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As filed with the Securities and Exchange Commission on October 21, 1999
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Registration No. 333- )
Pre-Effective Amendment No.___
Post-Effective Amendment No.___
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
(Registration No. 811- )
Amendment No.___
(Check appropriate box or boxes)
HICAPS FUNDS, INC.
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(Exact Name of Registrant as Specified in Charter)
1125 17th Street, Suite 1600, Denver, Colorado 80202
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (303) 296-2300
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Terry L. Maltarich
1125 17th Street, Suite 1600
Denver, Colorado 80202
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(Name and Address of Agent for Service)
Copy to:
Kathleen L. Prudhomme
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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HICAPS
MONEY MARKET FUND
PROSPECTUS _________, 1999
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved the shares of this Fund, or determined if the
information in this prospectus is accurate or complete. Any statement to the
contrary is a criminal offense.
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TABLE OF CONTENTS
Page
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Fund Summary..............................................................
Objective............................................................
Principal Investment Strategies......................................
Principal Risks......................................................
Fees and Expenses....................................................
Your Account..............................................................
How to Contact the Fund..............................................
General Information..................................................
When and How NAV Is Determined.......................................
How to Buy Shares of the Fund.............................................
Types of Accounts....................................................
By Telephone.........................................................
By Mail..............................................................
Automatic Investment Plans...........................................
Transactions Through Third Parties...................................
How to Pay for Your Purchase of Shares...............................
Limitations on Purchases.............................................
Canceled or Failed Payments..........................................
How to Redeem Shares of the Fund..........................................
By Mail..............................................................
By Wire..............................................................
By Telephone.........................................................
Automatic Redemption.................................................
Signature Guarantee Requirements.....................................
Redemption in Kind...................................................
Lost Accounts........................................................
Dividends.................................................................
Taxes.....................................................................
Fund Management...........................................................
Year 2000 Issues.....................................................
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FUND SUMMARY
This section briefly describes the objective, principal investment strategies
and principal risks of the HICAPS Money Market Fund. It also provides you with
information on Fund fees and expenses.
OBJECTIVE
The Fund's objective is to provide shareholders with as high a level of current
income as is consistent with the preservation of capital and the maintenance of
liquidity.
PRINCIPAL INVESTMENT STRATEGIES
As a money market fund, the Fund seeks to maintain a stable price of $1.00 per
share. The Fund invests in high quality, short-term debt obligations including:
- securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities;
- certificates of deposit, time deposits, bankers' acceptances and
other short-term securities issued by domestic or foreign banks or
their subsidiaries or branches;
- domestic and dollar-denominated foreign commercial paper and other
short-term corporate obligations, including those with floating or
variable rates of interest;
- asset-backed securities; and
- repurchase agreements.
The Fund complies with Securities and Exchange Commission regulations that apply
to money market funds. Under these regulations:
- the average maturity of the Fund's investments (on a
dollar-weighted basis) must be 90 days or less;
- all investments must mature within 397 days from the date of
purchase; and
- all investments must be in U.S. dollar-denominated high quality
securities which have been determined by the Fund's adviser to present
minimal credit risks.
PRINCIPAL RISKS
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund attempts
to preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Fund.
The following factors could reduce the Fund's share price:
- there could be a sharp rise in interest rates, causing the Fund's
share price to decline;
- there could be a default or credit downgrade on a security held by
the Fund, or the counterparty to a repurchase agreement could fail to
honor the terms of its agreement, or could default or go into
bankruptcy;
- the risks of dollar-denominated foreign investments, such as
economic and political developments, imposition of withholding taxes,
seizure of foreign deposits, currency controls, interest limitations
and other governmental restrictions, might affect the payment of
principal or interest on securities owned by the Fund.
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In addition, the Fund's yield will fluctuate as market and interest rate
conditions change, and as the short-term securities in its portfolio mature and
the proceeds are reinvested in securities with different interest rates.
FEES AND EXPENSES
As an investor, you pay certain fees and expenses if you buy and hold shares of
the Fund, which are described below. The Fund is a no-load investment, so you
will not pay any shareholder fees such as initial or deferred sales charges when
you buy or sell shares. However, when you hold shares of the Fund you indirectly
pay a portion of the Fund's operating expenses. These expenses are deducted from
Fund assets.
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
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Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT ARE DEDUCTED FROM
FUND ASSETS)(as a % of average net assets)
Management Fees 0.25%
Distribution and Service (12b-1) Fees 0.15%
Other Expenses* 0.30%
Total Annual Fund Operating Expenses** 0.70%
</TABLE>
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* Other Expenses are based on estimated amounts for the current fiscal year.
