments or engage in other
transactions permissible under the 1940 Act which may
be considered a borrowing (such as reverse repurchase
agreements), provided that the amount borrowed may not
exceed 33 1/3% of the value of the Fund's net assets.
The Fund's borrowings create an opportunity for greater
return to the Fund and, ultimately, the Fund's
shareholders, but at the same time increase exposure to
losses. In addition, interest payments and fees paid
by the Fund on any borrowings may offset or exceed the
return earned on borrowed funds. The Fund currently
intends to borrow money only for temporary,
extraordinary or emergency purposes.
Lending Portfolio Securities
The Fund may lend portfolio securities with a
value not exceeding 33 1/3% of the Fund's total assets
to brokers or dealers, banks or other institutional
borrowers of securities as a means of earning income.
In return, the Fund will receive collateral in cash or
money market instruments. Such collateral will be
maintained at all times in an amount equal to at least
100% of the current market value of the loaned
securities. The purpose of such securities lending is
to permit the borrower to use such securities for
delivery to purchasers when such borrower has sold
short. The Fund will continue to receive the
equivalent of the interest or dividends paid by the
issuer of the securities lent, and the Fund may also
receive interest on the investment of collateral, or a
fee from the borrower as compensation for the loan.
The Fund may pay reasonable custodial and
administrative fees in connection with the loan. The
Fund will retain the right to call, upon notice, lent
securities. While there may be delays in recovery or
even a loss of right in collateral should the borrower
fail financially, the Fund's investment adviser will
review the credit worthiness of the entities to which
such loans are made to evaluate those risks. Although
the Fund is authorized to lend securities, the Fund
does not presently intend to engage in lending.
Concentration
The Fund has adopted a fundamental investment
policy which prohibits the Fund from investing more
than 25% of its assets in the securities of companies
in any one industry. An industry is defined as a
business-line subsector of a stock-market sector.
While the Fund may be heavily invested in a single
market sector like technology or health care, for
example, it will not invest more than 25% of its assets
in securities of companies in any one industry or
subsector. Technology industries or subsectors include
networking, telecommunications, software,
semiconductors, and voice-processing business lines.
Health care industries or subsectors include medical
devices and information systems business lines.
DIRECTORS AND OFFICERS
Under the laws of the State of Wisconsin, the
Board of Directors of the Fund is responsible for
managing the Fund's business and affairs.
The directors and officers of the Fund, together
with information as to their principal business
occupations during the last five years, and other
information, are shown below. Each director and
officer who is deemed an "interested person" of the
Fund, as defined in the 1940 Act, is indicated by an
asterisk.
*Darwin F. Isaacson, age 43. Mr. Isaacson is the
Treasurer and a Director of the Fund. Since 1991, Mr.
Isaacson has been employed by North Central Trust
Company ("North Central") and currently serves as a
Vice President in the estate and financial planning
area.
*Steven J. Hulme, age 39. Mr. Hulme is the
President, Secretary, portfolio manager and a Director
of the Fund. Since 1993, Mr. Hulme has served as Vice
President and head of North Central's investment
division, during which time he has managed the
collective investment fund and the common trust fund
for which North Central serves as trustee. He is also
the President, a Director and a Class B Member of La
Crosse Advisers, L.L.C. Mr. Hulme
<PAGE>
received his
undergraduate degree from the University of Nebraska
and his MBA from the University of Chicago. Mr. Hulme
is a Chartered Financial Analyst.
Ralph A. La Point, age 59. Mr. La Point is a
Director of the Fund. Since 1994, Mr. La Point has
served as the Chief Executive Officer of the Gillette
Group. Mr. La Point has served as a Director of Wis-
Pak, Inc. since 1990, and was appointed its Chairman in
March 1998.
Joseph T. Kastantin, age 51. Mr. Kastantin is a
Director of the Fund. Since 1984, Mr. Kastantin has
served as an Assistant Professor at the University of
Wisconsin - La Crosse. From February 1997 until August
1998, he was employed by KPMG Peat Marwick as a
training manager. Mr. Kastantin served as a Director
of North Central from 1991 to 1994.
The address of each director and officer is 311
Main Street, La Crosse, Wisconsin 54602.
As of December 14, 1998, officers and directors of
the Fund beneficially owned none of the shares of the
Fund's then outstanding shares.
Directors and officers of the Fund who are also
officers, directors, or employees of the Adviser do not
receive any remuneration from the Fund for serving as
directors or officers. Accordingly, neither Mr. Hulme
nor Mr. Isaacson receive any remuneration from the Fund
for their services as directors and/or officers.
However, Messrs. La Point and Kastantin receive the
following fees for their services as directors of the
Fund:
Name Cash Other Total
Compensation(1) Compensation
Ralph A. La Point $2,000 0 $2,000
Joseph T. Kastantin $2,000 0 $2,000
__________
(1)Each director who is not deemed an "interested
person" of the Fund, as defined in the 1940 Act,
will receive $500 for each Board of Directors
meeting attended by such person and reimbursement
of reasonable expenses incurred in connection
therewith. The Board expects to hold four meetings
during fiscal 1999. Thus, each disinterested
director would receive $2,000 during such time
period from the Corporation, plus reasonable
expenses.
PRINCIPAL SHAREHOLDERS
As of December 14, 1998, the following persons
owned of record or are known by the Fund to own
beneficially 5% or more of the outstanding shares of
the Fund:
Name and Address Number of Shares Percentage
La Crosse 10,000 100%
Advisers, L.L.C.
311 Main Street
La Crosse, Wisconsin 54602
Based on the foregoing, as of December 14, 1998,
the Adviser owned a controlling interest in the Fund.
Shareholders with a controlling interest could effect
the outcome of proxy voting or the direction of
management of the Fund. The amount of fund shares
owned by Fund directors and officers as a group is less
than 1% of the outstanding shares of the Fund.
<PAGE>
The initial investors in the Fund will be the
collective investment fund and the common trust fund
(the "Trust Funds") for which North Central Trust
Company, the parent company of the Adviser ("North
Central"), serves as trustee. The ownership that will
result from the conversion of the Trust Funds based
upon present holdings and commitments as of December 9,
1998 is expected to be as follows:
Name and Address Number of Shares Percentage
Common Trust Fund C: Equity 833,366 73%
NCTC Growth Common Fund 308,798 27%
INVESTMENT ADVISER
La Crosse Advisers, L.L.C. (the "Adviser") is the
investment adviser to the Fund. The Adviser is a
subsidiary of North Central, a state-chartered trust
company bank.
The investment advisory agreement between the Fund
and the Adviser dated as of December ___, 1998 (the
"Advisory Agreement") has an initial term of two years
and thereafter is required to be approved annually by
the Board of Directors of the Fund or by vote of a
majority of the Fund's outstanding voting securities.
Each annual renewal must also be approved by the vote
of a majority of the directors who are not parties to
the Advisory Agreement or interested persons of any
such party ("disinterested directors"), cast in person
at a meeting called for the purpose of voting on such
approval. The Advisory Agreement was approved on
December ____, 1998 by the full Board of Directors, a
majority of the disinterested directors and the initial
shareholder of the Fund. The Advisory Agreement is
terminable without penalty on 60 days' written notice
by the Board of Directors, by vote of a majority of the
Fund's outstanding voting securities, or by the
Adviser, and will terminate automatically in the event
of its assignment.
Under the terms of the Advisory Agreement, the
Adviser manages the Fund's investments and business
affairs, subject to the supervision of the Board of
Directors. At its expense, the Adviser provides office
space and all necessary office facilities, equipment,
and personnel for managing the investments of the Fund.
As compensation for its services, the Corporation pays
the Adviser an annual management fee of .75% of the
Fund's average daily net assets. The advisory fee is
accrued daily and paid monthly.
The Adviser has agreed until December 31, 1999 to
waive its management fees and/or reimburse the Fund's
operating expenses to the extent necessary to ensure
that the total annual operating expenses for the Fund
will not exceed 1.00% of average daily net assets.
After such date, the Adviser may from time to time
voluntarily waive all or a portion of its fee and/or
absorb expenses for the Fund. Any waiver of fees or
reimbursement of expenses will be made on a monthly
basis and, with respect to the latter, will be paid to
the Fund by reduction of the Adviser's fee. Any such
waiver and/or reimbursement is subject to later
adjustment during the term of the Advisory Agreement to
allow the Adviser to recoup amounts waived and/or
reimbursed to the extent actual fees and expenses are
less than the expense limitation caps, provided,
however, that the Adviser shall only be entitled to
recoup such amounts for a maximum period of three years
from the date such amount was waived or reimbursed.
FUND TRANSACTIONS AND BROKERAGE
Under the Advisory Agreement, the Adviser is
responsible for decisions to buy and sell securities
for the Fund and for the placement of the Fund's
securities business, the negotiation of the commissions
to be paid on such transactions, and the allocation of
portfolio brokerage and principal business. Purchases
may be made from brokers, dealers and, on occasion,
issuers. The purchase price of securities purchased
from a broker or dealer may include commissions and
dealer spreads. The Fund may also pay mark-ups on
principal transactions.
<PAGE>
In executing transactions on behalf of the Fund,
the Adviser has no obligation to deal with any
particular broker or dealer. Rather, the Adviser seeks
to obtain the best execution at the best security price
available with respect to each transaction. The best
price means the best net price without regard to the
mix between purchase or sale price and commission, if
any. While the Adviser seeks reasonably competitive
commission rates, the Fund does not necessarily pay the
lowest available commission. Brokerage may be
allocated based on the sale of the Fund's shares where
best execution and price may be obtained from more than
one broker or dealer.
Section 28(e) of the Securities Exchange Act of
1934, as amended ("Section 28(e)"), permits an
investment adviser, under certain circumstances, to
cause an account to pay a broker or dealer who supplies
brokerage and research services a commission for
effecting a transaction in excess of the amount of
commission another broker or dealer would have charged
for effecting the transaction. Brokerage and research
services include (i) furnishing advice as to the value
of securities, the advisability of investing,
purchasing, or selling securities, and the availability
of securities or purchasers or sellers of securities;
(ii) furnishing analyses and reports concerning
issuers, industries, sectors, securities, economic
factors and trends, portfolio strategy, and the
performance of accounts; and (iii) effecting securities
transactions and performing functions incidental
thereto (such as clearance, settlement, and custody).
In selecting brokers or dealers, the Adviser
considers investment and market information and other
research, such as economic, securities, and performance
measurement research provided by such brokers or
dealers and the quality and reliability of brokerage
services, including execution capability, performance,
and financial responsibility. Accordingly, the
commissions charged by any such broker or dealer may be
greater than the amount another firm might charge if
the Adviser determines in good faith that the amount of
such commissions is reasonable in relation to the value
of the research information and brokerage services
provided by such broker or dealer to the Fund. The
Adviser believes that the research information received
in this manner provides the Fund with benefits by
supplementing the research otherwise available to the
Fund. Such higher commissions will not, however, be
paid by the Fund unless (i) the Adviser determines in
good faith that the amount is reasonable in relation to
the services in terms of the particular transaction or
in terms of the Adviser's overall responsibilities with
respect to the accounts, including the Fund, as to
which it exercises investment discretion; (ii) such
payment is made in compliance with the provisions of
Section 28(e) and other applicable state and federal
laws; and (iii) in the opinion of the Adviser, the
total commissions paid by the Fund will be reasonable
in relation to the benefits to the Fund over the long
term.
The Adviser may place portfolio transactions for
other advisory accounts in addition to the Fund.
Research services furnished by firms through which the
Fund effects its securities transactions may be used by
the Adviser in servicing all of its accounts; that is,
not all of such services may be used by the Adviser in
connection with the Fund. The Adviser believes it is
not possible to measure separately the benefits from
research services received by each of the accounts
(including the Fund) managed by it. Because the volume
and nature of the trading activities of the accounts
are not uniform, the amount of commissions in excess of
those charged by another broker or dealer paid by each
account for brokerage and research services will vary.
However, the Adviser believes that such costs to the
Fund will not be disproportionate to the benefits
received by the Fund on a continuing basis. The
Adviser seeks to allocate portfolio transactions
equitably whenever concurrent decisions are made to
purchase or sell securities by the Fund and another
advisory account. In some cases, this procedure could
have an adverse effect on the price or the amount of
securities available to the Fund. There can be no
assurance that a particular purchase or sale
opportunity will be allocated to the Fund. In making
such allocations between the Fund and other advisory
accounts, certain factors considered by the Adviser are
the respective investment objectives, the relative size
of portfolio holdings of the same or comparable
securities, the availability of cash for investment,
and the size of investment commitments generally held.
CUSTODIAN
As custodian of the Fund's assets, North Central,
the parent company of the Adviser, has custody of all
securities and cash of the Fund, delivers and receives
payment for portfolio securities sold, receives and
pays for portfolio securities purchased, collects
income from investments, if any, and performs other
duties, all as directed by the officers of the
Corporation. For the foregoing services, North Central
receives from the Fund a fee, computed
<PAGE>
and payable
monthly based on the average net asset value of the
Fund at the annual rate of 0.01%, plus out-of-pocket
expenses.
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Sunstone Financial Group, Inc. ("Sunstone"), 207
East Buffalo Street, Suite 315, Milwaukee, Wisconsin
53202-5712, serves as the transfer agent and dividend-
disbursing agent for the Fund.
From time to time, the Corporation, on behalf of
the Fund, directly or indirectly through arrangements
with the Adviser, the Distributor (as defined below) or
Sunstone, may pay amounts to third parties that provide
transfer agent type services and other administrative
services relating to the Fund to persons who
beneficially have interests in the Fund, such as
participants in 401(k) plans. These services may
include, among other things, sub-accounting services,
transfer agent type activities, answering inquiries
relating to the Fund, transmitting proxy statements,
annual reports, updated prospectuses, other
communications regarding the Fund and related services
as the Fund or beneficial owners may reasonably
request. In such cases, the Fund will not pay fees
based on the number of beneficial owners at a rate that
is greater than the rate the Fund is currently paying
Sunstone for providing these services to the Fund's
shareholders.
ADMINISTRATOR AND FUND ACCOUNTANT
Sunstone also provides administrative and fund
accounting services to the Fund pursuant to an
administration and fund accounting agreement dated as
of December _____, 1998 (the "Administrative
Agreement"). Under the Administrative Agreement,
Sunstone Financial calculates the daily net asset value
of the shares; prepares and files all federal and state
tax returns; oversees the Fund's insurance
relationships; participates in the preparation of
registration statements, proxy statements and reports;
prepares filings relating to the qualification of the
Fund's shares pursuant to state securities laws;
compiles data for and prepares notices to the SEC;
prepares financial statements for annual and semi-
annual reports; monitors the Fund's expense accruals
and performs securities valuations; monitors compliance
with the Fund's investment policies; and generally
assists in the Fund's administrative operations. For
the foregoing services, Sunstone receives from the Fund
a fee, computed daily and payable monthly based on the
average net asset value of the Fund, at the annual rate
of 0.28% which decreases as the assets of the Fund
reach certain levels, subject to an annual minimum of
$115,000, plus out-of-pocket expenses.
DISTRIBUTOR
Under a distribution agreement dated as of
December ___, 1998 (the "Distribution Agreement"),
Sunstone Distribution Services, LLC (the "Distributor")
acts as principal distributor of the Fund's shares.
Under the Distribution Agreement, the Distributor shall
offer shares of the Fund on a continuous basis and may
engage in advertising and solicitation activities in
connection therewith. The Distributor is not obligated
to sell any certain number of shares of the Fund. The
Distributor's principal business address is 207 East
Buffalo Street, Suite 315, Milwaukee, Wisconsin 53202.
FINANCIAL INTERMEDIARIES
If you purchase or redeem shares of the Fund
through a financial intermediary (such as a broker-
dealer), certain features of the Fund relating to such
transactions may not be available or may be modified.
In addition, certain operational policies of the Fund,
including those related to settlement and dividend
accrual, may vary from those applicable to direct
shareholders of the Fund and may vary among
intermediaries. You should consult your financial
intermediary for more information regarding these
matters. Refer to "Transfer Agent and Dividend-
Disbursing Agent" for information regarding certain
fees paid by the Corporation to financial
intermediaries. Certain
<PAGE>
financial intermediaries may
charge you an advisory, transaction or other fee for
their services. You will not be charged for such fees
if you purchase or redeem your Fund shares directly
from the Fund without the intervention of a financial
intermediary.
PURCHASE AND PRICING OF SHARES
Shares of the Fund are offered to the public at
the net asset value per share next computed after the
time a properly completed purchase application and
funds are received by Sunstone.
The net asset value per share is determined as of
the close of trading (generally 4:00 p.m., Eastern
Time) on each day the New York Stock Exchange ("NYSE")
is open for business. Purchase orders and redemption
requests received on a day the NYSE is open for
trading, prior to the close of trading on that day,
will be valued as of the close of trading on that day.
Applications for the purchase of shares and requests
for the redemption of shares received after the close
of trading on the NYSE will be valued as of the close
of trading on the next day the NYSE is open. The Fund
is not required to calculate its net asset value on
days during which the Fund receives no orders to
purchase or redeem shares. Net asset value per share
is calculated by taking the fair value of the total
assets of the Fund, including interest or dividends
accrued, but not yet collected, less all liabilities,
and dividing by the total number of shares outstanding
of the Fund. The result, rounded to the nearest cent,
is the net asset value per share.
In determining net asset value, expenses are
accrued and applied daily and securities and other
assets for which market quotations are available are
valued at fair value. Common stocks and other equity-
type securities are valued at the last sales price on
the national securities exchange or NASDAQ on which
such securities are primarily traded, however,
securities traded on a national securities exchange or
NASDAQ for which there were no transactions on a given
day, and securities not listed on a national securities
exchange or NASDAQ, are valued at the average of the
most recent bid and asked prices. Any securities or
other assets for which market quotations are not
readily available are valued at fair value as
determined in good faith by the Board of Directors of
the Fund or its delegate. The Board of Directors may
approve the use of pricing services to assist the Fund
in the determination of net asset value. All money
market instruments held by the Fund will be valued on
an amortized cost basis.
TAXATION OF THE FUND
The Fund intends to qualify annually for treatment
as a "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended, and,
if so qualified, will not be liable for federal income
taxes to the extent earnings are distributed to
shareholders on a timely basis. In the event the Fund
fails to qualify as a "regulated investment company,"
it will be treated as a regular corporation for federal
income tax purposes. Accordingly, the Fund would be
subject to federal income taxes and any distributions
that it makes would be taxable and non-deductible by
the Fund. What this means for shareholders of the Fund
is that the cost of investing in the Fund would
increase. Under these circumstances, it would be more
economical for shareholders to invest directly in
securities held by the Fund, rather than invest
indirectly in such securities through the Fund.
PERFORMANCE INFORMATION
The Fund's historical performance or return may be
shown in the form of various performance figures,
including average annual total return, total return,
and cumulative total return. The Fund's performance
figures are based upon historical results and are not
necessarily representative of future performance.
Factors affecting the Fund's performance include
general market conditions, operating expenses,
investment management, and the
<PAGE>
imposition of sales
charges. Any additional fees charged by a dealer or
other financial services firm would reduce the returns
described in this section.
Total Return
Average annual total return and total return
figures measure both the net investment income
generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the
underlying investments of the Fund over a specified
period of time, assuming the reinvestment of all
dividends and distributions. Average annual total
return figures are annualized and therefore represent
the average annual percentage change over the specified
period. Total return figures are not annualized and
therefore represent the aggregate percentage or dollar
value change over the period.
The average annual total return of the Fund is
computed by finding the average annual compounded rates
of return over the periods that would equate the
initial amount invested to the ending redeemable value,
according to the following formula:
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
stated periods at the end of the stated periods.
Performance for a specific period is calculated by
first taking an investment (assumed to be $1,000) (the
"initial investment") in the shares on the first day of
the period and computing the "ending value" of that
investment at the end of the period. The total return
percentage is then determined by subtracting the
initial investment from the ending value and dividing
the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes
that all income and capital gains dividends paid by the
Fund have been reinvested at the net asset value of the
shares on the reinvestment dates during the period.
The calculation also assumes that all recurring fees
have been charged to all shareholder accounts. Total
return may also be shown as the increased dollar value
of the hypothetical investment over the period.
Cumulative total return represents the simple
change in the value of an investment over a stated
period and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their
components of income and capital (including capital
gains and changes in share price) in order to
illustrate the relationship between these factors and
their contributions to total return.
Comparisons
From time to time, in marketing and other Fund
literature, the performance of shares of the Fund may
be compared to the performance of other mutual funds in
general or to the performance of particular types of
mutual funds with similar investment goals, as tracked
by independent organizations. Among these
organizations, Lipper Analytical Services, Inc.
("Lipper"), a widely used independent research firm
which ranks mutual funds by overall performance,
investment objectives, and assets, may be cited.
Lipper performance figures are based on changes in net
asset value, with all income and capital gains
dividends reinvested. Shares of the Fund will be
compared to Lipper's appropriate fund category; that
is, by fund objective and portfolio holdings.
The performance of the Fund may be compared in
publications to averages, performance rankings, or
other information prepared by recognized mutual fund
statistical services. The Fund's performance may also
be compared to the performance of other mutual funds by
Morningstar, Inc. ("Morningstar"), which ranks funds on
the basis of historical risk and total return.
Morningstar's rankings range from five stars (highest)
to one star (lowest) and represent Morningstar's
assessment of the historical risk level and total
return of a fund as a weighted average for 3, 5, and 10
year periods. Rankings are not absolute or necessarily
predictive of future performance.