** The Fund's adviser has agreed to waive its fees and/or assume the expenses of
the Fund so that Total Annual Fund Operating Expenses do not exceed 0.18% for
the current fiscal year. The adviser may discontinue fee waivers and expense
assumptions at any time after the Fund's fiscal year end.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. It assumes that you invest
$10,000 in the Fund for the time periods indicated, that your investment has a
5% return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
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1 year $ 74
3 years $ 241
</TABLE>
YOUR ACCOUNT
HOW TO CONTACT THE FUND
For more information about the Fund or your account, you may write to us at:
HICAPS Money Market Fund
c/o American Data Services, Inc.
P.O. Box 5536
Hauppauge, NY 11788-0132
Or you may call us toll free at (800) .
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GENERAL INFORMATION
You pay no sales charge to buy or sell (redeem) shares of the Fund. You may buy
or redeem shares at the net asset value per share, or NAV, next calculated after
the Fund's transfer agent receives your request in proper form. For instance, if
the transfer agent receives your purchase request in proper form before 4 p.m.,
eastern time, your transaction will be priced at that day's NAV. If the transfer
agent receives your purchase request after 4 p.m., your transaction will be
priced at the next day's NAV. The Fund will not accept orders that request a
particular day or price for the transaction or any other special conditions. The
Fund reserves the right to refuse any purchase request.
The Fund does not issue share certificates.
You will receive quarterly statements and a confirmation of each transaction.
You should verify the accuracy of all transactions in your account as soon as
you receive your confirmation.
During unusual market conditions, the Fund may temporarily suspend or
discontinue any service or privilege.
WHEN AND HOW NAV IS DETERMINED
The Fund calculates its NAV as of the close of the New York Stock Exchange
(normally 4:00 p.m., eastern time) on each weekday except days when the New York
Stock Exchange or the Federal Reserve Bank of New York is closed. The time at
which NAV is calculated may be changed in case of an emergency or if the New
York Stock Exchange closes early. The Fund's NAV is determined by taking the
market value of all securities owned by the Fund (plus all other assets such as
cash), subtracting all liabilities and then dividing the result (net assets) by
the number of shares outstanding. The Fund values securities on the basis of
amortized cost. This involves valuing an instrument at its cost and thereafter
assuming a constant amortization of any discount or premium until the
instrument's maturity, rather than looking at actual changes in the market value
of the instrument. The Fund's NAV is normally expected to be $1 per share.
HOW TO BUY SHARES OF THE FUND
TYPES OF ACCOUNTS
If you are making an initial investment in the Fund, you will need to open one
of the following types of accounts. There is no required minimum investment
amount.
Individual, Sole Proprietorship and Joint Accounts. Individual and sole
proprietorship accounts are owned by one person, while joint accounts can have
two or more owners. Each individual owner of a joint account may give
instructions on purchases and redemptions without notice to the other owner.
Account applications and written instructions to the Fund, or requests for
transactions that require a signature guarantee, must be signed by each owner
exactly as their names appear on the account.
Uniform Gift or Transfer to a Minor Accounts (UGMA, UTMA). Depending on the laws
of your state, you can set up a custodial account under the Uniform Gift (or
Transfers) to Minors Act. These custodial accounts provide a way to give money
to a child and obtain tax benefits. You can give up to $10,000 a year per child
without paying Federal gift tax. To open a UGMA or UTMA account, you must
include the minor's social security number on the application and the custodian,
or trustee, of the UGMA or UTMA must sign instructions in a manner indicating
trustee capacity.
Corporate and Partnership Accounts. To open a corporate or partnership account,
or to send instructions to the Fund, the following documents are required:
- For corporations, a corporate resolution signed by an authorized
person with a signature guarantee.
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- For partnerships, a certification for a partnership agreement, or
the pages from the partnership agreement that identify the general
partners.
An authorized officer of the corporation or other legal entity must sign the
application.
Trust Accounts. The trust must be established before you can open a trust
account. To open the account you must include the name of each trustee, the name
of the trust and provide a certification for trust, or the pages from the trust
document that identify the trustees.
Retirement Accounts. The Fund offers IRA accounts, including traditional and
Roth IRAs. Fund shares may also be an appropriate investment for other
retirement plans. Before investing in any IRA or other retirement plan, you
should consult your tax adviser. Whenever making an investment in an IRA, be
sure to indicate the year in which the contribution is made.
BY TELEPHONE
To open an account by telephone, call (xxx) xxx-xxxx to obtain an account number
and instructions. We will take information necessary to open your account,
including social security or tax identification number, over the phone.
After you have obtained an account number, you may purchase shares of the Fund
by wiring federal funds. Your bank may charge a fee for doing this. You should
instruct your bank to wire funds to:
Union Bank of California
ABA # _____________________
Account # ________________
F/B/O Shareholder Account No. ___________________
You will then need to mail a signed account application to:
HICAPS Money Market Fund
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, NY 11788-0786
BY MAIL
You may also open an account by mailing a completed and signed account
application, together with a check, to:
HICAPS Money Market Fund
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, NY 11788-0786
AUTOMATIC INVESTMENT PLANS
You may invest a specified amount of money in the Fund once or twice a month on
specified dates. These payments are taken from your bank account by automated
clearinghouse payment ("ACH").