<PAGE>
Evaluations of the Fund's performance made by
independent sources may also be used in advertisements
concerning the Fund, including reprints of or
selections from editorials or articles about the Fund.
Sources for Fund performance and articles about the
Fund may include publications such as Money, Forbes,
Kiplinger's, Financial World, Business Week, U.S. News
and World Report, The Wall Street Journal, Barron's,
and a variety of investment newsletters.
The Fund may compare the performance of the shares
of the Fund to a wide variety of indices and measures
of inflation, including the Lipper Growth & Income
Index. There are differences and similarities between
the investments that the Fund may purchase and the
investments measured by these indices. The performance
of the Fund may be compared in publications to the
performance of various indices and investments for
which reliable performance data is available. The
Fund's performance may also be discussed during
television interviews of the Adviser personnel
conducted by news organizations to be broadcast in the
United States and elsewhere.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has been selected as the
independent accountant for the Fund.
FINANCIAL STATEMENTS
The following financial statements of the Fund are
contained herein:
(a) Report of Independent Accountants.
(b) Statement of Asset and Liabilities.
(c) Notes to Statement of Assets and Liabilities.
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of La Crosse Funds, Inc.:
We have audited the statements of assets and
liabilities of the La Crosse Large Cap Stock Fund (the
"Fund," a Wisconsin corporation), as of December 14,
1998. This financial statement is the responsibility
of the Fund's management. Our responsibility is to
express an opinion on this financial statement based
upon our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free
of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and
disclosures in the financial statement. An audit also
includes assessing the accounting principals used and
significant estimates made by management, as well as
evaluating the overall financial statement
presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities
referred to above presents fairly, in all material
respects, the net assets of the Fund as of December 14,
1998 in conformity with generally accepted accounting
principals.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
December 15, 1998
<PAGE>
La Crosse Funds, Inc.
Statement of Assets and Liabilities
December 14, 1998
Assets
La Crosse Large
Cap Stock Fund
Cash $100,000
Prepaid initial registration expenses 19,015
Total Assets 119,015
LIABILITIES AND NET ASSETS
Payable to Advisor 19,015
Total Liabilities 19,015
Net Assets $100,000
Total Liabilities and Net Assets $119,015
Net Assets Consist of:
Shares of beneficial interest; unlimited
authorized shares 10,000
Net asset value, redemption price and offering
price per share $10.00
The accompanying notes to the Statement of
Assets and Liabilities are an integral part of
this statement.
<PAGE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 14, 1998
Note 1-Organization and Registration
La Crosse Funds, Inc. (the "Company") was established
on September 4, 1998, as a Wisconsin Corporation and is
registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management
investment company. The Company currently offers one
investment portfolio, the La Crosse Large Cap Stock
Fund, (the "Fund"). The Fund has had no operations
other than those relating to organizational matters,
including the sale of 10,000 shares of beneficial
interest to the Fund to capitalize the Fund's
("Original Shares"), which were sold to La Crosse
Advisers, L.L.C. (the "Adviser") on December 11, 1998
for cash in the amount of $100,000.
Initial registration expenses of $19,015 will be
amortized over one year.
Note 2-Significant Accounting Policies
The following is a summary of significant accounting
policies consistently followed by the Fund in the
preparation of their financial statements. These
policies are in conformity with generally accepted
accounting principles ("GAAP").
a. Use of Estimates
The preparation of financial statements in
conformity with generally accepted accounting
principles requires management to make estimates and
assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements
and the reported changes in net assets during the
reporting period. Actual results could differ from
those estimates.
b. Federal Income Taxes
The Fund intends to qualify annually for treatment
as a "regulated investment company" under Subchapter M
of the Internal Revenue Code of 1986, as amended, and,
if so qualified, will not be liable for federal income
taxes to the extent earnings are distributed to
shareholders on a timely basis.
Note 3-Investment Advisory and Other Agreements
La Crosse Advisers, L.L.C. serves as the Fund's
investment adviser. As compensation for its services
to the Fund, the Adviser receives an investment
advisory fee at an annual rate of 0.75% of the average
daily net assets of the Fund which is accrued daily and
paid monthly. The Adviser is entitled to recoup
amounts waived or reimbursed for a period of up to
three years from the date such amounts were reimbursed
or waived.
The Fund has entered into an administration and fund
accounting agreement and transfer agent agreement with
Sunstone Financial Group, Inc. The administrative
services agreement provides for an annual fee of 0.28%
which decreases as the assets of the Fund reach certain
levels, subject to a minimum annual fee of $115,000
plus out-of-pocket expenses. The transfer agent
agreement provides for an annual base fee per
shareholder account, with a minimum annual fee of
$17,000. The transfer agent is also paid certain fees
related to set-up costs, processing and out-of-pocket
expenses.
The Fund has entered into a distribution agreement with
Sunstone Distribution Services, LLC (the
"Distributor"). Under the Distribution Agreement, the
Distributor shall offer shares of the Fund on a
continuous basis and may engage in advertising and
solicitation activities in connection therewith.
Certain officers and directors of La Crosse Advisers,
L.L.C. are also officers and directors of the Fund.
<PAGE>
Note 4-Capital Stock
The Company is authorized to issue an unlimited number
of shares with a $.00001 par value. A total of 10,000
shares were initially sold to the Adviser to capitalize
the Fund.
<PAGE>
APPENDIX
SHORT-TERM RATINGS
Standard & Poor's Short-Term Debt Credit Ratings
A Standard & Poor's credit rating is a current
opinion of the creditworthiness of an obligor with
respect to a specific financial obligation, a specific
class of financial obligations or a specific financial
program. It takes into consideration the
creditworthiness of guarantors, insurers or other forms
of credit enhancement on the obligation and takes into
account the currency in which the obligation is
denominated. The credit rating is not a recommendation
to purchase, sell or hold a financial obligation,
inasmuch as it does not comment as to market price or
suitability for a particular investor.
Credit ratings are based on current information
furnished by the obligors or obtained by Standard &
Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in
connection with any credit rating and may, on occasion,
rely on unaudited financial information. Credit
ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such
information, or based on other circumstances.
Short-term ratings are generally assigned to those
obligations considered short-term in the relevant
market. In the U.S., for example, that means
obligations with an original maturity of no more than
365 days_including commercial paper. Short-term
ratings are also used to indicate the creditworthiness
of an obligor with respect to put features on long-term
obligations. The result is a dual rating, in which the
short-term rating addresses the put feature, in
addition to the usual long-term rating.
Ratings are graded into several categories,
ranging from `A-1' for the highest quality obligations
to `D' for the lowest. These categories are as
follows:
A-1 A short-term obligation rated `A-1' is rated
in the highest category by Standard & Poor's.
The obligor's capacity to meet its financial
commitment on the obligation is strong.
Within this category, certain obligations are
designated with a plus sign (+). This
indicates that the obligor's capacity to meet
its financial commitment on these obligations
is extremely strong.
A-2 A short-term obligation rated `A-2' is
somewhat more susceptible to the adverse
effects of changes in circumstances and
economic conditions than obligations in
higher rating categories. However, the
obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
A-3 A short-term obligation rated `A-3' exhibits
adequate protection parameters. However,
adverse economic conditions or changing
circumstances are more likely to lead to a
weakened capacity of the obligor to meet its
financial commitment on the obligation.
B A short-term obligation rated `B' is regarded
as having significant speculative
characteristics. The obligor currently has
the capacity to meet its financial commitment
on the obligation; however, it faces major
ongoing uncertainties which could lead to the
obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated `C' is
currently vulnerable to nonpayment and is
dependent upon favorable business, financial
and economic conditions for the obligor to
meet its financial commitment on the
obligation.
D A short-term obligation rated `D' is in
payment default. The `D' rating category is
used when payments on an obligation are not
made on the date due even if the applicable
grace period has not expired, unless Standard
& Poor's believes that such payments will be
made during such grace period. The `D'
rating also will be used upon the filing of a
bankruptcy petition or the taking of a
similar action if payments on an obligation
are jeopardized.
<PAGE>
Moody's Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of
the ability of issuers to repay punctually senior debt
obligations. These obligations have an original
maturity not exceeding one year, unless explicitly
noted. Moody's ratings are opinions, not
recommendations to buy or sell, and their accuracy is
not guaranteed.
Moody's employs the following three designations,
all judged to be investment grade, to indicate the
relative repayment ability of rated issuers:
PRIME-1 Issuers rated `Prime-1' (or supporting
institutions) have a superior ability for
repayment of senior short-term debt
obligations. Prime-1 repaying ability will
often be evidenced by many of the following
characteristics:
Leading market positions in well-established
industries.
High rates of return on funds employed.
Conservative capitalization structure with
moderate reliance on debt and ample asset protection.
Broad margins in earnings coverage of fixed
financial charges and high internal cash generation.
Well-established access to a range of financial
markets and assured sources of alternate liquidity.
PRIME-2 Issuers rated `Prime-2' (or supporting
institutions) have a strong ability for
repayment of senior short-term debt
obligations. This will normally be evidenced
by many of the characteristics cited above,
but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more
subject to variation. Capitalization
characteristics, while still appropriate, may
be more affected by external conditions.
Ample alternate liquidity is maintained.
PRIME-3 Issuers rated `Prime-3' (or supporting
institutions) have an acceptable ability for
repayment of senior short-term obligations.
The effect of industry characteristics and
market compositions may be more pronounced.
Variability in earnings and profitability may
result in changes in the level of debt
protection measurements and may require
relatively high financial leverage. Adequate
alternate liquidity is maintained.
NOT PRIME Issuers rated `Not Prime' do not fall within
any of the Prime rating categories.
Fitch IBCA International Short-Term Debt Credit Ratings
Fitch IBCA's international debt credit ratings are
applied to the spectrum of corporate, structured and
public finance. They cover sovereign (including
supranational and subnational), financial, bank,
insurance and other corporate entities and the
securities they issue, as well as municipal and other
public finance entities, securities backed by
receivables or other financial assets and
counterparties. When applied to an entity, these short-
term ratings assess its general creditworthiness on a
senior basis. When applied to specific issues and
programs, these ratings take into account the relative
preferential position of the holder of the security and
reflect the terms, conditions and covenants attaching
to that security.
International credit ratings assess the capacity
to meet foreign currency or local currency commitments.
Both "foreign currency" and "local currency" ratings
are internationally comparable assessments. The local
currency rating measures the probability of payment
within the relevant sovereign state's currency and
jurisdiction and therefore, unlike the foreign currency
rating, does not take account of the possibility of
foreign exchange controls limiting transfer into
foreign currency.
<PAGE>
A short-term rating has a time horizon of less
than 12 months for most obligations, or up to three
years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to
meet financial commitments in a timely manner.
F-1 Highest credit quality. Indicates the
strongest capacity for timely payment of
financial commitments; may have an added "+"
to denote any exceptionally strong credit
feature.
F-2 Good credit quality. A satisfactory capacity
for timely payment of financial commitments,
but the margin of safety is not as great as
in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely
payment of financial commitments is adequate;
however, near term adverse changes could
result in a reduction to non-investment
grade.
B Speculative. Minimal capacity for timely
payment of financial commitments, plus
vulnerability to near term adverse changes in
financial and economic conditions.
C High default risk. Default is a real
possibility. Capacity for meeting financial
commitments is solely reliant upon a
sustained, favorable business and economic
environment.
D Default. Denotes actual or imminent payment
default.
Duff & Phelps, Inc. Short-Term Debt Ratings
Duff & Phelps Credit Ratings' short-term debt
ratings are consistent with the rating criteria used by
money market participants. The ratings apply to all
obligations with maturities of under one year,
including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of
credit and current maturities of long-term debt. Asset-
backed commercial paper is also rated according to this
scale.
Emphasis is placed on liquidity which is defined
as not only cash from operations, but also access to
alternative sources of funds including trade credit,
bank lines and the capital markets. An important
consideration is the level of an obligor's reliance on
short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit
Ratings' short-term debt ratings is the refinement of
the traditional `1' category. The majority of short-
term debt issuers carry the highest rating, yet quality
differences exist within that tier. As a consequence,
Duff & Phelps Credit Rating has incorporated gradations
of `1+' (one plus) and `1-` (one minus) to assist
investors in recognizing those differences.
These ratings are recognized by the SEC for broker-
dealer requirements, specifically capital computation
guidelines. These ratings meet Department of Labor
ERISA guidelines governing pension and profit sharing
investments. State regulators also recognize the
ratings of Duff & Phelps Credit Rating for insurance
company investment portfolios.
Rating Scale: Definition
High Grade
D-1+ Highest certainty of timely payment.
Short-term liquidity, including internal
operating factors and/or access to
alternative sources of funds, is outstanding,
and safety is just below risk-free U.S.
Treasury short-term obligations.
D-1 Very high certainty of timely payment.
Liquidity factors are excellent and supported
by good fundamental protection factors. Risk
factors are minor.
D-1- High certainty of timely payment.
Liquidity factors are strong and supported by
good fundamental protection factors. Risk
factors are very small.
<PAGE>
Good Grade
D-2 Good certainty of timely payment.
Liquidity factors and company fundamentals
are sound. Although ongoing funding needs may
enlarge total financing requirements, access
to capital markets is good. Risk factors are
small.
Satisfactory Grade
D-3 Satisfactory liquidity and other
protection factors qualify issue as to
investment grade. Risk factors are larger
and subject to more variation. Nevertheless,
timely payment is expected.
Non-investment Grade
D-4 Speculative investment characteristics.
Liquidity is not sufficient to insure against
disruption in debt service. Operating
factors and market access may be subject to a
high degree of variation.
Default
D-5 Issuer failed to meet scheduled
principal and/or interest payments.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
See "Exhibit Index."
Item 24. Persons Controlled by or under Common Control
with Registrant
The Registrant neither controls any person nor is
under common control with any other person.
Item 25. Indemnification
Article VII of the Registrant's By-laws provides
as follows:
ARTICLE VII. INDEMNIFICATION OF OFFICERS AND
DIRECTORS
SECTION 7.01. Mandatory Indemnification.
The Corporation shall indemnify, to the full
extent permitted by the WBCL, as in effect from
time to time, the persons described in Sections
180.0850 through 180.0859 (or any successor
provisions) of the WBCL or other provisions of the
law of the State of Wisconsin relating to
indemnification of directors and officers, as in
effect from time to time. The indemnification
afforded such persons by this section shall not be
exclusive of other rights to which they may be
entitled as a matter of law.
SECTION 7.02. Permissive Supplementary
Benefits. The Corporation may, but shall not be
required to, supplement the right of
indemnification under Section 7.01 by (a) the
purchase of insurance on behalf of any one or more
of such persons, whether or not the Corporation
would be obligated to indemnify such person under
Section 7.01; (b) individual or group
indemnification agreements with any one or more of
such persons; and (c) advances for related
expenses of such a person.
SECTION 7.03. Amendment. This Article VII
may be amended or repealed only by a vote of the
shareholders and not by a vote of the Board of
Directors.
SECTION 7.04. Investment Company Act. In no
event shall the Corporation indemnify any person
hereunder in contravention of any provision of the
Investment Company Act.
Item 26. Business and Other Connections of Investment
Adviser
Gary M. Veldey, the Chief Executive Officer and a
Director of La Crosse Advisers, L.L.C. (the "Adviser"),
is the President of North Central Trust Company, the
Adviser's parent company ("North Central"). Steven J.
Hulme, the President and a Director of the Adviser, is
the Vice President of Investments of North Central.
Mark J. Chamberlain, the Chief Financial Officer,
Secretary and a Director of the Adviser, is the Vice
President of the Personal Trust Department of North
Central.
Item 27. Principal Underwriters
(a) Northern Funds, First Omaha Funds, Inc.,
The Marsico Investment Fund, The Green
Century Funds, The Haven Fund, JohnsonFamily
Funds.
<PAGE>
(b) The principal business address of
Sunstone Distribution Services, LLC
("Sunstone"), the Registrant's principal
underwriter, is 207 East Buffalo Street,
Suite 315, Milwaukee, Wisconsin 53202. The
following information relates to each
director and officer of Sunstone:
Positions and Offices Positions and Offices
Name With Underwriter With Registrant
Miriam M. Allison President None
Daniel S. Allison Secretary None
Therese A. Ladwig Vice President None
Peter Hammond Vice President None
(c) None.
Item 28. Location of Accounts and Records
All accounts, books or other documents required to
be maintained by Section 31(a) of the Investment
Company Act of 1940, as amended, and the rules
promulgated thereunder are in the possession of
La Crosse Advisers, L.L.C., the Registrant's investment
adviser, and North Central Trust Company, the
Registrant's custodian, at the Registrant's corporate
offices, except for records held and maintained by
Sunstone Financial Group, Inc., the Registrant's
administrator, fund accountant, and dividend-disbursing
and transfer agent and Sunstone Distribution Services,
LLC, the Registrant's distributor, all of which are
located at 207 East Buffalo Street, Suite 315,
Milwaukee, Wisconsin 53202.
Item 29. Management Services
All management-related service contracts entered
into by Registrant are discussed in Parts A and B of
this Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant has duly caused this Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of La Crosse and State of
Wisconsin on the 11th of December, 1998.
LA CROSSE FUNDS, INC.
(Registrant)
By:/s/ Steven J. Hulme
---------------------
Steven J. Hulme
President and
Secretary
Each person whose signature appears below
constitutes and appoints Steven J. Hulme his true and
lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to
sign any and all amendments to this Registration
Statement and to file the same, with all exhibits
thereto, and any other documents in connection
therewith, with the Securities and Exchange Commission
and any other regulatory body, granting unto said
attorney-in-fact and agent, full power and authority to
do and perform each and every act and thing requisite
and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact
and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act
of 1933, this Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on
the date(s) indicated.
Name Title Date
/s/ Steven J. Hulme
- ---------------------- President, Secretary December 11, 1998
Steven J. Hulme and a Director
/s/ Darwin F. Isaacson
- ----------------------- Treasurer December 11, 1998
Darwin F. Isaacson and a Director
/s/ Ralph A. La Point
- ----------------------- Director December 11, 1998
Ralph A. La Point
/s/ Joseph T. Kastantin
- ----------------------- Director December 11, 1998
Joseph T. Kastantin
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a.1) Registrant's Articles of Incorporation(1)
(a.2) Amendment to Registrant's Articles of Incorporation
(b) Registrant's By-Laws(1)
(c) None
(d) Form of Investment Advisory Agreement
dated as of __________, 1998 between La
Crosse Funds, Inc. and La Crosse Advisers,
L.L.C.
(e) Form of Distribution Agreement dated
as of __________, 1998 between La Crosse
Funds, Inc. and Sunstone Distribution
Services, L.L.C.
(f) None
(g) Form of Custodian Agreement dated as
of __________, 1998 between La Crosse
Funds, Inc. and North Central Trust Company
(h.1) Form of Transfer Agency Agreement
dated as of __________, 1998 between La
Crosse Funds, Inc. and Sunstone Investor
Services, L.L.C.
(h.2) Form of Administration and Fund
Accounting Agreement dated as of
__________, 1998 between La Crosse Funds,
Inc. and Sunstone Financial Group, Inc.
(i) Opinion and Consent of Godfrey & Kahn, S.C.
(j) Consent of Arthur Andersen LLP
(k) None
(l) Initial Subscription Agreement
(m) None
(n) Financial Data Schedule
(o) None
___________________
(1) Incorporated by reference to the Registrant's
Registration Statement on Form N-1A filed
October 13, 1998.
AMENDMENT OF ARTICLES OF INCORPORATION
OF
LA CROSSE FUNDS, INC.
The undersigned, the Secretary of La Crosse Funds,
Inc. (the "Corporation"), hereby certifies that in
accordance with Section 180.1005 of the Wisconsin
Statutes, the following Amendment was duly adopted to
(i) change the distinguishing designation of the sole
class of the Corporation's shares and (ii) increase the
number of authorized shares of the Corporation.
"Paragraph A of Article IV is hereby amended by
deleting Paragraph A thereof and inserting the
following as a new paragraph:
`A. The Corporation shall have the authority to
issue an indefinite number of shares of Common Stock
with a par value of $.00001 per share. Subject to the
following paragraph the authorized shares are
classified as follows:
Class Authorized Number of Shares
La Crosse Large Cap Stock Fund Indefinite'"
This Amendment to the Articles of Incorporation of
the Corporation was adopted by the Corporation's Board
of Directors on November 24, 1998 in accordance with
Section 180.1005 of the Wisconsin Statutes. No shares
of the Corporation have been subscribed for.
Executed in duplicate this 24th day of November,
1998.
LA CROSSE FUNDS, INC.
/s/ Steven J. Hulme
--------------------------
Name: Steven J. Hulme
Title: Secretary
This instrument was drafted by:
Dennis F. Connolly
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
LA CROSSE FUNDS, INC.
FORM OF INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is entered into as of the _____ day
of ______________, 1998, between La Crosse Funds, Inc.,
a Wisconsin corporation (the "Corporation") and
La Crosse Advisers, L.L.C., a Wisconsin limited
liability company (the "Adviser").
W I T N E S S E T H
WHEREAS, the Corporation is an open-end investment
company registered under the Investment Company Act of
1940, as amended (the "1940 Act"). The Corporation is
authorized to create separate series, each with its own
separate investment portfolio (the "Funds"), and the
beneficial interest in each such series will be
represented by a separate series of shares (the
"Shares").
WHEREAS, the Adviser is a registered investment
adviser, engaged in the business of rendering
investment advisory services.
WHEREAS, in managing the Corporation's assets, as
well as in the conduct of certain of its affairs, the
Corporation seeks the benefit of the Adviser's services
and its assistance in performing certain managerial
functions. The Adviser desires to furnish such
services and to perform the functions assigned to it
under this Agreement for the consideration provided for
herein.
NOW THEREFORE, the parties mutually agree as
follows:
1. Appointment of the Adviser. The Corporation
hereby appoints the Adviser as investment adviser for
each of the Funds of the Corporation on whose behalf
the Corporation executes an Exhibit to this Agreement,
and the Adviser, by execution of each such Exhibit,
accepts the appointments. Subject to the direction of
the Board of Directors (the "Directors") of the
Corporation, the Adviser shall manage the investment
and reinvestment of the assets of each Fund in
accordance with the Fund's investment objective and
policies and limitations, for the period and upon the
terms herein set forth. The investment of funds shall
also be subject to all applicable restrictions of the
Articles of Incorporation and By-Laws of the
Corporation as may from time to time be in force.
2. Expenses Paid by the Adviser. In addition to the
expenses which the Adviser may incur in the performance
of its responsibilities under this Agreement, and the
expenses which it may expressly undertake to incur and
pay, the Adviser shall incur and pay all reasonable
compensation, fees and related expenses of the
Corporation's officers and its Directors, except for
such Directors who are not interested persons (as that
term is defined in Section 2(a)(19) of the 1940 Act) of
the Adviser.
3. Investment Advisory Functions. In its capacity as
investment adviser, the Adviser shall have the
following responsibilities:
(a) To furnish continuous advice and recommendations
to the Funds, as to the acquisition, holding or
disposition of any or all of the securities or other
assets which the Funds may own or contemplate acquiring
from time to time;
(b) To cause its officers to attend meetings and
furnish oral or written reports, as the Corporation may
reasonably require, in order to keep the Directors and
appropriate officers of the Corporation fully informed
as to the condition of the investments of the Funds,
the investment recommendations of the Adviser, and the
investment considerations which have given rise to
those recommendations; and
(c) To supervise the purchase and sale of securities
or other assets as directed by the appropriate officers
of the Corporation.
The services of the Adviser are not to be
deemed exclusive and the Adviser shall be free to
render similar services to others as long as its
services for others does not in any way
hinder, preclude or prevent the Adviser from performing
its duties and obligations under this Agreement. In
the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or
duties hereunder on the part of the Adviser, the
Adviser shall not be subject to liability to the
Corporation, the Funds, or to any shareholder for any
act or omission in the course of, or in connection
with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale
of any security.
4. Obligations of the Corporation. The Corporation
shall have the following obligations under this
Agreement:
(a) To keep the Adviser continuously and fully
informed as to the composition of the Funds'
investments and the nature of all of their respective
assets and liabilities;
(b) To furnish the Adviser with a copy of any
financial statement or report prepared for it by
certified or independent public accountants, and with
copies of any financial statements or reports made to
the Funds' shareholders or to any governmental body or
securities exchange;
(c) To furnish the Adviser with any further materials
or information which the Adviser may reasonably request
to enable it to perform its functions under this
Agreement; and
(d) To compensate the Adviser for its services in
accordance with the provisions of paragraph 5 hereof.
5. Compensation. The Corporation will pay the
Adviser a fee for its services with respect to each
Fund (the "Advisory Fee") at the annual rate set forth
on the Exhibit(s) hereto. The Advisory Fee shall be
accrued each calendar day during the term of this
Agreement and the sum of the daily fee accruals shall
be paid monthly as soon as practicable following the
last day of each month. The daily fee accruals will be
computed by multiplying 1/365 by the annual rate and
multiplying the product by the net asset value of the
Fund as determined in accordance with the Corporation's
registration statement as of the close of business on
the previous day on which the Fund was open for
business, or in such other manner as the parties agree.
The Adviser may from time to time and for such periods
as it deems appropriate or for such time and to the
extent agreed on Exhibit A for a Fund reduce its
compensation and/or assume expenses for one or more of
the Funds; provided, however, that with respect to any
agreement set forth on Exhibit A the Adviser shall be
entitled to recoup such amounts for a period of up to
three (3) years from the date such amount was reduced
or assumed.
6. Expenses Paid by Corporation.
(a) Except as provided in this paragraph, nothing in
this Agreement shall be construed to impose upon the
Adviser the obligation to incur, pay, or reimburse the
Corporation for any expenses not specifically assumed
by the Adviser under paragraph 2 above. Each Fund
shall pay or cause to be paid all of its expenses and
the Fund's allocable share of the Corporation's
expenses, including, but not limited to, investment
adviser fees; any compensation, fees, or reimbursements
which the Corporation pays to its Directors who are not
interested persons (as that phrase is defined in
Section 2(a)(19) of the 1940 Act) of the Adviser; fees
and expenses of the custodian, transfer agent,
registrar or dividend disbursing agent; current legal,
accounting and printing expenses; administrative,
clerical, recordkeeping and bookkeeping expenses;
brokerage commissions and all other expenses in
connection with the execution of Fund transactions;
interest; all federal, state and local taxes (including
stamp, excise, income and franchise taxes); expenses of
shareholders' meetings and of preparing, printing and
distributing proxy statements, notices and reports to
shareholders; expenses of preparing and filing reports
and tax returns with federal and state regulatory
authorities; and all expenses incurred in complying
with all federal and state laws and the laws of any
foreign country applicable to the issue, offer, or sale
of Shares of the Funds, including but not limited to,
all costs involved in the registration or qualification
of Shares of the Funds for sale in any jurisdiction and
all costs involved in preparing, printing and
distributing prospectuses and statements of additional
information to existing shareholders of the Funds.
(b) If expenses borne by a Fund in any fiscal year
(including the Adviser's fee, but excluding taxes,
interest, brokerage commissions, Rule 12b-1 expenses
and similar fees) exceed those set forth in any
statutory or regulatory formula applicable to a Fund,
the Adviser will reimburse the Fund for any excess.
7. Brokerage Commissions. For purposes of this
Agreement, brokerage commissions paid by a Fund upon
the purchase or sale of securities shall be considered
a cost of the securities of the Fund and shall be paid
by the respective Fund. The Adviser is authorized and
directed to place Fund transactions only with brokers
and dealers who render satisfactory service in the
execution of orders at the most favorable prices and at
reasonable commission rates; provided, however, that
the Adviser may pay a broker or dealer an amount of
commission for effecting a securities transaction in
excess of the amount of commission another broker or
dealer would have charged for effecting that
transaction, if the Adviser determines in good faith
that such amount of commission was reasonable in
relation to the value of the brokerage and research
services provided by such broker or dealer viewed in
terms of either that particular transaction or the
overall responsibilities of the Adviser. In placing
Fund business with such broker or dealers, the Adviser
shall seek the best execution of each transaction, and
all such brokerage placement shall be made in
compliance with Section 28(e) of the Securities
Exchange Act of 1934, as amended, and other applicable
state and federal laws. Notwithstanding the foregoing,
the Corporation shall retain the right to direct the
placement of all Fund transactions, and the Directors
may establish policies or guidelines to be followed by
the Adviser in placing Fund transactions for the Funds
pursuant to the foregoing provisions.
8. Proprietary Rights. The Adviser has proprietary
rights in each Fund's name and the Corporation's name.
The Corporation acknowledges and agrees that the
Adviser may withdraw the use of such names from the
Funds or the Corporation should it cease to act as the
investment adviser to any Fund.
9. Termination. This Agreement may be terminated at
any time, without penalty, by the Directors of the
Corporation or by the shareholders of a Fund acting by
the vote of at least a majority of its outstanding
voting securities (as that phrase is defined in Section
2(a)(42) of the 1940 Act), provided in either case that
60 days' written notice of termination be given to the
Adviser at its principal place of business. This
Agreement may also be terminated by the Adviser at any
time by giving 60 days' written notice of termination
to the Corporation, addressed to its principal place of
business.
10. Assignment. This Agreement shall terminate
automatically in the event of any assignment (within
the meaning of Section 2(a)(4) of the 1940 Act) of this
Agreement.
11. Term. This Agreement shall begin for each Fund as
of the date of execution of the applicable Exhibit and
shall continue in effect with respect to each Fund (and
any subsequent Funds added pursuant to an Exhibit
during the initial term of this Agreement) for two
years from the date of this Agreement and thereafter
for successive periods of one year, subject to the
provisions for termination and all of the other terms
and conditions hereof if such continuation shall be
specifically approved at least annually (i) by the vote
of a majority of the Directors of the Corporation,
including a majority of the Directors who are not
parties to this Agreement or "interested persons" of
any such party (as defined in the 1940 Act), cast in
person at a meeting called for that purpose or (ii) by
the vote of a majority of the outstanding voting
securities (as that phrase is defined in Section
2(a)(42) of the 1940 Act) of each Fund. If a Fund is
added after the first approval by the Directors as
described above, this Agreement will be effective as to
that Fund upon execution of the applicable Exhibit and
will continue in effect until the next annual approval
of this Agreement by the Directors and thereafter for
successive periods of one year, subject to approval as
described above.
12. Amendments. This Agreement may be amended by the
mutual consent of the parties, provided that the terms
of each such amendment shall be approved by the
Directors or by the affirmative vote of a majority of
the outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 1940 Act) of each
Fund.
13. Governing Law. This Agreement shall be governed
by and construed in accordance with the internal laws
of the State of Wisconsin, provided, however that
nothing herein shall be construed in a manner that is
inconsistent with the 1940 Act, the Investment Advisers
Act of 1940, as amended, or the rules and regulations
promulgated with respect to such respective Acts.
This Agreement will become binding on the parties
hereto upon their execution of the Exhibit(s) to this
Agreement.
MW1-141587-1
EXHIBIT A
to the
Investment Advisory Agreement
LA CROSSE LARGE CAP STOCK FUND
For all services rendered by the Adviser
hereunder, the Corporation shall pay the Adviser, on
behalf of the above-named Fund, and the Adviser agrees
to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee
equal to 0.75% of the average daily net assets of the
Fund.
The Adviser hereby agrees that until December 31,
1999, the Adviser will waive its fees and/or reimburse
the Fund's operating expenses to the extent necessary
to ensure that the Fund's total operating expenses (on
an annual basis) do not exceed 1.00% of its average
daily net assets, subject to possible later recoupment
as provided in Section 5.
The annual investment advisory fee shall be
accrued daily at the rate of 1/365th of 0.75% applied
to the daily net assets of the Fund. The advisory fee
so accrued shall be paid by the Corporation to the
Adviser monthly.
Executed as of this _____ day of December, 1998.
The Adviser:
LA CROSSE ADVISERS, L.L.C.
By:_______________________
Gary M. Veldey, Chief
Executive Officer
The Corporation:
LA CROSSE FUNDS, INC.
By:______________________
Steven J. Hulme,
President
DISTRIBUTION AGREEMENT
THIS AGREEMENT is made as of this ___ day of
December, 1998, by and between La Crosse Funds, Inc., a
Wisconsin corporation (the "Corporation"), and Sunstone
Distribution Services, LLC, a Wisconsin limited
liability company (the "Distributor").
WHEREAS, the Corporation is an open-end investment
company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and is authorized
to issue shares of common stock (the "Shares") in
separate series with each such series representing
interests in a separate portfolio of securities and
other assets;
WHEREAS, the Distributor is registered as a broker-
dealer under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member of the
National Association of Securities Dealers, Inc. (the
"NASD"); and
WHEREAS, the Corporation and Distributor desire to
enter into an agreement pursuant to which Distributor
shall be the distributor of the Shares of the
Corporation representing the investment portfolios
listed on Schedule A hereto and any additional
investment portfolios the Corporation and Distributor
may agree upon and include on Schedule A as such
Schedule may be amended from time to time (such
investment portfolios and any additional investment
portfolios are individually referred to as a "Fund" and
collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good
and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Appointment of the Distributor.
The Corporation hereby appoints the Distributor
as agent for the distribution of the Shares, on the
terms and for the period set forth in this Agreement.
Distributor hereby accepts such appointment as agent
for the distribution of the Shares on the terms and for
the period set forth in this Agreement.
2. Services, Duties and Representations of the
Distributor.
2.1 Distributor will act as agent for the
distribution of Shares in accordance with the
instructions of the Corporation's Board of Directors
and the registration statement and prospectuses then in
effect with respect to the Funds under the Securities
Act of 1933, as amended (the "1933 Act").
2.2 Distributor may finance appropriate
activities which it deems reasonable which are
primarily intended to result in the sale of Shares,
including, but not limited to, advertising, the
printing and mailing of prospectuses to other than
current shareholders, and the printing and mailing of
sales literature. Distributor may enter into servicing
and/or selling agreements with qualified broker/dealers
and other persons with respect to the offering of
Shares to the public, and if it so chooses Distributor
will act only on its own behalf as principal. The
Distributor shall not be obligated to sell any certain
number of Shares of any Fund.
2.3 All Shares of the Funds offered for sale by
Distributor shall be offered for sale to the public at
a price per unit (the "offering price") equal to their
net asset value (determined in the manner set forth in
the Funds' then current prospectus).
2.4 Distributor shall act as distributor of the
Shares in compliance in all material respects with all
applicable laws, rules and regulations, including,
without limitation, all rules and regulations made or
adopted pursuant to the 1940 Act, by the Securities and
Exchange Commission (the "Commission") and the NASD.
2.5 Distributor shall furnish the Corporation
from time to time such information with respect to the
Distributor and its operations as the Corporation may
reasonably request including, but not limited to, such
information regarding the Distributor and its
operations as may be required to be included in filings
with the Commission.
2.6 Distributor acknowledges that the Corporation
has inquired of the Distributor as to the Year 2000
compliance status of its computer systems and software
and those of its software vendors. Distributor shall
report to the Board of the Corporation at least
quarterly as to the Year 2000 compliance status of its
mission critical computer systems and software .
3. Duties and Representations of the Corporation.
3.1 The Corporation represents that it is
registered as an open-end management investment company
under the 1940 Act and that it has and will continue to
act in conformity with its Articles of Incorporation,
By-Laws, its registration statement as may be amended
from time to time and resolutions and other
instructions of its Board of Directors and has and will
continue to comply with all applicable laws, rules and
regulations including without limitation the 1933 Act,
the 1934 Act, the 1940 Act, the laws of the states in
which Shares are offered and sold, and the rules and
regulations thereunder.
3.2 The Corporation shall take or cause to be
taken all necessary action to register and maintain the
registration of the Shares under the 1933 Act for sale
as herein contemplated and shall pay all costs and
expenses in connection with the registration of Shares
under the 1933 Act, and be responsible for all expenses
in connection with maintaining facilities for the issue
and transfer of Shares and for supplying information,
prices and other data to be furnished by the
Corporation hereunder.
3.3 The Corporation shall execute any and all
documents and furnish any and all information and
otherwise take all actions which may be reasonably
necessary in the discretion of the Corporation's
officers in connection with the qualification of the
Shares for sale in such states as Distributor and the
Corporation may approve, shall maintain the
registration of a sufficient number or amount of shares
thereunder, and shall pay all expenses which may be
incurred in connection with such qualification.
3.4 The Corporation shall, at its expense, keep
the Distributor fully informed with regard to its
affairs. Distributor shall be deemed to have the same
knowledge of the Corporation's affairs as Distributor's
affiliates' actual knowledge of such affairs. In
addition, the Corporation shall furnish Distributor
from time to time such information with respect to the
Corporation and the Shares as Distributor may
reasonably request, and the Corporation warrants that
the statements contained in any such information shall
be true and correct. The Corporation represents that it
will not use or authorize the use of any advertising or
sales material unless and until such materials have
been approved and authorized for use by the
Distributor.
3.5 The Corporation represents to Distributor
that all registration statements and prospectuses of
the Corporation filed or to be filed with the
Commission under the 1933 Act with respect to the
Shares have been and will be prepared in conformity
with the requirements of the 1933 Act, the 1940 Act,
and the rules and regulations of the Commission
thereunder. As used in this Agreement the terms
"registration statement" and "prospectus" shall mean
any registration statement and prospectus (together
with the related statement of additional information)
at any time now or hereafter filed with the Commission
with respect to any of the Shares and any amendments
and supplements thereto which at any time shall have
been or will be filed with said Commission. The
Corporation represents and warrants to Distributor that
any registration statement and prospectus, when such
registration statement becomes effective, will contain
all statements required to be stated therein in
conformity with the 1933 Act, the 1940 Act and the
rules and regulations of the Commission; that all
information contained in the registration statement and
prospectus will be true and correct in all material
respects when such registration statement becomes
effective; and that neither the registration statement
nor any prospectus when such registration statement
becomes effective will include an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make the
statements therein not misleading. The Corporation
agrees to file from time to time such amendments,
supplements, reports and other documents as may be
necessary or required in order to comply with the 1933
Act and the 1940 Act and in order that there may be no
untrue statement of a material fact in a registration
statement or prospectus, or necessary or required in
order that there may be no omission to state a material
fact in the registration statement or prospectus which
omission would make the statements therein misleading.
3.6 The Corporation shall not file any amendment
to the registration statement or supplement to any
prospectus without giving Distributor reasonable notice
thereof in advance and if the Distributor objects to
such amendment (after a reasonable time), the
Corporation may terminate this Agreement forthwith by
written notice to the Distributor without payment of
any penalty. If the Corporation shall not propose an
amendment or amendments and/or supplement or
supplements promptly after receipt by the Corporation
of a written request in good faith from Distributor to
do so, Distributor may, at its option, immediately
terminate this Agreement. In addition, if, at any time
during the term of this Agreement, the Distributor
requests the Corporation to make any change in its
governing instruments or in its methods of doing
business which are necessary in order to comply with
any requirement of applicable law or regulation, and
the Corporation fails (after a reasonable time) to make
any such change as requested, the Distributor may
terminate this Agreement forthwith by written notice to
the Corporation without payment of any penalty. Nothing
contained in this Agreement shall in any way limit the
Corporation's right to file at any time any amendments
to any registration statement and/or supplements to any
prospectus, of whatever character, as the Corporation
may deem advisable, such right being in all respects
absolute and unconditional.
3.7 Whenever in their judgment such action is
warranted by market, economic or political conditions,
or by circumstances of any kind, the Corporation's
officers may decline to accept any orders for, or make
any sales of, any Shares until such time as they deem
it advisable to accept such orders and to make such
sales and the Corporation shall advise Distributor
promptly of such determination.
3.8 The Corporation agrees to advise the
Distributor promptly in writing:
(i) of any correspondence or other
communication by the Commission or its staff relating
to the Funds including requests by the Commission for
amendments to the registration statement or
prospectuses;
(ii) in the event of the issuance by the
Commission of any stop order suspending the
effectiveness of the registration statement or
prospectuses then in effect or the initiation of any
proceeding for that purpose;
(iii) of the happening of any event which
makes untrue any statement of a material fact made in
the registration statement or prospectuses or which
requires the making of a change in such registration
statement or prospectuses in order to make the
statements therein not misleading; and
(iv) of all actions taken by the Commission
with respect to any amendments to any registration
statement or prospectus which may from time to time be
filed with the Commission.
3.9 Distributor agrees to advise the Corporation
promptly in writing of the happening of any event which
makes untrue any statement of a material fact regarding
the Distributor made in the registration statement or
prospectuses (which statement was included in the
registration statement or prospectuses in reliance on,
and in conformity with, information relating to the
Distributor and furnished to the Corporation or its
counsel by the Distributor for the purpose of, and used
in, the registration statement), or which requires the
making of a change in such registration statement or
prospectuses in order to make such statements regarding
the Distributor not misleading.
4. Indemnification.
4.1(a) The Corporation authorizes Distributor
to use any prospectus, in the form furnished to
Distributor from time to time, in connection with the
sale of Shares. The Corporation shall indemnify,
defend and hold the Distributor, and each of its
present or former directors, members, officers,
employees, representatives and any person who controls
or previously controlled the Distributor within the
meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all losses, claims,
demands, liabilities, damages and expenses (including
the costs of investigating or defending any alleged
losses, claims, demands, liabilities, damages or
expenses and any counsel fees incurred in connection
therewith) which Distributor, each of its present and
former directors, officers, employees or
representatives or any such controlling person, may
incur under the 1933 Act, the 1934 Act, the 1940 Act,
any other statute (including Blue Sky laws) or any rule
or regulation thereunder, or under common law or
otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material
fact contained in the registration statement or any
prospectus, as from time to time amended or
supplemented, or an annual or interim report to
shareholders, or arising out of or based upon any
omission, or alleged omission, to state therein a
material fact required to be stated therein or
necessary to make the statements therein not
misleading; provided, however, that the Corporation's
obligation to indemnify Distributor and any of the
foregoing indemnitees shall not be deemed to cover any
losses, claims, demands, liabilities, damages or
expenses arising out of any untrue statement or alleged
untrue statement or omission or alleged omission made
in the registration statement, prospectus, or annual or
interim report in reliance upon and in conformity with
information relating to the Distributor and furnished
to the Corporation or its counsel by Distributor for
the purpose of, and used in, the preparation thereof;
and provided further that the Corporation's agreement
to indemnify Distributor and any of the foregoing
indemnitees shall not be deemed to cover any liability
to the Corporation or its shareholders to which
Distributor would otherwise be subject by reason of its
willful misfeasance, bad faith or gross negligence in
the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under
this Agreement. The Corporation's agreement to
indemnify the Distributor, and any of the foregoing
indemnitees, as the case may be, with respect to any
action, is expressly conditioned upon the Corporation
being notified of such action brought against
Distributor, or any of the foregoing indemnitees,
within a reasonable time after the summons or other
first legal process giving information of the nature of
the claim shall have been served upon the Distributor,
or such person, such notification to be given by letter
or by telegram addressed to the Corporation's
President, but the failure so to notify the Corporation
of any such action shall not relieve the Corporation
from any liability which the Corporation may have to
the person against whom such action is brought by
reason of any such untrue, or alleged untrue, statement
or omission, or alleged omission, otherwise than on
account of the Corporation's indemnity agreement
contained in this Section 4.1.