To open an Automatic Investment Plan account ("AIP"), call or write to us to
request an "Automatic Investment" form. Complete and sign the form, and return
it to us together with a voided check for the account from which payments will
be made.
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TRANSACTIONS THROUGH THIRD PARTIES
If you invest through a broker or other financial institution, the policies and
fees charged by that institution may be different than those of the Fund. Banks,
brokers, retirement plans and financial advisers may charge transaction fees and
may set different minimum investments or limitations on buying or selling
shares. Consult a representative of your financial institution or retirement
plan for further information.
HOW TO PAY FOR YOUR PURCHASE OF SHARES
You may purchase shares of the Fund by check, automated clearinghouse payment,
or wire. All payments must be in U.S. dollars.
Checks. All checks must be drawn on U.S. banks and made payable to "HICAPS Money
Market Fund". No other method of check payment is acceptable (for instance, you
may not pay by travelers check).
ACH Payments. Instruct your financial institution to make an ACH (automated
clearinghouse) payment to us. These payments typically take two days. Your
financial institution may charge you a fee for this service.
Wires. Instruct your financial institution to make a Federal Funds wire payment
to us. Your financial institution may charge you a fee for this service.
CANCELED OR FAILED PAYMENTS
The Fund accepts checks and ACH transfers at full value subject to collection.
If your payment for shares is not received or you pay with a check or ACH
transfer that does not clear, your purchase will be canceled. You will be
responsible for any losses or expenses incurred by the Fund or the Fund's
transfer agent, and the Fund may redeem other shares you own in the account as
reimbursement. The Fund and its agents have the right to reject or cancel any
purchase, exchange, or redemption due to nonpayment.
HOW TO REDEEM SHARES OF THE FUND
The Fund processes redemption orders promptly. Your shares will be redeemed at
the NAV next determined after we receive your redemption request in good order.
We normally will send out checks or wire funds within one business day, and in
any event not more than seven days, after we accept your request to redeem. If
you redeem shares recently purchased by check, you will be required to wait up
to fifteen business days before we will send your redemption proceeds. This
delay is necessary to ensure that the purchase check has cleared.
BY MAIL
To redeem shares by mail, prepare a written request including:
- Your name(s) and signature(s);
- The name of the Fund, and your account number;
- The dollar amount or number of shares you want to redeem;
- How and where to send your proceeds;
- A signature guarantee, if required (see "Signature Guarantee
Requirements" below); and
- Any other required documentation, such as a corporate resolution.
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Mail your request and documentation to
HICAPS Money Market Fund
c/o American Data Services, Inc.
P.O. Box 5786
Hauppauge, NY 11788-0786
BY WIRE
You may only request payment of your redemption proceeds by wire if you have
previously elected wire redemption privileges on your account application or a
separate form.
Wire requests are only available if your redemption is for $10,000 or more.
To request a wire redemption, mail us your request (see "By Mail"), or call us
with your request. If you wish to make your wire request by telephone, however,
you must have previously elected telephone redemption privileges.
BY TELEPHONE
We accept redemption requests by telephone only if you have elected telephone
redemption privileges on your account application or a separate form.
To redeem shares by telephone, call us with your request. You will need to
provide your account number and the exact name(s) in which the account is
registered. We may also require a password or additional forms of
identification.
Your proceeds will be mailed to you or wired to you (if you have elected wire
redemption privileges - see "By Wire" above).
Telephone redemptions are easy and convenient, but this account option involves
a risk of loss from unauthorized or fraudulent transactions. We will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and by reviewing immediately
any account statement and transaction confirmations that you receive. Neither
the Fund nor the Fund's transfer agent will be responsible for any losses to due
to telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity.
AUTOMATIC REDEMPTION
If you own shares of the Fund with an aggregated value of at least $10,000, you
may request a specified amount of money from your account once a month or once a
quarter on a specified date. These payments are sent from your account to a
designated bank account by ACH payment. Automatic requests must be for at least
$100.
To set up periodic redemptions automatically, call or write us for an "Automatic
Redemption" form. You should complete the form and mail it to us with a voided
check for the account into which you would like the redemption proceeds
deposited.
SIGNATURE GUARANTEE REQUIREMENTS
To protect you and the Fund against fraud, signatures on certain requests must
have a "signature guarantee." For requests made in writing a signature guarantee
is required for any of the following:
- Redemption of over $5,000 worth of shares;
- Changes to a shareholder's record name or address;
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- Redemption from an account for which the address or account
registration has changed within the last 30 days;
- Sending proceeds to any person, address, brokerage firm or bank
account not on record;
- Sending proceeds to an account with a different registration (name
or ownership) from yours; and
- Changes to automatic investment or redemption programs,
distribution options, telephone or wire redemption privileges, or any
other election in connection with your account.
A signature guarantee verifies the authenticity of your signature. You can
obtain one from most banking institutions or securities brokers, but not from a
notary public.
LOST ACCOUNTS
The Fund's transfer agent will consider your account "lost" if correspondence to
your address of record is returned as undeliverable, unless the transfer agent
determines your new address. When an account is "lost," all distributions on the
account will be reinvested in additional shares of the Fund. In addition, the
amount of any outstanding (unpaid for six months or more) checks for
distributions that have been returned to the transfer agent will be reinvested
and the checks will be canceled.
DIVIDENDS
Dividends from the Fund's net investment income are declared daily and paid once
a month. Because the Fund is managed to maintain a constant share price, it is
not expected to make any capital gains distributions. Your dividends will be
reinvested in additional shares of the Fund unless you instruct the Fund
otherwise. There are no fees or sales charges on reinvestments.
In order to earn dividends on a purchase of Fund shares on the day of purchase,
the Fund's transfer agent must receive payment in federal funds before 12:00
noon, Mountain time, on that day. Purchases made by payment in other forms, or
payments in federal funds received after 12:00 noon but before the close of the
New York Stock Exchange, will begin to earn dividends on the next business day.
In the case of redemptions, if the Fund receives your redemption order before
12:00 noon, Mountain time, we well try to transmit payment of redemption
proceeds on that same day and you will not earn dividends for that day. If your
redemption request is received after 12:00 noon, Mountain time, and before the
close of trading on the New York Stock Exchange, you will earn dividends on that
day and we generally will transmit payment on the next business day.
TAXES
Dividends you receive from the Fund generally will be taxable as ordinary
income, whether you receive them in cash or reinvest them (unless your
investment is in an IRA or other tax advantaged account). However, because
everyone's tax situation is unique, be sure to consult with your tax adviser.
You will receive an annual tax statement from the Fund containing information
about the tax status of the year's dividends.
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FUND MANAGEMENT
Hanifen, Imhoff Capital Services Inc. ("HICAPS") is the Fund's investment
adviser. HICAPS is a newly formed, registered investment adviser located at 1125
17th Street, Suite 1600, Denver, Colorado 80202.
The Fund has entered into a Investment Advisory Agreement with HICAPS under
which HICAPS provides the Fund with investment advisory services and is
responsible for managing the Fund's business affairs, subject to the authority
of the Board of Directors. The Fund pays the investment adviser a monthly fee
for providing investment advisory services. On an annual basis, this fee is
equal to 0.25% of the Fund's average daily net assets. HICAPS has agreed to
waive receipt of its its advisory fee and/or assume the expenses of the Fund so
that total annual fund operating expenses do not exceed 0.18% of the Fund's
average daily net assets for the current fiscal year. HICAPS may discontinue fee
waivers and expense assumptions at any time after the Fund's fiscal year end.
YEAR 2000 ISSUES
The Fund could be adversely affected if the computer systems used by HICAPS and
the Fund's transfer agent, administrator, and other third party service
providers do not properly process and calculate date-related information from
and after January 1, 2000. HICAPS is working to avoid year 2000-related problems
in its systems and to obtain assurances from other service providers that they
are taking similar steps. In addition, issuers of securities in which the Fund
invests may be adversely affected by year 2000-related problems. This could have
an impact on the value of the Fund's investments and its yield and share price.
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FOR MORE INFORMATION ABOUT HICAPS MONEY MARKET FUND
The Fund's statement of additional information ("SAI") and annual and
semi-annual reports to shareholders include additional information about the
Fund. The SAI provides more details about the Fund and its policies. A current
SAI is on file with the Securities and Exchange Commission (SEC) and is
incorporated into this prospectus by reference (which means that it is legally
considered part of this prospectus). Additional information about the Fund's
investments is available in the Fund's annual and semiannual reports to
shareholders. You may obtain free copies of these materials by calling the Fund
toll free at 1-800-945-3863.
You may also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009. For more information, call
1/800-SEC-0330.
Information about the Fund is also available on the Internet. Text only versions
of fund documents can be viewed online or downloaded from the SEC's Internet
site at http://www.sec.gov.
SEC file number: 811-
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HICAPS MONEY MARKET FUND
A SERIES OF
HICAPS FUNDS, INC.