4.1(b) The Corporation shall be entitled to
participate at its own expense in the defense or, if it
so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage
or expense, but if the Corporation elects to assume the
defense, such defense shall be conducted by counsel
chosen by the Corporation and approved by the
Distributor, which approval shall not be unreasonably
withheld. In the event the Corporation elects to
assume the defense of any such suit and retain such
counsel, the indemnified defendant or defendants in
such suit shall bear the fees and expenses of any
additional counsel retained by them. If the
Corporation does not elect to assume the defense of any
such suit, or in case the Distributor does not, in the
exercise of reasonable judgment, approve of counsel
chosen by the Corporation, the Corporation will
reimburse the indemnified person or persons named as
defendant or defendants in such suit, for the fees and
expenses of any counsel retained by Distributor and
them. The Corporation's indemnification agreement
contained in this Section 4.1 and the Corporation's
representations and warranties in this Agreement shall
remain operative and in full force and effect
regardless of any investigation made by or on behalf of
the Distributor, and each of its present or former
directors, officers, employees, representatives or any
controlling person, and shall survive the delivery of
any Shares and the termination of this Agreement. This
agreement of indemnity will inure exclusively to the
Distributor's benefit, to the benefit of each of its
present or former directors, members, officers,
employees or representatives or to the benefit of any
controlling persons and their successors. The
Corporation agrees promptly to notify Distributor of
the commencement of any litigation or proceedings
against the Corporation or any of its officers or
directors in connection with the issue and sale of any
of the Shares.
4.2(a) Distributor shall indemnify, defend and
hold the Corporation, and each of its present or former
directors, officers, employees, representatives, and
any person who controls or previously controlled the
Corporation within the meaning of Section 15 of the
1933 Act, free and harmless from and against any and
all losses, claims, demands, liabilities, damages and
expenses (including the costs of investigating or
defending any alleged losses, claims, demands,
liabilities, damages or expenses, and any counsel fees
incurred in connection therewith) which the
Corporation, and each of its present or former
directors, officers, employees, representatives, or any
such controlling person, may incur under the 1933 Act,
the 1934 Act, the 1940 Act, any other statute
(including Blue Sky laws) or any rule or regulation
thereunder, or under common law or otherwise, arising
out of or based upon any untrue, or alleged untrue,
statement of a material fact contained in the
Corporation's registration statement or any prospectus,
as from time to time amended or supplemented, or annual
or interim report to shareholders or the omission, or
alleged omission, to state therein a material fact
required to be stated therein or necessary to make the
statement not misleading, but only if such statement or
omission was made in reliance upon, and in conformity
with, information relating to the Distributor and
furnished to the Corporation or its counsel by the
Distributor for the purpose of, and used in, the
preparation thereof. Distributor's agreement to
indemnify the Corporation and any of the foregoing
indemnitees shall not be deemed to cover any liability
to Distributor to which the Corporation would otherwise
be subject by reason of its willful misfeasance, bad
faith or gross negligence in the performance of its
duties, or by reason of its reckless disregard of its
obligations and duties, under this Agreement. The
Distributor's Agreement to indemnify the Corporation,
and any of the foregoing indemnitees, is expressly
conditioned upon the Distributor's being notified of
any action brought against the Corporation, and any of
the foregoing indemnitees, such notification to be
given by letter or telegram addressed to Distributor's
President, within a reasonable time after the summons
or other first legal process giving information of the
nature of the claim shall have been served upon the
Corporation or such person, but the failure so to
notify Distributor of any such action shall not relieve
Distributor from any liability which Distributor may
have to the person against whom such action is brought
by reason of any such untrue, or alleged untrue,
statement or omission, otherwise than on account of
Distributor's indemnity agreement contained in this
Section 4.2(a).
4.2(b) The Distributor shall be entitled to
participate at its own expense in the defense or, if it
so elects, to assume the defense of any suit brought to
enforce any such loss, claim, demand, liability, damage
or expense, but if the Distributor elects to assume the
defense, such defense shall be conducted by counsel
chosen by the Distributor and approved by the
Corporation, which approval shall not be unreasonably
withheld. In the event the Distributor elects to
assume the defense of any such suit and retain such
counsel, the indemnified defendant or defendants in
such suit shall bear the fees and expenses of any
additional counsel retained by them. If the
Distributor does not elect to assume the defense of any
such suit, or in case the Corporation does not, in the
exercise of reasonable judgment, approve of counsel
chosen by the Distributor, the Distributor will
reimburse the indemnified person or persons named as
defendant or defendants in such suit, for the fees and
expenses of any counsel retained by the Corporation and
them. The Distributor's indemnification agreement
contained in this Section 4.2 and the Distributor's
representations and warranties in this Agreement shall
remain operative and in full force and effect
regardless of any investigation made by or on behalf of
the Corporation, and each of its present or former
directors, officers, employees, representatives or any
controlling person, and shall survive the delivery of
any Shares and the termination of this Agreement. This
Agreement of indemnity will inure exclusively to the
Corporation's benefit, to the benefit of each of its
present or former directors, officers, employees or
representatives or to the benefit of any controlling
persons and their successors. The Distributor agrees
promptly to notify the Corporation of the commencement
of any litigation or proceedings against the
Distributor or any of its officers or directors in
connection with the issue and sale of any of the
Shares.
5. Offering of Shares.
No Shares shall be offered by either the
Distributor or the Corporation under any of the
provisions of this Agreement and no orders for the
purchase or sale of such Shares hereunder shall be
accepted by the Corporation if and so long as the
effectiveness of the registration statement then in
effect or any necessary amendments thereto shall be
suspended under any of the provisions of the 1933 Act,
or if and so long as the current prospectus as required
by Section 10 of the 1933 Act, as amended, is not on
file with the Commission; provided, however, that
nothing contained in this paragraph 5 shall in any way
restrict or have an application to or bearing upon the
Corporation's obligation to repurchase Shares from any
shareholder in accordance with the provisions of the
registration statement.
6. Term.
6.1 This Agreement shall become effective with
respect to each Fund listed on Schedule A hereof as of
the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is
executed. Unless sooner terminated as provided herein,
this Agreement shall continue in effect with respect to
each Fund until December __, 1999. Thereafter, if not
terminated, this Agreement shall continue automatically
in effect as to each Fund for successive annual
periods, provided such continuance is specifically
approved at least annually by (i) the Corporation's
Board of Directors or (ii) the vote of a majority (as
defined in the 1940 Act) of the outstanding voting
securities of a Fund, and provided that in either event
the continuance is also approved by the Distributor and
by a majority of the Corporation's Board of Directors
who are not "interested persons" (as defined in the
1940 Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting
on such approval.
6.2 This Agreement may be terminated without
penalty with respect to a particular Fund (1) through a
failure to renew this Agreement at the end of a term,
(2) upon mutual consent of the parties, or (3) on no
less than thirty (30) days' written notice, by the
Corporation's Board of Directors, by vote of a majority
(as defined with respect to voting securities in the
1940 Act) of the outstanding voting securities of a
Fund, or by the Distributor (which notice may be waived
by the party entitled to such notice). In addition,
this Agreement may be terminated at any time, without
penalty, with respect to a particular Fund by vote of a
majority of the members of the Board of Directors who
are not interested persons of the Corporation (as
defined in the 1940 Act) and have no direct or indirect
financial interest in this Agreement. The terms of this
Agreement shall not be waived, altered, modified,
amended or supplemented in any manner whatsoever except
by a written instrument signed by the Distributor and
the Corporation. This Agreement will also terminate
automatically in the event of its assignment (as
defined in the 1940 Act).
7. Miscellaneous.
7.1 The services of the Distributor rendered to
the Funds are not deemed to be exclusive. The
Distributor may render such services and any other
services to others, including other investment
companies. The Corporation recognizes that from time
to time directors, officers, and employees of the
Distributor may serve as directors, trustees, officers
and employees of other entities (including other
investment companies), that such other entities may
include the name of the Distributor as part of their
name and that the Distributor or its affiliates may
enter into distribution, administration, fund
accounting, transfer agent or other agreements with
such other entities.
7.2 Distributor agrees on behalf of itself and
its employees to treat confidentially and as
proprietary information of the Corporation all records
relative to the Funds and prior, present or potential
shareholders of the Corporation (and clients of said
shareholders), and not to use such records and
information for any purpose other than performance of
its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the
Corporation, which approval may not be withheld where
the Distributor may be exposed to civil or criminal
proceedings for failure to comply, when requested to
divulge such information by duly constituted
authorities, when subject to governmental or regulatory
audit or investigation, or when so requested by the
Corporation. Records and information which have become
known to the public through no wrongful act of the
Distributor or any of its employees, agents or
representatives shall not be subject to this paragraph.
7.3 This Agreement shall be governed by Wisconsin
law. To the extent that the applicable laws of the
State of Wisconsin, or any of the provisions herein,
conflict with the applicable provisions of the 1940
Act, the latter shall control, and nothing herein shall
be construed in a manner inconsistent with the 1940 Act
or any rule or order of the Commission thereunder. Any
provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in
any other jurisdiction.
7.4 Any notice required or to be permitted to be
given by either party to the other shall be in writing
and shall be deemed to have been given when sent by
registered or certified mail, postage prepaid, return
receipt requested, as follows: Notice to the
Distributor shall be sent to Sunstone Distribution
Services, LLC, 207 East Buffalo Street, Suite 400,
Milwaukee, WI, 53202, Attention: Miriam M. Allison, and
notice to the Corporation shall be sent to La Crosse
Funds, Inc. 311 Main Street, La Crosse, Wisconsin
54601 Attention: Steven J. Hulme.
7.5 This Agreement may be executed in any
number of counterparts, each of which shall be deemed
to be an original agreement but such counterparts shall
together constitute but one and the same instrument.
7.6 The Corporation shall not bear any
distribution fees or costs for the performance of the
Distributor's services hereunder, nor shall the
Corporation incur any such costs. Any such fees or
costs shall be borne by the Corporation's investment
adviser.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer as of the day and year first above written.
LA CROSSE FUNDS, INC.
(the "Corporation")
By:______________________________
Steven J. Hulme
President
SUNSTONE DISTRIBUTION SERVICES, LLC
(the "Distributor")
By:______________________________________
Miriam M. Allison
President
Schedule A
to the
Distribution Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Distribution Services, LLC
Name of Funds
Fund Effective Date
La Crosse Large Cap Stock Fund December __, 1998
FORM OF CUSTODIAN CONTRACT
Between
LA CROSSE FUNDS, INC.
and
NORTH CENTRAL TRUST COMPANY
TABLE OF CONTENTS
Page
1. EMPLOYMENT OF CUSTODIAN AND PROPERTY TO BE HELD BY IT 1
2. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF
THE FUNDS HELD BY THE CUSTODIAN 1
2.1 HOLDING SECURITIES 1
2.2 DELIVERY OF SECURITIES 2
2.3 REGISTRATION OF SECURITIES 4
2.4 BANK ACCOUNTS 4
2.5 PAYMENTS FOR SHARES 5
2.6 AVAILABILITY OF FEDERAL FUNDS 5
2.7 COLLECTION OF INCOME 5
2.8 PAYMENT OF FUND MONEYS 5
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF
SECURITIES PURCHASED 6
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF
SHARES OF A FUND 7
2.11 APPOINTMENT OF AGENTS 7
2.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEM 7
2.125 BOOK ENTRY MUTUAL FUND SHARES 8
2.13 SEGREGATED ACCOUNT 9
2.15 OWNERSHIP CERTIFICATES FOR TAX PURPOSES 10
2.16 PROXIES 10
2.17 COMMUNICATIONS RELATING TO FUND PORTFOLIO
SECURITIES 10
2.18 PROPER INSTRUCTIONS 10
2.19 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY 11
2.20 EVIDENCE OF AUTHORITY 11
3. RESERVED 11
4. RECORDS 11
5. OPINION OF FUNDS' INDEPENDENT PUBLIC ACCOUNTANTS 12
6. ASSET VERIFICATIONS; REPORTS 12
7. COMPENSATION OF CUSTODIAN 12
8. RESPONSIBILITY OF CUSTODIAN 12
9. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT 13
10. SUCCESSOR CUSTODIAN 14
11. INTERPRETIVE AND ADDITIONAL PROVISIONS 15
12. WISCONSIN LAW TO APPLY 15
13. NOTICES 15
14. COUNTERPARTS 15
CUSTODIAN CONTRACT
This Contract between LA CROSSE FUNDS, INC., (the
"Corporation"), a Wisconsin corporation, on behalf of
the portfolios (hereinafter collectively called the
"Funds" and individually referred to as a "Fund") of
the Corporation, organized and existing under the laws
of the State of Wisconsin, having its principal place
of business at 311 Main Street, La Crosse, Wisconsin
54602, and NORTH CENTRAL TRUST COMPANY, a Wisconsin
corporation, having its principal place of business at
311 Main Street, La Crosse, Wisconsin 54602,
hereinafter called the "Custodian",
WITNESSETH: That in consideration of the mutual
covenants and agreements hereinafter contained, the
parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by
It
The Corporation hereby employs the Custodian as
the custodian of the assets of each of the Funds of the
Corporation. Except as otherwise expressly provided
herein, the securities and other assets of each of the
Funds shall be segregated from the assets of each of
the other Funds and from all other persons and
entities. The Corporation will deliver to the
Custodian all securities and cash owned by the Funds
and all payments of income, payments of principal or
capital distributions received by them with respect to
all securities owned by the Funds from time to time,
and the cash consideration received by them for shares
of capital stock of the Funds ("Shares") as may be
issued or sold from time to time. The Custodian shall
not be responsible for any property of the Funds held
or received by the Funds and not delivered to the
Custodian.
Upon receipt of "Proper Instructions" (within the
meaning of Section 2.18), the Custodian shall from time
to time employ one or more sub-custodians upon the
terms specified in the Proper Instructions, provided
that the Custodian shall remain responsible for such
sub-custodian's actions or omissions. References
herein to Custodian may include the Custodian acting
through sub-custodians engaged under this Section 1.
In addition, the Corporation authorizes the use by the
Custodian of State Street Bank and Trust Company
("State Street") as a sub-custodian under this
agreement pursuant to an agreement between the
Custodian and State Street, it being understood that
the Corporation shall not bear any separate charges of
State Street.
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian
2.1 Holding Securities. The Custodian shall hold and
physically segregate for the account of each Fund
all noncash property, including all securities
owned by each Fund, other than securities (i)
which are maintained pursuant to Section 2.12 in a
clearing agency which acts as a securities
depository or in a book-entry system authorized by
the U.S. Department of the Treasury, collectively
referred to herein as a "Securities System" or
which are uncertified shares of investment
companies held with transfer agents of such
investment companies pursuant to Section 2.125,
collectively referred to herein as "Book Entry
Mutual Fund Shares", (ii) held by sub-custodians,
(iii) on loans which are collateralized to the
extent of their full market value, (iv)
hypothecated, pledged or placed in escrow for the
account of the Corporation in connection with a
loan or other transaction authorized by specific
resolutions of the Board, (v) in transit in
connection with the sale, exchange, redemption,
maturity or conversion, the exercise of warrants
or rights, assents to changes in the terms of the
securities, or (vi) transactions necessary or
appropriate in the ordinary course of business
relating to the management of securities. The
Custodian shall maintain records of all receipts,
deliveries and locations of such securities,
together with a current inventory thereof, and
make all necessary reports to officers of the
Corporation in accordance with Rule 17f-2 under
the Investment Company Act of 1940, as amended
(the "1940 Act"), and shall conduct periodic
physical inspections of certificates representing
stocks, bonds and other securities held by it
under this Contract in such manner as the
Custodian shall determine from time to time to be
advisable in order to verify the accuracy of such
inventory. With respect to securities held by any
agent appointed pursuant to Section 2.11 hereof,
and with respect to securities held by any sub-
custodian appointed pursuant to section 1 hereof,
the Custodian may rely upon certificates from such
agent as to the holdings of such agent and from
such sub-custodian as to the holdings of such sub-
custodian, it being understood that such reliance
in no way relieves the Custodian of its
responsibilities under this Contract. The
Custodian will promptly report to the Corporation
the results of such inspections, indicating any
shortages or discrepancies uncovered thereby, and
take appropriate action to remedy any such
shortages or discrepancies.
2.2 Delivery of Securities. The Custodian shall
release and deliver securities owned by a Fund
held by the Custodian or in a Securities System
account, or Book Entry Mutual Fund Shares only
upon receipt of Proper Instructions, which may be
continuing instructions when deemed appropriate by
the parties, and only in the following cases:
(1) Upon sale of such securities for the account
of a Fund and receipt of payment therefor;
(2) Upon the receipt of payment in connection
with any repurchase agreement related to such
securities entered into by the Corporation;
(3) In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 2.12 hereof, or in the
case of Book Entry Mutual Fund Shares in
accordance with the provisions of Section
2.125 hereof;
(4) To the depository agent in connection with
tender or other similar offers for portfolio
securities of a Fund, in accordance with the
provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or
otherwise become payable; provided that, in
any such case, the cash or other
consideration is to be delivered to the
Custodian;
(6) To the issuer thereof, or its agent, for
transfer into the name of a Fund or into the
name of any nominee or nominees of the
Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.11
or into the name or nominee name of any sub-
custodian appointed pursuant to Section 1; or
for exchange for a different number of bonds,
certificates or other evidence representing
the same aggregate face amount or number of
units; provided that, in any such case, the
new securities are to be received in
exchange;
(7) Upon the sale of such securities for the
account of a Fund, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery custom"; provided that in any such
case, the Custodian shall have no
responsibility or liability for any loss
arising from the delivery of such securities
prior to receiving payment for such
securities except as may arise from the
Custodian's own failure to act in accordance
with the standard of reasonable care or any
higher standard of care imposed upon the
Custodian by any applicable law or regulation
if such above-stated standard of reasonable
care were not part of this Contract;
(8) For exchange or conversion pursuant to any
plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to provisions
for conversion contained in such securities,
or pursuant to any deposit agreement;
provided that, in any such case, the new
securities and cash, if any, are to be
delivered to the Custodian;
(9) In the case of warrants, rights or similar
securities, the surrender thereof in the
exercise of such warrants, rights or similar
securities or the surrender of interim
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Custodian;
(10) For delivery in connection with any loans of
portfolio securities of a Fund, but only
against receipt of adequate collateral in the
form of (a) cash, in an amount specified by
the Corporation, (b) certificated securities
of a description specified by the
Corporation, registered in the name of the
Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof
or in proper form for transfer, or (c)
securities of a description specified by the
Corporation, transferred through a Securities
System in accordance with Section 2.12
hereof;
(11) For delivery as security in connection with
any borrowings requiring a pledge of assets
by a Fund, but only against receipt of
amounts borrowed, except that in cases where
additional collateral is required to secure a
borrowing already made, further securities
may be released for the purpose;
(12) For delivery in accordance with the
provisions of any agreement among the
Corporation, the Custodian and a broker-
dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act"), as
amended, and a member of the National
Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the
rules of the Options Clearing Corporation and
of any registered national securities
exchange, or of any similar organization or
organizations, regarding escrow or other
arrangements in connection with transactions
for a Fund;
(13) For delivery in accordance with the
provisions of any agreement among the
Corporation, the Custodian, and a Futures
Commission Merchant registered under the
Commodity Exchange Act, relating to
compliance with the rules of the Commodity
Futures Trading Commission and/or any
Contract Market, or any similar organization
or organizations, regarding account deposits
in connection with transactions for a Fund;
(14) Upon receipt of instructions from the
transfer agent ("Transfer Agent") for a Fund,
for delivery to such Transfer Agent or to the
holders of shares in connection with
distributions in kind, in satisfaction of
requests by holders of Shares for repurchase
or redemption; and
(15) For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Board of Directors (the
"Board") of the Corporation on behalf of a
Fund signed by an officer of the Corporation
and certified by its Secretary or an
Assistant Secretary, specifying the
securities to be delivered, setting forth the
purpose for which such delivery is to be
made, declaring such purpose to be a proper
corporate purpose, and naming the person or
persons to whom delivery of such securities
shall be made.
2.3 Registration of Securities. Securities held by
the Custodian (other than bearer securities) shall
be registered in the name of a particular Fund or
in the name of any nominee of the Fund or of any
nominee of the Custodian or sub-custodian
appointed under Section 1.
2.4 Bank Accounts. The Custodian may open and
maintain a separate bank account or accounts in
the name of each Fund, subject only to draft or
order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such
account or accounts, subject to the provisions
hereof, all cash received by it from or for the
account of each Fund. Funds held by the Custodian
for a Fund may be deposited by it to its credit as
Custodian in such banks or trust companies as it
may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust
company shall be qualified to act as a custodian
under the Investment Company Act of 1940, as
amended, and that each such bank or trust company
and the funds to be deposited with each such bank
or trust company shall be approved by vote of a
majority of the Board of Directors ("Board") of
the Corporation. Such funds shall be deposited by
the Custodian in its capacity as Custodian for the
Fund and shall be withdrawable by the Custodian
only in that capacity. If requested by the
Corporation, the Custodian shall furnish the
Corporation, not later than twenty (20) days after
the last business day of each month, an internal
reconciliation of the closing balance as of that
day in all accounts described in this section to
the balance shown on the daily cash report for
that day rendered to the Corporation. Nothing
contained herein shall prohibit the Fund from
maintaining other bank accounts with banks in
accordance with the 1940 Act.
2.5 Payments for Shares. The Custodian shall make
such arrangements with the Transfer Agent of each
Fund, as will enable the Custodian to receive the
cash consideration due to each Fund and will
deposit into each Fund's account such payments as
are received from the Transfer Agent. The
Custodian will provide timely notification to the
Corporation and the Transfer Agent of any receipt
by it of payments for Shares of the respective
Fund.
2.6 Availability of Federal Funds. Upon mutual
agreement between the Corporation and the
Custodian, the custodian may make federal funds
available to the Funds as of specified times
agreed upon from time to time by the Corporation
and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which
are deposited into the Funds' accounts.
2.7 Collection of Income.
(1) The Custodian shall collect on a timely basis
all income and other payments with respect to
registered securities held hereunder to which
each Fund shall be entitled either by law or
pursuant to custom in the securities
business, and shall collect on a timely basis
all income and other payments with respect to
bearer securities if, on the date of payment
by the issuer, such securities are held by
the Custodian or its agent thereof and shall
credit such income, as collected, to each
Fund's custodian account. Without limiting
the generality of the foregoing, the
Custodian shall detach and present for
payment all coupons and other income items
requiring presentation as and when they
become due and shall collect interest when
due on securities held hereunder. The
collection of income due the Funds on
securities loaned pursuant to the provisions
of Section 2.2 (10) shall be the
responsibility of the Corporation. The
Custodian will have no duty or responsibility
in connection therewith, other than to
provide the Corporation with such information
or data as may be necessary to assist the
Corporation in arranging for the timely
delivery to the Custodian of the income to
which each Fund is properly entitled.
(2) The Corporation shall promptly notify the
Custodian whenever income due on securities
is not collected in due course and will
provide the Custodian with weekly reports of
the status of past due income. The
Corporation will furnish the Custodian with a
weekly report of accrued/past due income for
the fund. Once an item is identified as past
due and the Corporation has furnished the
necessary claim documentation to the
Custodian, the Custodian will then initiate a
claim on behalf of the Corporation. The
Custodian will furnish the Corporation with a
bi-weekly status report.
2.8 Payment of Fund Moneys. Upon receipt of Proper
Instructions, which may be continuing instructions
when deemed appropriate by the parties, the
Custodian shall pay out moneys of each Fund in the
following cases only:
(1) Upon the purchase of securities, futures
contracts or options on futures contracts for
the account of a Fund but only (a) against
the delivery of such securities, or evidence
of title to futures contracts, to the
Custodian (or any bank, banking firm or trust
company doing business in the United States
or abroad which is qualified under the 1940
Act, as amended, to act as a custodian and
has been designated by the Custodian as its
agent for this purpose) or a sub-custodian
appointed under Section 1 registered as
provided in Section 2.3 hereof or in proper
form for transfer, (b) in the case of a
purchase effected through a Securities
System, in accordance with the conditions set
forth in Section 2.12 hereof or in the case
of a purchase of Book Entry Mutual Fund
Shares, in accordance with the conditions set
forth in Section 2.125 hereof, or (c) in the
case of repurchase agreements entered into
between the Corporation and any other party,
(i) against delivery of the securities either
in certificate form or through an entry
crediting the Custodian's account at the
Federal Reserve Bank with such securities or
(ii) against delivery of the receipt
evidencing purchase for the account of the
Fund of securities owned by the Custodian
along with written evidence of the agreement
by the Custodian to repurchase such
securities from the Fund;
(2) In connection with conversion, exchange or
surrender of securities owned by a Fund as
set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of
a Fund issued by the Corporation as set forth
in Section 2.10 hereof;
(4) For the payment of any expense or liability
incurred by a Fund, including but not limited
to the following payments for the account of
the Fund: interest; taxes; management,
accounting, administration, transfer agent
and legal fees; and operating expenses of the
Fund, whether or not such expenses are to be
in whole or part capitalized or treated as
deferred expenses;
(5) For the payment of any dividends on Shares of
a Fund declared pursuant to the governing
documents of the Corporation;
(6) For payment of the amount of dividends
received in respect of securities sold short;
(7) For any other proper purpose, but only upon
receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Board of the Corporation on
behalf of a Fund signed by an officer of the
Corporation and certified by its Secretary or
an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose
for which such payment is to be made,
declaring such purpose to be a proper
purpose, and naming the person or persons to
whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased. In any and every case where
payment for purchase of securities for the account
of a Fund is made by the Custodian in advance of
receipt of the securities purchased, in the
absence of specific written instructions from the
Corporation to so pay in advance, the Custodian
shall be absolutely liable to the Fund for such
securities to the same extent as if the securities
had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares
of a Fund. From such funds as may be available
for the purpose of repurchasing or redeeming
Shares of a Fund, but subject to the limitations
of the Articles of Incorporation and any
applicable votes of the Board of the Corporation
pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent,
make funds available for payment to holders of
shares of such Fund who have delivered to the
Transfer Agent a request for redemption or
repurchase of their shares including without
limitation through bank drafts, automated
clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of
Shares of the Funds, the Custodian is authorized
upon receipt of instructions from the Transfer
Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any
time or times in its discretion appoint (and may
at any time remove) any other bank or trust
company which is itself qualified under the
Investment Company Act of 1940, as amended, and
any applicable state law or regulation, to act as
a custodian, as its agent to carry out such of the
provisions of this Section 2 as the Custodian may
from time to time direct; provided, however, that
the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities
hereunder.
2.12 Deposit of Fund Assets in Securities System. The
Custodian (including any sub-custodian appointed
under Section 1) may deposit and/or maintain
securities owned by the Funds in a clearing agency
registered with the Securities and Exchange
Commission under Section 17A of the Exchange Act,
which acts as a securities depository, or in the
book-entry system authorized by the U.S.
Department of the Treasury and certain federal
agencies, collectively referred to herein as a
"Securities System", in accordance with applicable
Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and
subject to the following provisions:
(1) The Custodian may keep securities of each
Fund in a Securities System provided that
such securities are represented in an account
("Account") of the Custodian in the
Securities System which shall not include any
assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise
for customers;
(2) The records of the Custodian with respect to
securities of the Funds which are maintained
in a Securities System shall identify by book-
entry those securities belonging to each
Fund;
(3) The Custodian shall pay for securities
purchased for the account of each Fund upon
(i) receipt of advice from the Securities
System that such securities have been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such payment and
transfer for the account of the Fund. The
Custodian shall transfer securities sold for
the account of a Fund upon (i) receipt of
advice from the Securities System that
payment for such securities has been
transferred to the Account, and (ii) the
making of an entry on the records of the
Custodian to reflect such transfer and
payment for the account of the Fund. Copies
of all advices from the Securities System of
transfers of securities for the account of a
Fund shall identify the Fund, be maintained
for the Fund by the Custodian and be provided
to the Corporation at its request. Upon
request, the Custodian shall furnish the
Corporation confirmation of each transfer to
or from the account of a Fund in the form of
a written advice or notice and shall furnish
to the Corporation copies of daily
transaction sheets reflecting each day's
transactions in the Securities System for the
account of a Fund.
(4) The Custodian shall provide the Corporation
with any report obtained by the Custodian on
the Securities System's accounting system,
internal accounting control and procedures
for safeguarding securities deposited in the
Securities System;
(5) The Custodian shall have received the initial
certificate, required by Section 9 hereof;
(6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be
liable to the Corporation for any loss or
damage to a Fund resulting from use of the
Securities System by reason of any
negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of
its or their employees or from failure of the
Custodian or any such agent to enforce
effectively such rights as it may have
against the Securities System; at the
election of the Corporation, it shall be
entitled to be subrogated to the rights of
the Custodian with respect to any claim
against the Securities System or any other
person which the Custodian may have as a
consequence of any such loss or damage if and
to the extent that a Fund has not been made
whole for any such loss or damage.
(7) The authorization contained in this Section
2.12 shall not relieve the Custodian from
using reasonable care and diligence in making
use of any Securities System.
2.125 Book Entry Mutual Fund Shares. The
Custodian may deposit funds with and/or maintain
uncertificated securities of any investment company
with the transfer agent for such securities provided
the Custodian complies with the following:
(1) The Custodian may keep Book Entry Mutual Fund
Shares in an account ("Account") with the
transfer agent in the name of the Custodian as
Custodian for the Fund which Account shall not
include any other assets of Custodian.
(2) The Custodian will confirm with any such
transfer agent that the transfer agent will
maintain segregated accounts representing any
assets held by the Custodian, as agent for the
Fund.
(3) The Custodian shall pay for and redeem Book
Entry Mutual Fund Shares upon receipt of
proper directions from the Corporation. The
Custodian shall send to the Corporation copies
of all confirmations received from the
transfer agents of Book Entry Mutual Fund
Shares of any transfers to or from the
Account.
(4) The Custodian will provide the Corporation
the reports identified in Section 6(2) of this
Contract if requested by the Corporation from
time to time.
(5) The Corporation shall have initially approved
this arrangement with respect to Book Entry
Mutual Fund Shares and this arrangement shall
have been reviewed at least annually
thereafter. The Corporation shall notify the
Custodian if such approval or authority has
been revoked.
(6) Anything to the contrary in this Contract
notwithstanding, the Custodian shall be liable
to the Corporation for any loss or damage to a
Fund resulting from the use of Book Entry
Mutual Fund Shares by reason of any
negligence, misfeasance or misconduct of the
Custodian or any of its agents or any of its
or their employees or from failure of the
Custodian or any such agents to enforce
effectively such rights as it may have against
the transfer agent; at the election of the
Corporation, it shall be entitled to be
subrogated to the rights of the Custodian with
respect to any claim against the transfer
agent or any other person which the Custodian
may have as a consequence of any such loss or
damage if and to the extent that a Fund has
not been made whole for any such loss or
damage.
(7) The authorization contained in this Section
2.125 shall not relieve the Custodian from
using reasonable care and diligence in making
use of Book Entry Mutual Fund Shares.
2.13 Segregated Account. The Custodian shall upon
receipt of Proper Instructions establish and
maintain a segregated account or accounts for and
on behalf of each Fund, into which account or
accounts may be transferred cash and/or
securities, including securities maintained in an
account by the Custodian pursuant to Section 2.12
hereof, (i) in accordance with the provisions of
any agreement among the Corporation, the Custodian
and a broker-dealer registered under the Exchange
Act and a member of the NASD (or any futures
commission merchant registered under the Commodity
Exchange Act), relating to compliance with the
rules of the Options Clearing Corporation and of
any registered national securities exchange (or
the Commodity Futures Trading Commission or any
registered contract market), or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions
for a Fund, (ii) for the purpose of segregating
cash or government securities in connection with
options purchased, sold or written for a Fund or
commodity futures contracts or options thereon
purchased or sold for a Fund, (iii) for the
purpose of compliance by the Corporation or a Fund
with the procedures required by any release or
releases of the Securities and Exchange Commission
relating to the maintenance of segregated accounts
by registered investment companies and (iv) for
other proper corporate purposes, but only, in the
case of clause (iv), upon receipt of, in addition
to Proper Instructions, a certified copy of a
resolution of the Board signed by an officer of
the Corporation and certified by the Secretary or
an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and
declaring such purposes to be proper corporate
purposes.
2.14 [Reserved].
2.15 Ownership Certificates for Tax Purposes. The
Custodian shall execute ownership and other
certificates and affidavits for all federal and
state tax purposes in connection with receipt of
income or other payments with respect to
securities of a Fund held by it and in connection
with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the
securities held hereunder, cause to be promptly
executed by the registered holder of such
securities, if the securities are registered
otherwise than in the name of a Fund or a nominee
of a Fund, all proxies, without indication of the
manner in which such proxies are to be voted, and
shall promptly deliver to the Corporation such
proxies, all proxy soliciting materials and all
notices relating to such securities.
2.17 Communications Relating to Fund Portfolio
Securities. The Custodian shall transmit promptly
to the Corporation all written information
(including, without limitation, pendency of calls
and maturities of securities and expirations of
rights in connection therewith and notices of
exercise of call and put options written by the
Fund and the maturity of futures contracts
purchased or sold by the Fund) received by the
Custodian from issuers of the securities being
held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit
promptly to the Corporation all written
information received by the Custodian from issuers
of the securities whose tender or exchange is
sought and from the party (or his agents) making
the tender or exchange offer. If the Corporation
desires to take action with respect to any tender
offer, exchange offer or any other similar
transaction, the Corporation shall notify the
Custodian in writing at least three business days
prior to the date on which the Custodian is to
take such action. However, the Custodian shall
nevertheless exercise its best efforts to take
such action in the event that notification is
received three business days or less prior to the
date on which action is required. Except for
securities held in a nominee name, the Custodian
will act as a secondary source of information and
will not be responsible for providing corporate
action notification to the Corporation.
2.18 Proper Instructions. Proper Instructions as used
throughout this Section 2 means a writing signed
or initialed by at least two persons, at least one
of them is an officer of the Corporation, as the
Board shall have from time to time authorized by
resolution. Each such writing shall set forth the
specific transaction or type of transaction
involved. Oral instructions will be considered
Proper Instructions if the Custodian reasonably
believes them to have been given by a person
previously authorized in Proper Instructions to
give such instructions with respect to the
transaction involved. The Corporation shall cause
all oral instructions to be confirmed in writing.
Upon receipt of a certificate of the Secretary or
an Assistant Secretary as to the authorization by
the Board of the Corporation accompanied by a
detailed description of procedures approved by the
Board, Proper Instructions may include
communications effected directly between electro-
mechanical or electronic devices provided that the
Board and the Custodian are satisfied that such
procedures afford adequate safeguards for a Fund's
assets.
2.19 Actions Permitted Without Express Authority. The
Custodian may in its discretion, without express
authority from the Corporation:
(1) make payments to itself or others for minor
expenses of handling securities or other
similar items relating to its duties under
this Contract, provided that all such
payments shall be accounted for to the
Corporation in such form that it may be
allocated to the affected Funds;
(2) surrender securities in temporary form for
securities in definitive form;
(3) endorse for collection, in the name of a
Fund, checks, drafts and other negotiable
instruments; and
(4) in general, attend to all non-discretionary
details in connection with the sale,
exchange, substitution, purchase, transfer
and other dealings with the securities and
property of each Fund except as otherwise
directed by the Corporation.
2.20 Evidence of Authority. The Custodian shall be
protected in acting upon any instructions, notice,
request, consent, certificate or other instrument
or paper reasonably believed by it to be genuine
and to have been properly executed on behalf of a
Fund. The Custodian may receive and accept a
certified copy of a vote of the Board of the
Corporation as conclusive evidence (a) of the
authority of any person to act in accordance with
such vote or (b) of any determination of or any
action by the Board pursuant to the Articles of
Incorporation as described in such vote, and such
vote may be considered as in full force and effect
until receipt by the Custodian of written notice
to the contrary.
3. Reserved.
4. Records
The Custodian shall create and maintain all
records relating to its activities and obligations
under this Contract in such manner as will meet the
obligations of the Corporation and the Funds under the
Investment Company Act of 1940, as amended, with
particular attention to Section 31 thereof and Rules
31a-1 and 31a-2 thereunder. All such records shall be
the property of the Corporation and shall at all times
during the regular business hours of the Custodian be
open for inspection by duly authorized officers,
employees or agents of the Corporation and employees
and agents of the Securities and Exchange Commission.
In the event of termination of this Contract, the
Custodian will deliver all such records to the
Corporation, to a successor Custodian, or to such other
person as the Corporation may direct. The Custodian
will electronically transmit daily to the Corporation,
information pertaining to the securities transactions
of the Fund as a "custody only" custodian. The
Custodian shall, at the Corporation's request, supply
the Corporation with a tabulation of securities owned
by a Fund and held by the Custodian and shall, when
requested to do so by the Corporation and for such
compensation as shall be agreed upon between the
Corporation and the Custodian, include certificate
numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants
The Custodian shall take all reasonable action, as the
Corporation may from time to time request, to obtain
from year to year favorable opinions from each Fund's
independent public accountants with respect to its
activities hereunder in connection with the preparation
of the Fund's registration statement, periodic reports,
or any other reports to the Securities and Exchange
Commission and with respect to any other requirements
of such Commission.
6. Asset Verifications; Reports
(1) Assets deposited by the Company with the
Custodian shall be verified by actual examination by
the Corporation's independent public accountant at
least three (3) times during each fiscal year, at least
two of which shall be chosen by such accountant without
prior notice to the Custodian. The Custodian shall
cooperate fully with such examinations, including
making its facilities and the Corporation's assets
available to the accountants on the dates chosen by the
accountants for such examinations.
(2) The Custodian shall provide the Corporation,
at such times as the Corporation may reasonably
request, with reports that have been prepared by on
behalf of the Custodian with respect to the Custodian's
or subcustodian's internal procedures relating to
custody, including, but not limited to, accounting
systems, internal accounting control and procedures for
safeguarding securities, futures contracts and options
on futures contracts, including securities deposited
and/or maintained in a Securities System or use of Book
Entry Mutual Fund Shares.
7. Compensation of Custodian
The Corporation shall pay the Custodian a fee for
its services with respect to each Fund (the "Custody
Fee") at the annual rate set forth on Exhibit A hereto.
The Custody Fee shall be accrued each calendar month
during the term of this Agreement and shall be paid
promptly after the end of the month in which accrued.
The monthly fee accruals will be computed by
multiplying 1/12 by the annual rate and multiplying the
product by the net asset value of the Fund as
determined in accordance with the Corporation's
registration statement as of the close of business on
the last day on which the Fund was open for business of
each month. The Corporation shall also reimburse the
Custodian for any reasonable out-of-pocket expenses the
Custodian incurs on behalf of a Fund in connection with
providing its services hereunder.
8. Responsibility of Custodian
The Custodian shall be held to a standard of
reasonable care in carrying out the provisions of this
Contract; provided, however, that the Custodian shall
be held to any higher standard of care which would be
imposed upon the Custodian by any applicable law or
regulation as if such above stated standard of
reasonable care were not part of this Contract. The
Custodian shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the
Corporation) on all matters, and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice, provided that such action is
not in violation of applicable federal or state laws or
regulations, and is in good faith and without
negligence. The Custodian shall be kept indemnified by
the Corporation but only from the assets of the Fund
involved in the issue at hand and be without liability
for any action taken or thing done by it in carrying
out the terms and provisions of this Contract in
accordance with the above standards.
In order that the indemnification provisions
contained in this Section 8 shall apply, however, it is
understood that if in any case the Corporation may be
asked to indemnify or save the Custodian harmless, the
Corporation shall be fully and promptly advised of all
pertinent facts concerning the situation in question,
and it is further understood that the Custodian will
use all reasonable care to identify and notify the
Corporation promptly concerning any situation which
presents or appears likely to present the probability
of such a claim for indemnification. The Corporation
shall have the option to defend the Custodian against
any claim which may be the subject of this
indemnification, and in the event that the Corporation
so elects it will so notify the Custodian and thereupon
the Corporation shall take over complete defense of the
claim, and the Custodian shall in such situation
initiate no further legal or other expenses for which
it shall seek indemnification under this Section. The
Custodian shall in no case confess any claim or make
any compromise in any case in which the Corporation
will be asked to indemnify the Custodian except with
the Corporation's prior written consent.
If the Corporation requires the Custodian to take
any action with respect to securities, which action
involves the payment of money or which action may, in
the reasonable opinion of the Custodian, result in the
Custodian or its nominee assigned to a Fund being
liable for the payment of money or incurring liability
of some other form, the Custodian may request the
Corporation, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to
the Custodian in an amount and form satisfactory to the
Custodian.
The Corporation agrees to indemnify and hold
harmless the Custodian and its nominee from and against
all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to
herein as authorized charges) incurred or assessed
against it or its nominee in connection with the
performance of this Contract, except such as may arise
from it or its nominee's own failure to act in
accordance with the standard of reasonable care or any
higher standard of care which would be imposed upon the
Custodian by any applicable law or regulation as if
such above-stated standard of reasonable care were not
part of this Contract.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its
execution, shall continue in full force and effect
until terminated as hereinafter provided, may be
amended at any time by written agreement of the parties
hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage
prepaid to the other party, such termination to take
effect not sooner than sixty (60) days after the date
of such delivery or mailing; provided, however, that
the Custodian shall not act under Section 2.12 hereof
in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board
of the Corporation has approved the initial use of a
particular Securities System as required in each case
by Rule 17f-4 under the Investment Company Act of 1940,
as amended; provided further, however, that the
Corporation shall not amend or terminate this Contract
in contravention of any applicable federal or state
regulations, or any provision of the Articles of
Incorporation, and further provided, that the
Corporation may at any time by action of its Board of
Directors (i) substitute another bank or trust company
for the Custodian by giving notice as described above
to the Custodian, or (ii) immediately terminate this
Contract in the event of the appointment of a
conservator or receiver for the Custodian or upon the
happening of a like event at the direction of an
appropriate regulatory agency or court of competent
jurisdiction. This Contract may not be assigned by one
party without the written consent of the other party;
such assignment to take effect not sooner than sixty
(60) days after the date of the written consent.