STATEMENT OF ADDITIONAL INFORMATION
DATED , 1999
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This Statement of Additional Information is not a prospectus, but
should be read in conjunction with the current Prospectus for HICAPS Money
Market Fund (the "Fund") dated , 1999. This Statement of Additional
Information is incorporated into the Fund's Prospectus by reference. Copies of
the Fund's Prospectus are available, without charge, by calling (800)_______ or
writing to HICAPS Money Market fund, c/o American Data Services, Inc., P.O. Box
5536, Hauppauge, NY 11788-0132. Please retain this Statement of Additional
Information for future reference.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
GENERAL INFORMATION...................................................................................... 1
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS............................................................... 1
INVESTMENT RESTRICTIONS.................................................................................. 6
PORTFOLIO TURNOVER....................................................................................... 7
DIRECTORS AND EXECUTIVE OFFICERS......................................................................... 7
INVESTMENT ADVISORY AND OTHER SERVICES................................................................... 8
SHAREHOLDER SERVICES PLAN................................................................................ 10
PORTFOLIO TRANSACTIONS................................................................................... 10
CAPITAL STOCK............................................................................................ 11
NET ASSET VALUE AND PUBLIC OFFERING PRICE................................................................ 12
VALUATION OF PORTFOLIO SECURITIES........................................................................ 12
TAXES.................................................................................................... 12
CALCULATION OF PERFORMANCE DATA.......................................................................... 13
COMMERCIAL PAPER AND BOND RATINGS........................................................................ 14
FINANCIAL STATEMENTS..................................................................................... 16
</TABLE>
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GENERAL INFORMATION
HICAPS Money Market Fund (the "Fund") is a diversified series of HICAPS
Funds, Inc. ("HFI"), an open-end, management investment company. HFI was
incorporated under the laws of the State of Minnesota on October 19, 1999 and is
a "series" investment company with one series of shares currently outstanding
(Series A, which consists of the shares of the Fund). Hanifen, Imhoff Capital
Services Inc. (the "Advisor") is the Fund's investment advisor.
The Bylaws of HFI provide that meetings of shareholders be held only
with such frequency as required under Minnesota law and the Investment Company
Act of 1940 (the "1940 Act"). Minnesota corporation law requires only that the
Board of Directors convene shareholders' meetings when it deems appropriate. In
addition, Minnesota law provides that if a regular meeting of shareholders has
not been held during the immediately preceding 15 months, a shareholder or
shareholders holding 3% or more of the voting shares of HFI may demand a regular
meeting of shareholders by written notice given to the chief executive officer
or chief financial officer of HFI. Within 30 days after receipt of the demand,
the Board of Directors shall cause a regular meeting of shareholders to be
called, which meeting shall be held no later than 40 days after receipt of the
demand, all at the expense of HFI. In addition, the 1940 Act requires a
shareholder vote for all amendments to fundamental investment policies and
restrictions, for approval of all investment advisory contracts and amendments
thereto, and for all amendments to Rule 12b-1 distribution plans.
INVESTMENT OBJECTIVE, STRATEGIES AND RISKS
The Fund's investment objective is to provide shareholders with as high
a level of current income as is consistent with the preservation of capital and
the maintenance of liquidity. This objective may not be changed without
shareholder approval. The principal investment strategies used by the Fund in
attempting to achieve its objective are set forth in the Fund's current
Prospectuses under "Fund Summary." This Section describes these principal
investment strategies in more detail and also describes secondary investment
strategies of the Fund.
If a percentage limitation under this section or under "Investment
Restrictions" below is adhered to at the time of an investment, a later increase
or decrease in percentage resulting from changes in values of assets will not
constitute a violation of such limitation except in the case of the Fund's
limitation on borrowing.
RULE 2a-7
The Fund is subject to the investment restrictions of Rule 2a-7 under
the 1940 Act in addition to the other policies and restrictions discussed herein
and in the Prospectus. Rule 2a-7 requires that the Fund invest exclusively in
securities that mature within 397 days from the date of purchase and that it
maintain an average dollar weighted maturity of not more than 90 days. Under
Rule 2a-7, securities which are subject to specified types of demand or put
features may be deemed to mature at the next demand or put date although they
have a longer stated maturity. Rule 2a-7 also requires that all investments by
the Fund be limited to United States dollar-denominated investments that (a)
present "minimal credit risk" and (b) are at the time of acquisition "Eligible
Securities." Eligible Securities include, among others, securities that are
rated by two Nationally Recognized Statistical Rating Organizations ("NRSROs")
in one of the two highest categories for short-term debt obligations, such as
A-1 or A-2 by Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), or Prime-1 or Prime-2 by Moody's
Investors Service, Inc. ("Moody's"). It is the responsibility of the Advisor to
determine that the Fund's investments present only "minimal credit risks" and
are Eligible Securities, pursuant to the oversight of, and written guidelines
and procedures established by, the Fund's Board of Directors.