Upon termination of the Contract, the Corporation
shall pay to the Custodian such compensation as may be
due as of the date of such termination and shall
likewise reimburse the Custodian for its costs,
expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the
Board of the Corporation, or if the Custodian shall
terminate this Contract, the Custodian shall, upon
termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form
for transfer, all securities then held by it hereunder
for each Fund and shall transfer to separate accounts
of the successor custodian all of each Fund's
securities held in a Securities System and the Book-
Entry Mutual Fund Shares.
If the Corporation terminates this Contract and no
such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a
certified copy of a vote of the Board of the
Corporation, deliver at the office of the Custodian and
transfer such securities, funds and other properties in
accordance with such vote.
If the Custodian terminates this Contract and no
successor custodian is appointed or in the event that
no written order designating a successor custodian or
certified copy of a vote of the Board shall have been
delivered to the Custodian on or before the date when
such termination shall become effective, then the
Custodian shall have the right to deliver to a bank or
trust company, which is a "bank" as defined in the
Investment Company Act of 1940, as amended, of its own
selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published
report, of not less than $100,000,000, all securities,
funds and other properties held by the Custodian and
all instruments held by the Custodian relative thereto
and all other property held by it under this Contract
for each Fund and to transfer to separate accounts of
such successor custodian all of each Fund's securities
held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the
Custodian under this Contract.
In the event that securities, funds and other
properties remain in the possession of the Custodian
after the date of termination hereof owing to failure
of the Corporation to procure the certified copy of the
vote referred to or of the Board to appoint a successor
custodian, the Custodian shall be entitled to fair
compensation for its services during such period as the
Custodian retains possession of such securities, funds
and other properties and the provisions of this
Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract,
the Custodian and the Corporation may from time to time
agree on such provisions interpretive of or in addition
to the provisions of this Contract as may in their
joint opinion be consistent with the general tenor of
this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties
and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene
any applicable federal or state regulations or any
provision of the Articles of Incorporation. No
interpretive or additional provisions made as provided
in the preceding sentence shall be deemed to be an
amendment of this Contract.
12. Wisconsin Law to Apply
This Contract shall be construed and the
provisions thereof interpreted under and in accordance
with the internal laws of the State of Wisconsin.
13. Notices
Except as otherwise specifically provided herein,
Notices and other writings delivered or mailed postage
prepaid to the Corporation at 311 Main Street,
La Crosse, Wisconsin 54602, or to the Custodian at 311
Main Street, La Crosse, Wisconsin 54602, or to such
other address as the Corporation or Custodian may
hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective
address.
14. Counterparts
This Contract may be executed simultaneously in
two or ore counterparts, each of which shall be deemed
an original.
IN WITNESS WHEREOF, each of the parties has caused
this instrument to be executed in its name and behalf
by its duly authorized representative as of the ______
day of December, 1998.
LA CROSSE FUNDS, INC.
By:
Name:
Title:
NORTH CENTRAL TRUST
COMPANY
By:
Name:
Title:
MW1-143684-3
EXHIBIT A
to the
Custodian Contract
LA CROSSE LARGE CAP STOCK FUND
For all services rendered by the Custodian
hereunder, the Corporation shall pay the Custodian, on
behalf of the above-named Fund, and the Custodian
agrees to accept as full compensation for all services
rendered hereunder, an annual custodian fee equal to
0.01% of the average daily net assets of the Fund.
The annual custodian fee shall be accrued monthly
at the rate of 1/12th of 0.01% applied to the net
assets of the Fund on the last day on which the Fund is
open for business of each month. The custodian fee so
accrued, plus out-of-pocket expenses, shall be paid by
the Corporation to the Custodian monthly.
Executed this ______ day of _____________, 1998.
The Custodian:
NORTH CENTRAL TRUST COMPANY
By:_______________________
Gary M. Veldey
Chief Executive
Officer
The Corporation:
LA CROSSE FUNDS, INC.
By:_______________________
Steven J. Hulme
President
TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made as of this ___ day of
December, 1998, by and between La Crosse Funds, Inc., a
Wisconsin corporation (the "Corporation"), and Sunstone
Financial Group, Inc., a Wisconsin corporation
("Sunstone"):
WHEREAS, the Corporation is registered under the
Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company and
is authorized to issue shares of common stock
("Shares") in separate series with each such series
representing the interests in a separate portfolio of
securities and other assets;
WHEREAS, the Corporation and Sunstone desire to
enter into an agreement pursuant to which Sunstone
shall provide certain transfer agency services to such
investment portfolios of the Corporation as are listed
on Schedule A hereto and any additional investment
portfolios the Corporation and Sunstone may agree upon
and include on Schedule A as such Schedule may be
amended from time to time (such investment portfolios
and any additional investment portfolios are
individually referred to as a "Fund" and collectively
the "Funds").
NOW, THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good
and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
ARTICLE I
APPOINTMENT OF TRANSFER AGENT
A. Appointment.
1. The Corporation hereby appoints Sunstone
as transfer agent and dividend disbursing agent of all
the Shares of the Funds during the period of this
Agreement, and Sunstone hereby accepts such appointment
as transfer agent and dividend disbursing agent and
agrees to perform the duties thereof as hereinafter set
forth.
2. Sunstone shall perform the transfer agent
and dividend disbursing agent services described on
Schedule B hereto. To the extent that the Corporation
requests Sunstone to perform any additional services,
Sunstone and the Corporation shall mutually agree as to
the services to be accomplished, the manner of
accomplishment and the compensation to which Sunstone
shall be entitled with respect thereto.
3. Sunstone may, in its discretion, appoint in
writing other parties qualified to perform transfer
agency services reasonably acceptable to the
Corporation (individually, a "Sub-transfer Agent") to
carry out some or all of its responsibilities under
this Agreement with respect to a Fund; provided,
however, that unless the Corporation shall enter into a
written agreement with such Sub-transfer Agent, the Sub-
transfer Agent shall be the agent of Sunstone and not
the agent of the Corporation or such Fund and, in such
event Sunstone shall be fully responsible for the acts
or omissions of such Sub-transfer Agent and shall not
be relieved of any of its responsibilities hereunder by
the appointment of such Sub-transfer Agent.
4. Subject to Sunstone's duty to act in good
faith with respect to the services, obligations and
covenants described in this Agreement, Sunstone shall
have no duties or responsibilities whatsoever hereunder
except such duties and responsibilities as are
specifically set forth in this Agreement, and no
covenant or obligation shall be implied in this
Agreement against Sunstone.
B. Documents/Records/Authorizations.
1. In connection with such appointment, the
Corporation shall deliver or cause to be delivered the
following documents to Sunstone:
a) A copy of the Articles of Incorporation
and By-laws of the Corporation and all amendments
thereto, each certified by the Secretary of the
Corporation;
b) A certificate signed by an officer of
the Corporation specifying: the number of authorized
Shares and the number of such authorized Shares issued
and currently outstanding, if any;
c) A certified copy of the resolutions of
the Board of Directors of the Corporation appointing
Sunstone as transfer agent and dividend disbursing
agent and authorizing the execution of this Transfer
Agency Agreement on behalf of the Funds; and
d) Copies of the Corporation's Registration
Statement, as amended to date, and the most recently
filed Post-Effective Amendment thereto, filed by the
Corporation with the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "1933
Act"), and under the 1940 Act, as amended, together
with any applications filed in connection therewith.
2. The Corporation agrees to deliver or to
cause to be delivered to Sunstone in Milwaukee,
Wisconsin, at the Corporation's expense, all of its
shareholder account records relating to the Funds in a
format acceptable to Sunstone and all such other
documents, records and information as Sunstone may
reasonably request in order for Sunstone to perform its
services hereunder.
3. The Corporation agrees to deliver or cause
to be delivered to Sunstone from time to time the
certificate required by Article III, Section D(1) of
this Agreement, signed by an officer of the Corporation
and designating the names of the individuals authorized
to provide oral instructions and to sign written
instructions and requests on behalf of the Corporation
(hereinafter referred to individually as an "Authorized
Person" and collectively as "Authorized Persons").
ARTICLE II
COMPENSATION & EXPENSES
A. Compensation. In consideration for its services
hereunder as transfer agent and dividend disbursing
agent, each Fund will pay to Sunstone such compensation
as provided in Schedule C.
B. Expenses. The Corporation on behalf of each
Fund also agrees to promptly reimburse Sunstone for all
reasonable out-of-pocket expenses or disbursements
incurred by Sunstone in connection with the performance
of services under this Agreement including, but not
limited to, expenses for postage, express delivery
services, freight charges, envelopes, checks, drafts,
forms (continuous or otherwise), specially requested
reports and statements, bank account service fees and
charges, telephone calls, telegraphs, stationery
supplies, outside printing and mailing firms, magnetic
tapes, reels or cartridges (if sent to a Fund or to a
third party at a Fund's request) and magnetic tape
handling charges, on-site and off-site record storage,
media for storage of records (e.g., microfilm,
microfiche, optical platters, computer tapes and
disks), computer equipment installed at a Fund's
request at a Fund's or a third party's premises,
telecommunications equipment,
telephone/telecommunication lines between the
Corporation and its agents, on one hand, and Sunstone
on the other, proxy soliciting, processing and/or
tabulating costs, second site back-up computer
facility, transmission of statement data for remote
printing or processing, and transaction fees to the
extent any of the foregoing are paid by Sunstone. Such
expenses shall not include personnel charges except
with the prior approval of an Authorized Person. If
requested by Sunstone, postage and other out-of-pocket
expenses are payable in advance, and in the event
requested, postage is due at least seven days prior to
the anticipated mail date. Other out-of pocket expenses
are payable in advance if so requested by Sunstone. In
the event Sunstone requests advance payment, Sunstone
shall not be obligated to incur such expenses or
perform the related service(s) until payment is
received. Sunstone may, at its option, arrange to have
various service providers submit invoices directly to
the Corporation for payment of out-of pocket expenses
reimbursable hereunder.
C. Payment Procedures.
1. Amounts due hereunder shall be due and paid
by the respective Fund on or before the thirtieth
(30th) day after the date of the statement therefor
(the "Due Date"). Service fees are billed monthly, and
out-of-pocket expenses are billed as incurred (unless
prepayment is requested by Sunstone). Sunstone may, at
its option, arrange to have various service providers
submit invoices directly to the Funds for payment of
out-of-pocket expenses reimbursable hereunder. The
Corporation is aware that its failure to pay all
amounts in a timely fashion so that they will be
received by Sunstone on or before the Due Date will
give rise to costs to Sunstone not contemplated by this
Agreement, including but not limited to carrying,
processing and accounting charges. Accordingly, in the
event that any amounts due hereunder are not received
by Sunstone by the Due Date, the Corporation shall pay
a late charge equal to one percent (1.0%) per month or
the maximum amount permitted by law, whichever is less,
until paid in full. In addition, the Corporation shall
pay reasonable attorney's fees and court costs of
Sunstone if any amounts due Sunstone are collected by
or through an attorney. The parties hereby agree that
such late charge represents a fair and reasonable
computation of the costs incurred by reason of late
payment or payment of amounts not properly due.
Acceptance of such late charge shall in no event
constitute a waiver of a Fund's default or prevent
Sunstone from exercising any other rights and remedies
available to it.
2. In the event that any charges are disputed,
the Fund shall, on or before the Due Date, pay all
undisputed amounts due hereunder and notify Sunstone in
writing of any disputed charges for out-of-pocket
expenses which it is disputing in good faith. Payment
for such disputed charges shall be due on or before the
close of the fifth (5th) business day after the day on
which Sunstone provides to the Corporation
documentation which an objective observer would agree
reasonably supports the disputed charges (the "Revised
Due Date"). Late charges shall not begin to accrue as
to charges disputed in good faith until the first day
after the Revised Due Date.
ARTICLE III
PROCESSING AND PROCEDURES
A. Issuance, Redemption and Transfer of Shares
1. Sunstone acknowledges that it has received a
copy of each Fund's Prospectus (as hereinafter
defined), which Prospectus describes how sales and
redemptions of shares of each Fund shall be made and
Sunstone agrees to accept purchase orders and
redemption requests with respect to Fund shares on each
Fund Business Day in accordance with such Prospectus.
"Fund Business Day" shall be deemed to be each day on
which the New York Stock Exchange is open for trading,
and "Prospectus" shall mean the last Fund prospectus
actually received by Sunstone from the Fund with
respect to which the Fund has indicated a registration
statement under the 1933 Act has become effective,
including the Statement of Additional Information,
incorporated by reference therein.
2. On each Fund Business Day Sunstone shall, as
of the time at which the net asset value of each Fund
is computed, issue to and redeem from the accounts
specified in a purchase order or redemption request in
proper form and accepted by the Corporation, which in
accordance with the Prospectus is effective on such
day, the appropriate number of full and fractional
Shares based on the net asset value per Share of the
respective Fund specified in a net asset value
calculation received on such Fund Business Day from or
on behalf of the Fund.
3. Upon the issuance of any Shares in
accordance with this Agreement, Sunstone shall not be
responsible for the payment of any original issue or
other taxes required to be paid by the Fund in
connection with such issuance of any Shares.
4. Sunstone shall not be required to issue any
Shares after it has received from an Authorized Person
or from an appropriate federal or state authority
written notification that the sale of Shares has been
suspended or discontinued, and Sunstone shall be
entitled to rely upon such written notification.
5. Upon receipt of a redemption request and
monies paid to it by the Custodian in connection with a
redemption of Shares, Sunstone shall cancel the
redeemed Shares and after making appropriate deduction
for any withholding of taxes required of it by
applicable law, make payment in accordance with the
Fund's redemption and payment procedures described in
the Prospectus.
6. (a) Except as otherwise provided in sub-
paragraph (b) of this paragraph, Shares will be
transferred or redeemed upon presentation to Sunstone
of instructions properly endorsed for transfer or
redemption, accompanied by such documents as Sunstone
deems necessary to evidence the authority of the person
making such transfer or redemption, and bearing
satisfactory evidence of the payment of stock transfer
taxes. Sunstone reserves the right to refuse to
transfer or redeem Shares until it is satisfied that
the instructions are valid and genuine, and for that
purpose it will require, unless otherwise instructed by
an Authorized Person or except as provided in sub-
paragraph (b) of this paragraph, a guarantee of
signature by an "Eligible Guarantor Institution" as
that term is defined by SEC Rule 17Ad-15. Sunstone
also reserves the right to refuse to transfer or redeem
Shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it
shall incur no liability for the refusal, in good
faith, to make transfers or redemptions which Sunstone,
in its judgment, deems improper or unauthorized, or
until it is satisfied that there is no reasonable basis
to any claims adverse to such transfer or redemption.
Sunstone may, in effecting transfers and redemptions of
Shares, rely upon those provisions of the Uniform Act
for the Simplification of Fiduciary Security Transfers
or the Uniform Commercial Code, as the same may be
amended from time to time, applicable to the transfer
of securities, and the applicable Fund or Funds shall
indemnify Sunstone for any act done or omitted by it in
good faith in reliance upon such laws. In no event will
a Fund indemnify Sunstone for any act done by it as a
result of willful misfeasance, bad faith, negligence or
reckless disregard of its duties.
(b) Notwithstanding the foregoing or any
other provision contained in this Agreement to the
contrary, Sunstone shall be fully protected by each
Fund in not requiring any instruments, documents,
assurances, endorsements or guarantees, including,
without limitation, any signature guarantees, in
connection with a redemption, or transfer, of Shares
whenever Sunstone reasonably believes that requiring
the same would be inconsistent with the transfer and
redemption procedures as described in the Prospectus.
7. Notwithstanding any provision contained in
this Agreement to the contrary, Sunstone shall not be
required to request, as a condition to any transfer or
redemption of any Shares pursuant to paragraph 6 of
this Article or any redemption of shares pursuant to a
computer tape or electronic data transmission, any
documents to evidence the authority of the person
requesting the transfer or redemption and/or the
payment of any stock transfer taxes, unless Sunstone
has some reasonable basis upon which to question said
authority, and shall be fully protected in acting in
accordance with the applicable provisions of this
Article.
8. In connection with each purchase and each
redemption of Shares, Sunstone shall prepare and send
to shareholders such statements as are prescribed by
the Federal securities laws applicable to transfer
agents or as described in the Prospectus. It is
understood that certificates representing Shares will
not be offered by the Corporation or available to
investors.
9. Procedures for effecting purchase,
redemption or transfer transactions accepted from
investors by telephone or other methods shall be
established by mutual agreement between the Corporation
and Sunstone consistent with the terms of the
Prospectus. Sunstone upon written notice to the
Corporation may establish such additional procedures,
rules and regulations governing the purchase,
redemption or transfer of Shares, as it may deem
advisable and consistent with such rules and
regulations generally adopted by mutual fund transfer
agents. Sunstone shall not be liable, and shall be held
harmless by the Corporation, for its actions or
omissions which are consistent with the foregoing
procedures.
10. Prior to the effective date of any increase
or decrease in the total number of Shares authorized to
be issued, or the issuance of any additional Shares of
a Fund pursuant to stock dividends, stock splits,
recapitalizations, capital adjustments or similar
transactions, the Corporation agrees to deliver to
Sunstone such documents, certificates, reports and
legal opinions as Sunstone may reasonably request.
B. Dividends and Distributions.
1. The Corporation shall furnish to Sunstone a
copy of a resolution of its Board of Directors,
certified by an Authorized Person, either (i) setting
forth the date of the declaration of a dividend or
distribution, the date of accrual or payment, as the
case may be, thereof, the record date as of which
shareholders entitled to payment, or accrual, as the
case may be, shall be determined, the amount per Share
of such dividend or distribution, the payment date on
which all previously accrued and unpaid dividends are
to be paid, and the total amount, if any, payable to
Sunstone (as dividend disbursing agent) on such payment
date, or (ii) authorizing the declaration of dividends
and distributions on a daily or other periodic basis
and authorizing Sunstone to rely on a certificate of an
Authorized Person setting forth the information
described in subsection (i) of this paragraph.
2. In connection with a reinvestment of a
dividend or distribution of Shares of a Fund, Sunstone
shall as of each Fund Business Day, as specified in a
certificate or resolution described in paragraph 1,
issue Shares of the Fund based on the net asset value
per Share of such Fund specified in instructions
received from or on behalf of the Fund on such Fund
Business Day.
3. Upon the mail date specified in such
certificate or resolution, as the case may be, the
Corporation shall, in the case of a cash dividend or
distribution, cause the Custodian to deposit in an
account in the name of Sunstone on behalf of a Fund, an
amount of cash, if any, sufficient for Sunstone to make
the payment, as of the mail date, specified in such
certificate or resolution, as the case may be, to the
shareholders who were of record on the record date.
Sunstone will, upon receipt of any such cash, make
payment of such cash dividends or distributions to the
shareholders of record as of the record date. Sunstone
shall not be liable for any improper payments made in
good faith and without negligence, in accordance with a
certificate or resolution described in the preceding
paragraph. If Sunstone shall not receive from the
Custodian sufficient cash to make payments of any cash
dividend or distribution to all shareholders of a Fund
as of the record date, Sunstone shall, upon notifying
the Fund, withhold payment to all shareholders of
record as of the record date until sufficient cash is
provided to Sunstone.
4. It is understood that Sunstone in its
capacity as transfer agent and dividend disbursing
agent shall in no way be responsible for the
determination of the rate or form of dividends or
capital gain distributions due to the shareholders
pursuant to the terms of this Agreement. It is
expressly agreed and understood that Sunstone is not
liable for any loss as a result of processing a
distribution based on information provided in the
Certificate that is incorrect. The Funds agree to pay
Sunstone for any and all costs, both direct and out-of-
pocket expenses, incurred in such corrective work as
necessary to remedy such error, provided that Sunstone
has acted in good faith and without negligence.
5. It is understood that Sunstone shall file
with the Internal Revenue Service and send to
shareholders such appropriate federal tax forms
concerning the payment of dividend and capital gain
distributions but shall in no way be responsible for
the collection or withholding of taxes due on such
dividends or distributions due to shareholders, except
and only to the extent required by applicable law.
C. Records.
1. Sunstone shall keep such records as are
specified in Schedule D hereto in the form and manner,
and for such period, as it may deem advisable but not
inconsistent with the rules and regulations of
appropriate government authorities, in particular Rules
31a-2 and 31a-3 under the 1940 Act. Sunstone may
deliver to the Corporation from time to time at its
discretion, for safekeeping or disposition by the
Corporation in accordance with law, such records,
papers and documents accumulated in the execution of
its duties as such transfer agent, as Sunstone may deem
expedient, other than those which Sunstone is itself
required to maintain pursuant to applicable laws and
regulations. The Corporation shall assume all
responsibility for any failure thereafter to produce
any record, paper, or other document so returned, if
and when required. To the extent required by Section
31 of the 1940 Act and the rules and regulations
thereunder, the records specified in Schedule D hereto
maintained by Sunstone, which have not been previously
delivered to the Corporation pursuant to the foregoing
provisions of this paragraph, shall be considered to be
the property of the Corporation, shall be made
available upon request for inspection by the officers,
employees, and auditors of the Corporation, and shall
be delivered to the Corporation promptly upon request
and in any event upon the date of termination of this
Agreement, in the form and manner kept by Sunstone on
such date of termination or such earlier date as may be
requested by the Corporation.