Rule 2a-7 requires that the Fund may not invest more than 5% of its
total assets in the securities of a single issuer (measured at the time of
purchase) other than United States "Government Securities" (as defined in the
1940 Act), provided that the Fund may invest in First Tier Securities (as
defined in Rule 2a-7) in excess of that limitation for a period of up to three
business days after the purchase thereof, but the Fund may not make more than
one such investment at any time. Rule 2a-7 also requires that (1) 95% of the
assets of the Fund be invested in Eligible Securities that are deemed First Tier
Securities, which include, among others, securities rated by two NRSROs in the
highest category (such as A-1 and P-1), (2) the Fund may not invest more than 5%
of its total assets in Second
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Tier Securities (i.e., Eligible Securities that are not First Tier Securities)
and (3) the Fund's investment in Second Tier Securities of a single issuer may
not exceed the greater of 1% of the Fund's total assets or $1,000,000.
BANK OBLIGATIONS
The Fund may invest in commercial paper, certificates of deposit, bank
notes, time deposits and bankers' acceptances issued by domestic banks, foreign
subsidiaries or foreign branches of domestic banks, and domestic and foreign
branches of foreign banks. Certificates of deposit are certificates evidencing
the obligation of a bank to repay funds deposited with it for a specified period
of time. Time deposits are non-negotiable deposits maintained in a banking
institution for a specified period of time at a stated interest rate. Time
deposits are not transferable and are therefore illiquid prior to their
maturity. Bankers' acceptances are credit instruments evidencing the obligation
of a bank to pay a draft drawn on it by a customer. These instruments reflect
the obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity.
Because the Fund may invest in securities of foreign subsidiaries or
foreign branches of domestic banks, foreign banks, and domestic branches of
foreign banks, the Fund may be subject to additional investment risks that are
different in some respects from those incurred by a fund that invests only in
debt obligations of United States banks. These risks may include future
unfavorable political and economic developments and possible withholding taxes,
seizure of foreign deposits, currency controls, interest limitations, or other
governmental restrictions which might affect the payment of principal or
interest on securities owned by the Fund. Additionally, there may be less public
information available about foreign banks and their branches. Various provisions
of federal law governing the establishment and operation of domestic branches do
not apply to foreign branches or subsidiaries of domestic banks. Obligations of
United States branches of foreign banks may be general obligations of the parent
bank in addition to the issuing branch, or may be limited by the terms of a
specific obligation and by federal and state regulation as well as by
governmental action in the country in which the foreign bank has its head
office. Certificates of deposit, bank notes, time deposits and bankers'
acceptances issued by foreign banks and by foreign branches or subsidiaries of
domestic banks will not benefit from insurance from the Bank Insurance Fund or
the Savings Association Insurance Fund administered by the Federal Deposit
Insurance Corporation.
PARTICIPATION INTERESTS
The Fund may purchase from financial institutions participation
interests in securities in which the Fund may invest. A participation interest
gives the Fund an undivided interest in the security in the proportion that the
Fund's participation interest bears to the total principal amount of the
security. These instruments may have fixed, floating or variable rates of
interest, with remaining maturities of 13 months or less. If the participation
interest is unrated, or has been given a rating below that which is permissible
for purchase by the Fund, the participation interest will be backed by an
irrevocable letter of credit or guarantee of a bank, or the payment obligation
otherwise will be collateralized by U.S. Government securities, or, in the case
of unrated participation interests, the Advisor must have determined that the
instrument is of comparable quality to those instruments in which the Fund may
invest. For certain participation interests, the Fund will have the right to
demand payment, on not more than seven days' notice, for all or any part of the
Fund's participation interest in the security, plus accrued interest. As to
these instruments, the Fund intends to exercise its right to demand payment only
upon a default under the terms of the security, as needed to provide liquidity
to meet redemptions or to maintain or improve the quality of its investment
portfolio.
COMMERCIAL PAPER
The Fund may purchase commercial paper consisting of short-term,
unsecured promissory notes issued to finance short-term credit needs. Commercial
paper in which the Fund invests includes variable amount master demand notes,
which are demand obligations that permit the investment of fluctuating amounts
at varying market rates of interest pursuant to arrangements between the issuer
and a commercial bank acting as agent for the payees of such notes, whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. The Fund may also invest in asset-backed commercial paper. See
"Asset-Backed Securities" below.
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<PAGE> 16
CORPORATE DEBT
The Fund may invest in nonconvertible corporate debt securities of
domestic and foreign entities (for example, bonds and debentures) with no more
than 397 calendar days remaining to maturity, provided such obligations are
Eligible Securities. Corporate debt securities with a remaining maturity of 397
calendar days or less tend to be liquid and are traded as money market
securities. Such issues tend to have greater liquidity and considerably less
market value fluctuations than longer term issues.
ASSET-BACKED SECURITIES
The Fund may purchase asset-backed securities, which are securities
issued by special purpose entities whose primary assets represent forms of
consumer credit such as automobile and credit card receivables, manufactured
(mobile) home loans, home improvement loans and home equity loans. Asset-backed
securities are generally privately issued and pass through cash flows to
investors. Interest and principal payments depend upon payment of the underlying
loans by individuals, although the securities may be supported by letters of
credit or other credit enhancements. The value of asset-backed securities may
also depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the credit
enhancement.
FOREIGN SECURITIES
The Fund may invest in U.S. dollar-denominated foreign commercial paper
and other short-term debt obligations of foreign corporations.
Investment in foreign securities is subject to special investment risks
that differ in some respects from those related to investments in securities of
United States domestic issuers. These risks include political, social or
economic instability in the country of the issuer, the difficulty of predicting
international trade patterns, the possibility of the imposition of exchange
controls, expropriation, limits on removal of currency or other assets,
nationalization of assets, foreign withholding and income taxation, and foreign
trading practices (including higher trading commissions, custodial charges and
delayed settlements). Foreign securities also may be subject to greater
fluctuations in price than securities issued by United States corporations. The
principal markets on which these securities trade may have less volume and
liquidity, and may be more volatile, than securities markets in the United
States.
In addition, there may be less publicly available information about a
foreign company than about a United States domiciled company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to United States domestic
companies. There is also generally less government regulation of securities
exchanges, brokers and listed companies abroad than in the United States.
Confiscatory taxation or diplomatic developments could also affect investment in
those countries.
UNITED STATES GOVERNMENT SECURITIES
The Fund may invest in securities issued or guaranteed as to principal
or interest by the United States Government, or agencies or instrumentalities of
the United States Government. These investments include direct obligations of
the United States Treasury such as United States Treasury bonds, notes, and
bills. The Treasury securities are essentially the same except for differences
in interest rates, maturities, and dates of issuance. In addition to Treasury
securities, the Fund may invest in securities, such as notes, bonds, and
discount notes which are issued or guaranteed by agencies of the United States
Government and various instrumentalities which have been established or
sponsored by the United States Government. Except for United States Treasury
securities, these United States Government obligations, even those which are
guaranteed by federal agencies or instrumentalities, may or may not be backed by
the "full faith and credit" of the United States. In the case of securities not
backed by the full faith and credit of the United States, the investor must look
principally to the agency issuing or guaranteeing the obligation for ultimate
repayment and may not be able to assert a claim against the United States itself
in the event the agency or instrumentality does not meet its commitment. The
Advisor considers securities guaranteed by an irrevocable letter of credit
issued by a government agency to be guaranteed by that agency.
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<PAGE> 17
ZERO COUPON OBLIGATIONS
The Fund may invest in zero coupon obligations of the U.S. government
or its agencies and corporate issuers. Zero coupon obligations do not make
interest payments; instead, they are sold at a deep discount from their face
value and are redeemed at face value when they mature. Because zero coupon
obligations do not pay current income, their prices can be very volatile when
interest rates change.
A broker-dealer creates a derivative zero by separating the interest
and principal components of a U.S. Treasury security and selling them as two
individual securities. CATS (Certificates of Accrual on Treasury Securities),
TIGRs (Treasury Investment Growth Receipts), and TRs (Treasury Receipts) are
examples of derivative zeros. The Federal Reserve Bank creates STRIPS (Separate
Trading of Registered Interest and Principal of Securities) by separating the
interest and principal components of an outstanding U.S. Treasury bond and
selling them as individual securities. Bonds issued by the Resolution Funding
Corporation (REFCORP) and the Financing Corporation (FICO) can also be separated
in this fashion. Original issue zeroes are zero coupon securities originally
issued by the U.S. government, a government agency, or a corporation in zero
coupon form.
VARIABLE AND FLOATING RATE OBLIGATIONS
Certain of the obligations in which the Fund may invest may be variable
or floating rate obligations in which the interest rate is adjusted either at
predesignated periodic intervals (variable rate) or when there is a change in
the index rate of interest on which the interest rate payable on the obligation
is based (floating rate). Variable or floating rate obligations may include a
demand feature which is a put that entitles the holder to receive the principal
amount of the underlying security or securities and which may be exercised
either at any time on no more than 30 days' notice or at specified intervals not
exceeding 397 calendar days on no more than 30 days' notice. Variable or
floating rate instruments with a demand feature enable the Fund to purchase
instruments with a stated maturity in excess of 397 calendar days. The Fund
determines the maturity of variable or floating rate instruments in accordance
with Securities and Exchange Commission ("SEC") rules which allow the Fund to
consider certain of such instruments as having maturities that are less than the
maturity date on the face of the instrument.
ILLIQUID SECURITIES
As a nonfundamental investment restriction that may be changed at any
time without shareholder approval, the Fund will not invest more than 10% of its
net assets in illiquid securities. A security is considered illiquid if it
cannot be sold in the ordinary course of business within seven days at
approximately the price at which it is valued. Illiquid securities may offer a
higher yield than securities which are more readily marketable, but they may not
always be marketable on advantageous terms.