2. Sunstone agrees to keep all records and
other information relative to the Corporation, the
Funds and their shareholders confidential. In case of
any requests or demands for the inspection of the
shareholder records of a Fund, Sunstone will endeavor
to notify the Fund promptly and to secure instructions
from an Authorized Person as to such inspection.
Sunstone reserves the right, however, to exhibit the
shareholder records to any person whenever it believes
that there is a reasonable likelihood that Sunstone
will be held liable for the failure to exhibit the
shareholder records to such person; provided, however,
that in connection with any such disclosure Sunstone
shall promptly notify the Corporation that such
disclosure has been made or is to be made.
Notwithstanding the foregoing, Sunstone may disclose
information when requested by a shareholder concerning
an account as to which such shareholder claims a legal
or beneficial interest or when requested by the
Corporation, the shareholder or the dealer of record as
to such account.
D. Miscellaneous.
Upon the execution of this Agreement, the
Corporation shall provide Sunstone with a certificate
containing the names of the initial Authorized Persons.
Any officer of the Corporation has the authority to
appoint additional Authorized Persons, to limit or
revoke the authority of any previously Authorized
Person, and to certify to Sunstone the names of the
Authorized Persons from time to time. The Corporation
shall provide Sunstone with an updated certificate
evidencing the appointment, removal or change of
authority of any Authorized Person, it being understood
Sunstone shall not be held to have notice of any change
in the authority of any Authorized Person until receipt
of written notice thereof from the Corporation.
ARTICLE IV
CONCERNING THE CORPORATION
A. Representations. The Corporation represents and
warrants to Sunstone that:
(a) It is a corporation duly organized and
existing under the laws of the State of Wisconsin, it
is empowered under applicable laws and by its Articles
of Incorporation and By-Laws to enter into and perform
this Agreement, and all requisite corporate proceedings
have been taken to authorize it to enter into and
perform this Agreement.
(b) It is an investment company registered under
the 1940 Act.
(c) A registration statement under the 1933 Act
with respect to the Shares is effective.
(d) Each officer of the Corporation has the
authority to appoint additional Authorized Persons, to
limit or revoke the authority of any previously
Authorized Person, and to certify to Sunstone the names
of the Authorized Persons from time to time.
B. Covenants.
1. The Corporation will provide to Sunstone
copies of all amendments to its Articles of
Incorporation and By-laws made after the date of this
Agreement. If requested by Sunstone, each copy of the
Articles of Incorporation of the Corporation and copies
of all amendments thereto shall be certified by the
Secretary of the Corporation. Each copy of the By-Laws
and copies of all amendments thereto, and copies of
resolutions of the Board of Directors, shall be
certified by the Secretary of the Corporation, if
requested by Sunstone.
2. The officers shall promptly deliver to
Sunstone written notice of any change in the Authorized
Persons, together with a specimen signature of each new
Authorized Person.
3. The Corporation shall deliver to Sunstone
each Fund's currently effective Prospectus and, for
purposes of this Agreement, Sunstone shall not be
deemed to have notice of any information contained in
such Prospectus until five (5) business days after it
is actually received by Sunstone.
4. All requisite steps will be taken by the
Corporation from time to time when and as necessary to
register the Corporation's shares for sale in all
states in which the Corporation's shares shall at the
time be offered for sale and require registration. If
at any time the Corporation receives notice of any stop
order or other proceeding in any such state affecting
such registration or the sale of the Corporation's
shares, or of any stop order or other proceeding under
the federal securities laws affecting the registration
or sale of the Corporation's shares, the Corporation
will give prompt notice thereof to Sunstone.
5. The Corporation will comply with all
applicable requirements of the 1933 Act, the Securities
Exchange Act of 1934, as amended, the 1940 Act, blue
sky laws, and any other applicable laws, rules and
regulations.
6. The Corporation agrees that prior to
effecting any change in the Prospectus which would
increase or alter the duties and obligations of
Sunstone hereunder, it shall advise Sunstone of such
proposed change at least 30 days prior to the intended
date of the same, and shall proceed with such change
only if it shall have received the written consent of
Sunstone thereto, which shall not be unreasonably
withheld.
ARTICLE V
CONCERNING THE TRANSFER AGENT
A. Representations. Sunstone represents and
warrants to the Fund that:
(a) It is a corporation duly organized and
existing under the laws of the State of Wisconsin, is
empowered under applicable law and by its Articles of
Incorporation to enter into and perform this Agreement,
and all requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement.
(b) It is duly registered as a transfer agent
under Section 17A of the Securities Exchange Act of
1934, as amended, to the extent required, and will
comply with all applicable laws in performing its
services hereunder.
(c) Sunstone acknowledges that the
Corporation has inquired of Sunstone as to the Year
2000 compliance status of its computer systems and
software and those of its software vendors. Sunstone
shall report to the Board of the Corporation at least
quarterly as to the Year 2000 compliance status of its
mission critical computer systems and software .
B. Limitation of Liability.
1. Sunstone shall not be liable for any loss or
damage, including counsel fees, resulting from its
actions or omissions to act or otherwise, except for
any loss or damage arising out of its bad faith,
willful misfeasance, negligence or reckless disregard
of its duties under this Agreement. Sunstone shall not
be liable and shall be indemnified in acting upon any
writing or document reasonably believed by it to be
genuine and to have been signed or made by an
Authorized Person or verbal instructions which the
individual receiving the instructions on behalf of
Sunstone reasonably believes in good faith to have been
given by an Authorized Person, and Sunstone shall not
be held to have any notice of any change of authority
of any person until receipt of written notice thereof
from an Authorized Person.
2. Sunstone assumes no responsibility
hereunder, and shall not be liable, for any damage,
loss of data, errors, delay or any other loss
whatsoever caused by events beyond its reasonable
control. Sunstone will, however, take all reasonable
steps to minimize service interruptions for any period
that such interruption continues beyond Sunstone's
control.
3. In no event and under no circumstances shall
either party to this Agreement be liable to anyone,
including, without limitation to the other party, for
consequential or punitive damages for any act or
failure to act under any provision of this Agreement
even if advised of the possibility thereof.
C. Indemnification.
1. The Corporation shall indemnify and hold
harmless Sunstone from and against any and all claims,
demands, losses, damages, costs, charges, payments,
expenses (including reasonable attorney's fees) and
liabilities of any and every nature which Sunstone may
sustain or incur or which may be asserted against
Sunstone by any person arising out of or attributable
to any action or failure or omission to act by Sunstone
in good faith and without negligence or willful
misconduct, or in reliance upon (i) any provision of
this Agreement; (ii) the Prospectus; (iii) any
instrument or order reasonably believed by it to be
genuine and to be signed, countersigned or executed by
an Authorized Person; (iv) any other instructions of an
Authorized Person; or (v) any opinion of legal counsel
for the Corporation or, if approved by the Corporation,
for Sunstone. In addition, the Corporation shall
indemnify and hold harmless Sunstone from and against
any and all claims (whether with or without basis in
fact or law), demands, expenses (including reasonable
attorney's fees) and liabilities of any and every
nature which Sunstone may sustain or incur or which may
be asserted against Sunstone by any person by reason of
or as a result of any action taken or omitted to be
taken by Sunstone in good faith in connection with its
appointment or in reliance upon any law, act,
regulation or any interpretation of the same.
2. Sunstone shall indemnify and hold harmless
the Corporation from and against any and all claims,
demands, losses, damages, costs, charges, payments,
expenses (including reasonable attorney's fees) and
liabilities of any and every nature which the
Corporation may sustain or incur or which may be
asserted against the Corporation by any person arising
out of or attributable to any action or failure or
omission to act by Sunstone as a result of Sunstone's
lack of good faith, negligence, willful misconduct or
reckless disregard of its duties under this Agreement.
3. The party seeking indemnification under this
Section (C) (the "Indemnified Party") shall not settle
any claim, demand, expense or liability to which it may
seek indemnity (each, an "Indemnifiable Claim") without
the express written consent of the party against which
indemnification is sought (the "Indemnifying Party").
The Indemnified Party shall notify the Indemnifying
Party promptly after receipt of notification of an
Indemnifiable Claim, provided that the failure to
furnish such notification shall not impair the
Indemnified Party's right to seek indemnification
unless the Indemnifying Party is unable to adequately
defend the Indemnifiable Claim as a result of such
failure, and further provided, that if as a result of
the failure to provide timely notice of the institution
of litigation a judgment by default is entered, prior
to seeking indemnification, the Indemnified Party, at
its own cost and expense, shall open such judgment.
The Indemnifying Party shall have the right to defend
any Indemnifiable Claim at its own expense, provided
that such defense shall be conducted by counsel
selected by the Indemnifying Party and reasonably
acceptable to the Indemnified Party. The Indemnified
Party may join in such defense at its own expense, but
to the extent that it shall so desire the Indemnifying
Party shall direct such defense. The Indemnifying
Party shall not settle any Indemnifiable Claim without
the express written consent of the Indemnified Party if
the Indemnified Party determines that such settlement
would have an adverse effect on the Indemnified Party
beyond the scope of this Agreement. In such event,
each of the Indemnifying Party and the Indemnified
Party shall be responsible for their own defense at
their own cost and expense, and such claim shall not be
deemed an Indemnifiable Claim hereunder. If the
Indemnifying Party shall fail or refuse to defend an
Indemnifiable Claim, the Indemnified Party may provide
its own defense at the cost and expense of the
Indemnifying Party. Anything in this Agreement to the
contrary notwithstanding, the Indemnifying Party shall
not indemnify the Indemnified Party against any
liability or expense arising out of the Indemnified
Party's willful misfeasance, bad faith, negligence or
reckless disregard of its duties and obligations under
this Agreement.
4. The indemnity and defense provisions
provided hereunder shall indefinitely survive the
termination of this Agreement.
D. Procedures.
1. At any time Sunstone may apply to an
Authorized Person of the Corporation for written
instructions with respect to any matter arising in
connection with Sunstone's duties and obligations under
this Agreement, and Sunstone shall not be liable for
any action taken or permitted by it in good faith in
accordance with such written instructions. Such
application by Sunstone for written instructions from
an Authorized Person of the Corporation may set forth
in writing any action proposed to be taken or omitted
by Sunstone with respect to its duties or obligations
under this Agreement and the date on and/or after which
such action shall be taken. Sunstone shall not be
liable for any action taken or omitted in accordance
with a proposal included in any such application on or
after the date specified therein unless, prior to
taking or omitting any such action, Sunstone has
received written instructions in response to such
application specifying the action to be taken or
omitted. Sunstone may consult counsel of the
Corporation, or upon prior notice and approval from the
Corporation, its own counsel, at the expense of the
Corporation and shall be fully protected with respect
to anything done or omitted by it in good faith in
accordance with the advice or opinion of counsel to the
Corporation or its own counsel.
2. Notwithstanding any of the foregoing
provisions of this Agreement, Sunstone shall be under
no duty or obligation under this Agreement to inquire
into, and shall not be liable for:
(a) The legality of the issue or sale of any
Shares, the sufficiency of the amount to be received
therefor, or the authority of the Corporation, as the
case may be, to request such sale or issuance;
(b) The legality of a transfer of Shares, or
of a redemption of any Shares (but the foregoing shall
not limit Sunstone's obligations pursuant to Article
III (A)(6) of this Agreement), the propriety of the
amount to be paid therefor, or the authority of the
Corporation, as the case may be, to request such
transfer or redemption;
(c) The legality of the declaration of any
dividend by the Corporation, on behalf of a Fund or
Funds, or the legality of the issue of any Shares in
payment of any stock dividend; or
(d) The legality of any recapitalization or
readjustment of Shares.
ARTICLE VI
TERM
1. This Agreement shall become effective with
respect to each Fund listed on Schedule A hereof as of
the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is
executed. This Agreement shall continue in effect with
respect to each Fund for a period of one-year from the
date hereof. Thereafter, if not terminated as provided
herein, this Agreement shall continue automatically in
effect as to each Fund for successive annual periods.
Each party, in addition to any other rights and
remedies, shall have the right to terminate this
Agreement at any time upon the material breach of this
Agreement by the other party. In the event of a
material breach, the non-breaching party shall notify
the breaching party in writing of such breach and upon
receipt of such notice, the breaching party shall have
45 days to remedy the breach or the non-breaching party
may forthwith terminate this Agreement upon the
expiration of said period.
2. This Agreement may be terminated with
respect to any one or more particular Funds without
penalty (i) upon mutual consent of the parties, or
(ii) by either party upon not less than sixty (60)
days' written notice to the other party (which notice
may be waived by the party entitled to the notice). In
the event such notice is given by the Corporation, it
shall be accompanied by a copy of a resolution of the
Board of Directors of the Corporation, certified by the
Secretary or any Assistant Secretary, electing to
terminate this Agreement and designating the successor
transfer agent or transfer agents. In the event such
notice is given by Sunstone, the Corporation shall on
or before the termination date, deliver to Sunstone a
copy of a resolution of its Board of Directors
certified by the Secretary or any Assistant Secretary
designating a successor transfer agent or transfer
agents. In the absence of such designation by the
Corporation, the Corporation shall upon the date
specified in the notice of termination of this
Agreement and delivery of the records maintained
hereunder, be deemed to be its own transfer agent and
Sunstone shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement. Fees and
out-of-pocket expenses incurred by Sunstone, but unpaid
by the Corporation upon such termination, shall be
immediately due and payable upon and notwithstanding
such termination.
3. In the event this Agreement is terminated as
provided herein, Sunstone, upon the written request of
the Corporation, shall deliver the records of the
Corporation to the Corporation or its successor
transfer agent in the form maintained by Sunstone. The
Corporation shall be responsible to Sunstone for all
out-of-pocket expenses and for the reasonable costs and
expenses associated with the preparation and delivery
of such media, including: (a) any custom programming
requested by the Corporation in connection with the
preparation of such media; (b) transportation of forms
and other Corporation materials used in connection with
the processing of Fund transactions by Sunstone; and
(c) transportation of the Corporation's records and
files in the possession of Sunstone. In addition, in
the event of termination of this Agreement, or the
proposed liquidation or merger of the Corporation or a
Fund(s), and the Corporation requests the Sunstone to
provide services in connection therewith, Sunstone
shall provide such services and be entitled to such
compensation as the parties may mutually agree.
Sunstone shall not reduce the level of service provided
to the Corporation following notice of termination by
the Corporation and, subject to this subparagraph 3,
shall assist the Corporation in the transition of the
functions to the successor transfer agent.
ARTICLE VII
MISCELLANEOUS
A. Notices. Any notice or other instrument in
writing, authorized or required pursuant to Article VI
to be given to the Corporation with respect to any Fund
shall be sufficiently given if addressed to the
Corporation and mailed and delivered to the President,
La Crosse Funds, Inc. 311 Main Street, La Crosse,
Wisconsin 54601, or at such other place as the
Corporation may from time to time designate in writing.
Any notice or other instrument in writing, authorized
or required pursuant to Article VI to be given to
Sunstone shall be sufficiently given if addressed to
Sunstone and mailed or delivered to the President at
207 East Buffalo Street, Suite 400, Milwaukee,
Wisconsin 53202, or at such other place as Sunstone may
from time to time designate in writing.
B. Amendments/Assignments.
1. This Agreement may not be amended or
modified in any manner except by a written agreement
executed by both parties.
2. This Agreement shall extend to and shall be
binding upon the parties hereto, and their respective
successors and assigns. This Agreement shall not be
assignable by either party without the written consent
of the other party except that Sunstone may assign this
Agreement to an affiliate with advance written notice
to the Corporation; provided, however, the personnel of
the affiliate have the same or better qualifications
and experience as Sunstone.
C. Wisconsin Law. This Agreement shall be governed
by and construed in accordance with the laws of the
State of Wisconsin. If any part, term or provision of
this Agreement is determined by the courts or any
regulatory authority having jurisdiction over the issue
to be illegal, in conflict with any law or otherwise
invalid, the remaining portion or portions shall be
considered severable and shall not be affected, and the
rights and obligations of the parties shall be
construed and enforced as if the Agreement did not
contain the particular part, term or provision held to
be illegal or invalid.
D. Counterparts. This Agreement may be executed in
any number of counterparts each of which shall be
deemed to be an original; but such counterparts shall,
together, constitute only one instrument.
E. Non-Exclusive; Other Agreements. The services
of Sunstone hereunder are not deemed exclusive and
Sunstone shall be free to render similar services to
others. 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 any party hereunder
shall not affect any rights or obligations of any other
party thereunder.
F. Captions. The captions in the Agreement are
included for convenience of reference only, and in no
way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective
corporate officer, thereunto duly authorized, as of the
day and year first above written.
SUNSTONE FINANCIAL GROUP, INC. LA CROSSE FUNDS, INC.
By:________________________ By:_______________________
(Signature) (Signature)
___________________________ ___________________________
(Name) Steven J. Hulme, President
___________________________
(Title)
Schedule A
to the
Transfer Agent Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
LA CROSSE LARGE CAP STOCK FUND
Schedule B
to the
Transfer Agent Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
SERVICES
Maintenance of shareholder accounts
Maintain records for each shareholder account;
Scan account documents for electronic storage;
Record changes to shareholder account information;
Maintain account documentation files for each shareholder; and
Establish and maintain retirement plan accounts.
Shareholder servicing and shareholder transactions
Respond to written and telephone (recorded lines)
inquiries from shareholders for information about their
accounts;
Process shareholder purchase and redemption
orders, including those of automatic investment and
systematic withdrawal plans;
Set up account information, including address,
dividend options, taxpayer identification numbers and
wire instructions;
Issue transaction confirmations;
Process transfers and exchanges;
Process dividend payments by check, wire or ACH or
purchase new shares through dividend reinvestment; and
Issues customer statements, including consolidated
and duplicate statements.
Compliance reporting and proxy processing
Provide required reports to the Securities and
Exchange Commission, the National Association of
Securities Dealers and the states in which each fund is
registered;
Prepare and distribute to the Internal Revenue
Service required Internal Revenue Service forms 1099,
1042, 5498 and 945 relating to earned income and
capital gains;
Issue tax withholding reports to the Internal
Revenue Service; and
Telephone service representatives on-line access
Respond to shareholder or dealer inquiries related to:
Account registration;
Share balances;
Account options;
Dividend and capital gain distribution status;
Withholding status;
Transaction dates and types;
Shares traded;
Address;
Customer or account type;
Dealer, branch and rep information;
Dollars available/not available in the account;
Shares purchased/redeemed today;
Dividend accrual, current dividend period; and
Market value of shares.
Standard reports Standard reports include:
Shareholder base analysis
New account listing
Purchases, redemptions, exchanges
Servicing summary
Rule 12b-1 reports
Schedule C
to the
Transfer Agent Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
FEE SCHEDULE
Base Fees
Annual Shareholder Minimum Annual Fee
Fund Account Fee Per Fund
Open/Closed
La Crosse Large Cap $17.00/$3.00 $17,000
Stock Fund
The base fee assumes a single class of shares, no load,
no 12b-1 plan, availability of automatic investment
plans and systematic withdrawal plans, quarterly or
less frequent dividend distributions, annual capital
gains distributions, and includes all standard reports.
One-time set-up fees
New funds set up (per fund) $2,000
NSCC Fund/SEV and Networking set-up
(per fund group) $2,500
Voice Response Unit (VRU) set-up $3,000
Website set-up/TA System Access
Adviser access $3,000
Shareholder data extract $5,000
NAV Link to website $1,500
Custom programming $150 per hour
Monthly website access fees
Adviser access fee $300/location
Shareholder data extract $500
Shareholder access to accounts $500
NAV link to website $150
Account maintenance and processing fees
(per occurrence)
Reprocessing shareholder transactions
- flat fee $750
Per transactions $1.00
Omnibus account transaction $2.50
Annual omnibus account maintenance
(per account) $150
Transaction processing - FundServ at cost
Certificate issuance $10.00
Locating lost shareholders/search $8.00
Out-of-pocket expenses
Per statement confirmation and check
processing $0.25
Per tax form processing $0.15
Per label printing for proxy
or marketing purposes $0.05
Production of ad hoc reports starting at $100
Bulk mailing/insert handling charge
1 insert $0.06
2 - 3 inserts $0.08
4 or more inserts as quoted
Bank account service fees and any
other bank charges at cost
Statement paper, check stock, envelopes,
tax forms at cost
Postage and express delivery charges at cost
Telephone and long distance charges at cost
Fax charges at cost
P.O. box rental at cost
800-phone number at cost
Inventory and records storage at cost
Fund/SERV charges at cost
Additional fees
(which may be passed on to shareholders)
Outgoing wire fee varies by bank
Account transcripts older than 2 years
(per year, per fund) $5.00
Non-sufficient funds varies by bank
IRA/SEP/SIMPLE/401(b) processing
Annual maintenance or custodial fee
(per account) $15.00
Account termination (transfer or rollover) $15.00
Schedule D
to the
Transfer Agent Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
RECORDS MAINTAINED BY SUNSTONE
Account applications
Checks including check registers, reconciliation
records, any adjustment records and tax
withholding documentation
Indemnity bonds for replacement of lost or missing
stock certificates and checks
Liquidation, redemption, withdrawal and transfer
requests including stock powers, signature
guarantees and any supporting documentation
Shareholder correspondence
Shareholder transaction records
Share transaction history of the Funds
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
THIS AGREEMENT is made as of this ___ day of
December, 1998, by and between La Crosse Funds, Inc., a
Wisconsin corporation (the "Corporation"), and Sunstone
Financial Group, Inc., a Wisconsin corporation (the
"Administrator").
WHEREAS, the Corporation is an open-end investment
company registered under the Investment Company Act of
1940, as amended (the "1940 Act") and is authorized to
issue shares of common stock (the "Shares") in separate
series with each such series representing interests in
a separate portfolio of securities and other assets;
and
WHEREAS, the Corporation and the Administrator
desire to enter into an agreement pursuant to which the
Administrator shall provide administration and fund
accounting services to such investment portfolios of
the Corporation as are listed on Schedule A hereto and
any additional investment portfolios the Corporation
and Administrator may agree upon and include on
Schedule A as such Schedule may be amended from time to
time (such investment portfolios and any additional
investment portfolios are individually referred to as a
"Fund" and collectively the "Funds").
NOW, THEREFORE, in consideration of the mutual
promises and agreements herein contained and other good
and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Appointment
The Corporation hereby appoints the Administrator as
administrator and fund accountant of the Funds for the
period and on the terms set forth in this Agreement.
The Administrator accepts such appointment and agrees
to render the services herein set forth, for the
compensation herein provided.
2. Services as Administrator
(a) Subject to the direction and control of the
Corporation's Board of Directors and utilizing
information provided by the Corporation and its agents,
the Administrator will provide the services set forth
in Schedule B hereto. The duties of the Administrator
shall be confined to those expressly specified in
Schedule B, and no implied duties are assumed by or may
be asserted against the Administrator hereunder.
(b) The Corporation shall direct its officers,
investment advisor, distributor, legal counsel,
independent accountants, transfer agent and custodian
for the Funds to cooperate with the Administrator and
to provide the Administrator, upon request, with such
information, documents and advice relating to the Funds
and the Corporation as is within the possession or
knowledge of such persons, in order to enable the
Administrator to perform its duties hereunder. In
connection with its duties hereunder, the Administrator
shall be entitled to rely, and shall be held harmless
by the Corporation when acting in reliance, upon the
instruction, advice, information or any documents
relating to the Funds provided to the Administrator by
an officer or representative of the Funds or by any of
the aforementioned persons. Fees charged by such
persons shall be an expense of the respective Fund (or
of the Funds' investment adviser) and shall not be
included in the fees payable to the Administrator. The
Administrator shall be entitled to rely on any document
which it reasonably believes to be genuine and to have
been signed or presented by the proper party. The
Administrator shall not be held to have notice of any
change of authority of any officer, agent,
representative or employee of the Corporation until
receipt of written notice thereof from the Corporation.
The Administrator shall cooperate with the Corporation
and its legal counsel, independent accountants,
custodian and transfer agent upon reasonable request in
order to enable the Corporation's service providers to
perform their duties with respect to the Funds.
(c) In compliance with the requirements of Rule 31a-
3 under the 1940 Act, the Administrator hereby agrees
that all records which it maintains for the Corporation
hereunder are the property of the Corporation and
further agrees to surrender promptly to the Corporation
any of such records upon the Corporation's request free
of any liens and charges. Subject to the terms of
Section 7, the Administrator further agrees to preserve
for the periods prescribed by Rule 31a-2 under the 1940
Act the records set forth on Schedule B which are
maintained by the Administrator for the Corporation.
(d) It is understood that in determining security
valuations, the Administrator employs one or more
pricing services to determine valuations of portfolio
securities for purposes of calculating net asset values
of the Funds. The Administrator shall identify to the
Corporation and the Board of Directors any such pricing
service utilized on behalf of the Corporation. The
Administrator is authorized to rely on the prices
provided by such service(s) or by the Funds' investment
advisor or other authorized representative of the
Funds, and shall not be liable for losses to the
Corporation or its securityholders as a result of its
reliance on the valuations provided by the approved
pricing service(s) or the representative.
(e) The Administrator shall perform its duties
hereunder in compliance with all applicable laws.
(f) The Corporation and the Funds' investment
advisor have and retain primary responsibility for all
compliance matters relating to the Funds including but
not limited to compliance with the 1940 Act, the
Internal Revenue Code of 1986, as amended, and the
policies and limitations of each Fund relating to the
portfolio investments as set forth in the Prospectus
and Statement of Additional Information. The
Administrator will perform the compliance functions set
forth in Schedule B and shall advise the Corporation of
any significant compliance problems of which it becomes
aware. The Administrator's monitoring and other
functions hereunder shall not relieve the Corporation
and the investment advisor of their responsibilities
for assuring the Corporation's compliance with all
applicable laws, rules and regulations and the Board of
the Corporation's oversight responsibility with respect
thereto.
3. Fees; Delegation; Expenses
(a) In consideration of the services rendered
pursuant to this Agreement, the Corporation will pay
the Administrator a fee, computed daily and payable
monthly, as provided in Schedule C hereto, plus out-of-
pocket expenses. The Corporation shall also pay the
Administrator for organizational start-up services
provided on behalf of the Funds as specified in
Schedule C. Out-of-pocket expenses include, but are
not limited to, travel, lodging and meals in connection
with travel on behalf of the Corporation, programming
and related expenses in connection with providing
electronic transmission of data between the
Administrator and the Funds' other service providers,
brokers, dealers and depositories, and photocopying,
postage and overnight delivery expenses. Fees shall be
paid by each Fund at a rate that would aggregate at
least the applicable minimum fee for each Fund.
(b) For the purpose of determining fees payable to
the Administrator, net asset value shall be computed in
accordance with the Corporation's Prospectuses and
resolutions of the Corporation's Board of Directors.
The fee for the period from the day of the month this
Agreement is entered into until the end of that month
shall be pro-rated according to the proportion which
such period bears to the full monthly period. Upon any
termination of this Agreement before the end of any
month, the fee for such part of a month shall be pro-
rated according to the proportion which such period
bears to the full monthly period and shall be payable
upon the date of termination of this Agreement. Should
the Corporation be liquidated, merged with or acquired
by another fund or investment company, any accrued fees
shall be immediately payable. Such fee as is
attributable to each Fund shall be a separate charge to
each Fund and shall be the several (and not joint or
joint and several) obligation of each such Fund.
(c) The Administrator will bear all expenses in
connection with the performance of its services under
this Agreement except as otherwise provided herein.
Other costs and expenses to be incurred in the
operation of the Funds, including, but not limited to:
taxes; interest; brokerage fees and commissions, if
any; salaries, fees and expenses of officers and
Directors; Securities and Exchange Commission
("Commission") fees and state Blue Sky fees; advisory
fees; charges of custodians, transfer agents, dividend
disbursing and accounting services agents; security
pricing services; insurance premiums; outside auditing
and legal expenses; costs of organization and
maintenance of corporate existence; typesetting,
printing, proofing and mailing of prospectuses,
statements of additional information, supplements,
notices and proxy materials for regulatory purposes and
for distribution to current shareholders; typesetting,
printing, proofing and mailing and other costs of
shareholder reports; expenses in connection with the
electronic transmission of documents and information
including electronic filings with the Commission and
the states; expenses incidental to holding meetings of
the Fund's shareholders and Directors; and any
extraordinary expenses; will be borne by the Funds or
their investment advisor. Expenses incurred for
distribution of shares, including the typesetting,
printing, proofing and mailing of prospectuses for
persons who are not shareholders of the Corporation,
will be borne by the investment advisor, except for
such expenses permitted to be paid by the Corporation
under a distribution plan adopted in accordance with
applicable laws, if any.
4. Proprietary and Confidential Information
The Administrator agrees on behalf of itself and its
employees to treat confidentially and as proprietary
information of the Corporation all records and other
information relative to the Funds and prior, present or
potential shareholders of the Corporation (and clients
of said shareholders), and not to use such records and
information for any purpose other than performance of
its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the
Corporation, which approval shall not be unreasonably
withheld and may not be withheld where the
Administrator may be exposed to civil or criminal
proceedings for failure to comply, when requested to
divulge such information by duly constituted
authorities, when subject to governmental or regulatory
audit or investigation, or when so requested by the
Corporation. Records and information which have become
known to the public through no wrongful act of the
Administrator or any of its employees, agents or
representatives shall not be subject to this paragraph.
5. Limitation of Liability
(a) The Administrator shall not be liable
for any error of judgment or mistake of law or for any
loss suffered by the Funds in connection with the
matters to which this Agreement relates, except for a
loss resulting from the Administrator's willful
misfeasance, bad faith or negligence in the performance
of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
Furthermore, the Administrator shall not be liable for
any action taken or omitted to be taken in accordance
with instructions received by the Administrator from
an officer or representative of the Corporation.
(b) The Administrator assumes no
responsibility hereunder, and shall not be liable, for
any damage, loss of data, errors, delay or any other
loss whatsoever caused by events beyond its reasonable
control. The Administrator will, however, take all
reasonable steps to minimize service interruptions for
any period that such interruption continues beyond its
control.
6. Year 2000 Compliance
Administrator acknowledges that the Corporation
has inquired of Administrator as to the Year 2000
compliance status of its computer systems and software
and those of its software vendors. Administrator shall
report to the Board of the Corporation at least
quarterly as to the Year 2000 compliance status of its
mission critical computer systems and software .
7. Term
(a) This Agreement shall become effective with
respect to each Fund listed on Schedule A hereof as of
the date hereof and, with respect to each Fund not in
existence on that date, on the date an amendment to
Schedule A to this Agreement relating to that Fund is
executed. This Agreement shall continue in effect with
respect to each Fund for a period of one-year from the
date hereof. Thereafter, if not terminated as provided
herein, this Agreement shall continue automatically in
effect as to each Fund for successive annual periods.
(b) This Agreement may be terminated with respect to
any one or more particular Funds without penalty (i)
upon mutual consent of the parties, or (ii) by either
party upon not less than ninety (90) days' written
notice to the other party (which notice may be waived
by the party entitled to the notice) (the "Notice
Period"). The terms of this Agreement shall not be
waived, altered, modified, amended or supplemented in
any manner whatsoever except by a written instrument
signed by the Administrator and the Corporation. During
the Notice Period the Administrator shall not reduce
the level of service provided to the Corporation and,
subject to subparagraph (c) below, shall assist the
Corporation in the transition of the functions to the
successor administrator.
(c) Notwithstanding anything herein to the contrary,
upon the termination of this Agreement or the
liquidation of a Fund or the Corporation, the
Administrator shall deliver the records of the Fund(s)
and/or Corporation as the case may be to the
Corporation or person(s) designated by the Corporation
and thereafter the Corporation or its designee shall be
solely responsible for preserving the records for the
periods required by all applicable laws, rules and
regulations. In addition, in the event of termination
of this Agreement, or the proposed liquidation or
merger of the Corporation or a Fund(s), and the
Corporation requests the Administrator to provide
services in connection therewith, the Administrator
shall provide such services and be entitled to such
compensation as the parties may mutually agree.
8. Non-Exclusivity
The services of the Administrator rendered to the
Corporation are not deemed to be exclusive. The
Administrator may render such services and any other
services to others, including other investment
companies. The Corporation recognizes that from time
to time directors, officers and employees of the
Administrator may serve as trustees, directors,
officers and employees of other entities (including
other investment companies), that such other entities
may include the name of the Administrator as part of
their name and that the Administrator or its affiliates
may enter into investment advisory or other agreements
with such other entities.
9. Governing Law; Invalidity
This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin. To
the extent that the applicable laws of the State of
Wisconsin, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the
latter shall control, and nothing herein shall be
construed in a manner inconsistent with the 1940 Act or
any rule or order of the Commission thereunder. Any
provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable
in any jurisdiction and shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in
any other jurisdiction.
10. Notices
Any notice required or permitted to be given by
either party to the other pursuant to Paragraph 7 shall
be in writing and shall be deemed to have been given
when sent by registered or certified mail, postage
prepaid, return receipt requested, as follows: Notice
to the Administrator shall be sent to Sunstone
Financial Group, Inc., 207 East Buffalo Street, Suite
400, Milwaukee, WI, 53202, Attention Miriam M. Allison,
and notice to the Corporation shall be sent to La
Crosse Funds, Inc. 311 Main Street, La Crosse,
Wisconsin 54601 Attention: Steven J. Hulme.
11. Entire Agreement
This Agreement constitutes the entire Agreement of
the parties hereto.
12. Counterparts
This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original agreement but such counterparts shall together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer as of the day and year first above written.
LA CROSSE FUNDS, INC.
(the "Corporation")
By:______________________
Steven J. Hulme
President
SUNSTONE FINANCIAL GROUP, INC.
("Administrator")
By:_______________________
President
Schedule A
to the
Administration and Fund Accounting Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
Fund Effective Date
La Crosse Large Cap Stock Fund December __, 1998
Schedule B
to the
Administration and Fund Accounting Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
Services
1. Provide office space, facilities, equipment and
personnel to carry out Administrator's services
hereunder:
2. Compile data for and prepare with respect to the
Funds timely Notices to the Commission required
pursuant to Rule 24f-2 under the 1940 Act and Semi-
Annual Reports on Form N-SAR;
3. Assist in the preparation of, for execution by the
Corporation, and file all federal income and excise tax
returns and state income tax returns (and such other
required tax filings as may be agreed to by the
parties) other than those required to be made by the
Corporation's custodian or transfer agent, subject to
review and approval of the Corporation and the
Corporation's independent accountants;
4. Prepare the financial statements for the Annual
and Semi-Annual Reports required pursuant to Section
30(d) under the 1940 Act;
5. Review drafts of the Registration Statement for
the Corporation relating to the Funds subject to this
Agreement (on Form N-1A or any replacement therefor)
and any amendments thereto as prepared by Fund counsel
and the Corporation, and provide the financial data for
the foregoing;
6. Determine and periodically monitor each Fund's
income and expense accruals and cause all appropriate
expenses to be paid from Corporation assets on proper
authorization from the Corporation;
7. Assist in the acquisition of the Corporation's
fidelity bond required by the 1940 Act, monitor the
amount of the bond and make the necessary Commission
filings related thereto;
8. Calculate daily net asset values and income
factors of each Fund;
9. Maintain all general ledger accounts and related
subledgers;
10. Perform security valuations in accordance with the
terms of the Funds' then current Prospectus and
instructions of the Corporation's Board of Directors;
11. From time to time as the Administrator deems
appropriate, check each Fund's compliance with the
policies and limitations of each Fund relating to the
portfolio investments as set forth in the Prospectus,
Statement of Additional Information, Articles and
Bylaws and monitor each Fund's status as a regulated
investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (but these functions
shall not relieve the Corporation and the investment
adviser of their of their responsibilities for assuring
the Corporation's compliance with all applicable laws,
rules and regulations and the Board's oversight
responsibilities with respect thereto);
12. Maintain, and/or coordinate with the other service
providers the maintenance of the accounts, books and
other documents required pursuant to Rule 31a-1(a) and
(b) under 1940 Act;
13. Prepare and/or file securities registration
compliance filings with the states identified by the
Corporation to maintain the Fund's securities
registration with the advice of the Corporation's legal
counsel;
14. Develop with legal counsel and the Corporation an
agenda for each board meeting and, if requested by the
directors, attend board meetings and prepare minutes;
15. Prepare Form 1099s for directors and other fund
vendors;
16. Calculate dividend and capital gains distributions
subject to review and approval by the Corporation and
its independent accountants;
17. Distribute to Fund access persons and receive
quarterly transaction reports under the Funds' Code of
Ethics, review reported transactions and report to the
Board any transactions by access persons reported to
have occurred within 7 days before or after a trade in
the same security by a Fund (or such other window as
the Board of Directors shall request);
18. Assist in the in-kind exchange of assets from
North Central Trust Company's Common Trust Fund C:
Equity and NCTC Growth Common Fund for shares of the
Fund in accordance with procedures adopted by the
Corporation, with the advice of legal counsel to the
Corporation; and
19. Generally assist in the Corporation's
administrative operations as mutually agreed to by the
parties.
Schedule C
to the
Administration and Fund Accounting Agreement
by and between
La Crosse Funds, Inc.
and
Sunstone Financial Group, Inc.
Name of Fund Annual Fees
La Crosse Large Cap Up to $50 Million 28 basis points (0.28%)
Stock Fund $50 Million to $100 Million 20 basis points (0.20%)
$100 Million to $250 Million 12 basis points (0.12%)
Over $250 Million 6 basis points (0.06%)
The foregoing fees for the initial Fund are subject to
a minimum annual fee of $115,000. The fees assume a
single class of shares. In addition, the Corporation
shall also pay/reimburse the Administrator's out-of-
pocket expenses as described in the Agreement. The
minimum annual fee is subject to an annual escalation
provision of 6%, which escalation shall be effective
commencing one year from the effective date of this
Agreement. Additional Funds shall also be subject to a
minimum annual fee and an annual escalation provision
which fees and escalation shall be specified in an
amendment to this Schedule C relating to the additional
Fund(s).
Additional fees shall apply when adding any additional
Fund(s) as compensation for the Administrator's
services in connection with the organization of the new
Fund(s). The Administrator shall provide such services
and be entitled to such compensation as the parties may
mutually agree in writing.
The Corporation shall pay the Administrator $_______
for its initial start-up services for the Funds.
Godfrey & Kahn, S.C.
Attorneys-At-Law
780 North Water Street
Milwaukee, Wisconsin 53202
Tel: (414) 273-3500
December 15, 1998
La Crosse Funds, Inc.
311 Main Street
La Crosse, Wisconsin 54602
Gentlemen:
We have acted as your counsel in connection with
the preparation of a Registration Statement on Form N-
1A (Registration Nos. 333-65579 and 811-9051) (the
"Registration Statement") relating to the sale by you
of up to that number of shares of the La Crosse Large
Cap Stock Fund common stock, $0.00001 par value (the
"Shares"), a series of the La Crosse Funds, Inc. (the
"Company"), as now or hereafter authorized pursuant to
the Company's Articles of Incorporation, as may be
amended from time to time, in the manner set forth in
the Registration Statement (and the Prospectus included
therein).
We have examined: (a) the Registration Statement
(and the Prospectus included therein), (b) the
Company's Articles of Incorporation and By-Laws, (c)
certain resolutions of the Company's Board of
Directors, and (d) such other proceedings, documents
and records as we have deemed necessary to enable us to
render this opinion.
Based upon the foregoing, we are of the opinion
that the Shares, when sold as contemplated in the
Registration Statement, will be duly authorized and
validly issued, fully paid and nonassessable, except as
provided in Section 180.0622(2)(b) of the Wisconsin
Statutes.
We consent to the use of this opinion as an
exhibit to the Registration Statement. In giving this
consent, however, we do not admit that we are "experts"
within the meaning of Section 11 of the Securities Act
of 1933, as amended, or within the category of persons
whose consent is required by Section 7 of said Act.
Very truly yours,
/s/ Godfrey & Kahn, S.C.
GODFREY & KAHN, S.C.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to
the use of our report (and to all references to our Firm)
included in or made a part of this registration
statement on Form N-1A for the LaCrosse Funds, Inc.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
December 15, 1998
SUBSCRIPTION AGREEMENT
La Crosse Funds, Inc.
311 Main Street
La Crosse, Wisconsin 54602
Gentlemen:
The undersigned purchaser (the "Purchaser") hereby
subscribes to the number of shares (the "Shares") of
common stock of La Crosse Funds, Inc. (the "Company"),
subject to adjustment as set forth below, as follows:
Aggregate
Series Number of Per Share Purchase Price
Shares Price
La Crosse Large 10,000 $10 $100,000
Cap Stock Fund
The undersigned acknowledges that the Number of
Shares set forth above may be adjusted to reflect the
per share price of the Company's common stock paid by
the Company's initial public shareholders.
It is understood that a certificate representing
the Shares shall not be issued to the undersigned, but
such ownership shall be recorded on the books and
records of the Company's transfer agent.
Notwithstanding the fact that a certificate
representing ownership will not be issued, the Shares
will be deemed fully paid and nonassessable.
The Purchaser agrees that the Shares are being
purchased for investment with no present intention to
resell or redeem the Shares.
Dated and effective as of the 11th day of
December, 1998.
Purchaser: La Crosse Advisers, L.L.C.
/s/ Gary M. Veldey
-------------------------
By: Gary M. Veldey
ACCEPTANCE
The foregoing subscription is hereby accepted.
Dated and effective as of the 11th day of
December, 1998.
LA CROSSE FUNDS, INC.
/s/ Steven J. Hulme
-------------------------------
By: Steven J. Hulme, President
[ARTICLE] 6
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] OCT-30-1999
[PERIOD-END] OCT-30-1999
[INVESTMENTS-AT-COST] 0
[INVESTMENTS-AT-VALUE] 0
[RECEIVABLES] 0
[ASSETS-OTHER] 119,015
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 119,015
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 19,015
[TOTAL-LIABILITIES] 19,015
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 100,000
[SHARES-COMMON-STOCK] 10,000
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 0
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 0
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 0
[NET-ASSETS] 100,000
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 0
[OTHER-INCOME] 0
[EXPENSES-NET] 0
[NET-INVESTMENT-INCOME] 0
[REALIZED-GAINS-CURRENT] 0
[APPREC-INCREASE-CURRENT] 0
[NET-CHANGE-FROM-OPS] 0
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 10,000
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] 100,000
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 0
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 0
[AVERAGE-NET-ASSETS] 100,000
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 10.00
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