The sale of illiquid securities often requires more time and results in
higher brokerage charges or dealer discounts and other selling expenses than
does the sale of securities eligible for trading on national securities
exchanges or in the over-the-counter markets. The Fund may be restricted in its
ability to sell such securities at a time when the Advisor deems it advisable to
do so. In addition, in order to meet redemption requests, the Fund may have to
sell other assets, rather than such illiquid securities, at a time which is not
advantageous.
"Restricted securities" are securities which were originally sold in
private placements and which have not been registered under the Securities Act
of 1933 (the "1933 Act"). Such securities generally have been considered
illiquid, since they may be resold only subject to statutory restrictions and
delays or if registered under the 1933 Act. In 1990, however, the SEC adopted
Rule 144A under the 1933 Act, which provides a safe harbor exemption from the
registration requirements of the 1933 Act for resales of restricted securities
to "qualified institutional buyers," as defined in the rule. The result of this
rule has been the development of a more liquid and efficient institutional
resale market for restricted securities. Thus, restricted securities are no
longer necessarily illiquid. The Fund may therefore invest in Rule 144A
securities and treat them as liquid when they have been determined to be liquid
by the Board of Directors of HFI or by the Advisor subject to the oversight of
and pursuant to procedures adopted by the Board of Directors. Under these
procedures, factors taken into account in determining the liquidity of a
security include (a) the frequency of trades and quotes for the security; (b)
the number of dealers willing to purchase or sell the security and the number of
other potential purchasers; (c) dealer undertakings to make a market in the
security;
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<PAGE> 18
and (d) the nature of the security and the nature of the marketplace trades
(e.g., the time needed to dispose of the security, the method of soliciting
offers and the mechanics of transfer). Similar determinations may be made with
respect to commercial paper issued in reliance on the so-called "private
placement" exemption from registration under Section 4(2) of the 1933 Act. The
Fund may invest a significant portion of its assets in this type of commercial
paper.
CREDIT ENHANCEMENT AGREEMENTS
The Fund may arrange for guarantees, letters of credit, or other forms
of credit enhancement agreements (collectively, "guarantees") for the purpose of
further securing the payment of principal and/or interest on the Fund's
investment securities. Although each investment security, at the time it is
purchased, must meet the Fund's creditworthiness criteria, guarantees sometimes
are purchased from banks and other institutions when the Advisor, through yield
and credit analysis, deems that credit enhancement of certain of the Fund's
securities is advisable.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to the
securities in which it may invest. A repurchase agreement involves the purchase
by the Fund of securities with the condition that after a stated period of time
the original seller (a member bank of the Federal Reserve System or a recognized
securities dealer) will buy back the same securities ("collateral") at a
predetermined price or yield. Repurchase agreements involve certain risks not
associated with direct investments in securities. In the event the original
seller defaults on its obligation to repurchase, as a result of its bankruptcy
or otherwise, the Fund will seek to sell the collateral, which action could
involve costs or delays. In such case, the Fund's ability to dispose of the
collateral to recover such investment may be restricted or delayed. To the
extent proceeds from the sale of collateral are less than the repurchase price,
the Fund will suffer a loss. Repurchase agreements maturing in more than seven
days are considered illiquid and subject to the Fund's restriction on investing
in illiquid securities.
The Fund's custodian will hold the securities underlying any repurchase
agreement or such securities will be part of the Federal Reserve Book Entry
System. The market value of the collateral underlying the repurchase agreement
will be determined on each business day. If at any time the market value of the
collateral falls below the repurchase price of the repurchase agreement
(including any accrued interest), the Fund will promptly receive additional
collateral (so the total collateral is an amount at least equal to the
repurchase price plus accrued interest).
LENDING PORTFOLIO SECURITIES
The Fund may lend securities from its portfolio to brokers, dealers and
other institutional investors needing to borrow securities to complete certain
transactions. The Fund continues to be entitled to payments in amounts equal to
the interest or other distributions payable on the loaned securities which
affords the Fund an opportunity to earn interest on the amount of the loan and
on the loaned securities' collateral. Loans of portfolio securities may not
exceed 33-1/3% of the value of the Fund's total assets, and the Fund will
receive collateral consisting of cash, U.S. Government securities or irrevocable
letters of credit which will be maintained at all times in an amount equal to at
least 100% of the current market value of the loaned securities. Such loans are
terminable by the Fund at any time upon specified notice. The Fund might
experience risk of loss if the institution with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund. In connection
with its securities lending transactions, the Fund may return to the borrower or
a third party which is unaffiliated with the Fund, and which is acting as a
"placing broker," a part of the interest earned from the investment of
collateral received for securities loaned.
FORWARD COMMITMENTS
The Fund may purchase securities on a forward commitment or when-issued
basis, which means that delivery and payment take place a number of days after
the date of the commitment to purchase. The payment obligation and the interest
rate receivable on a forward commitment or when-issued security are fixed when
the Fund enters into the commitment, but the Fund does not make payment until it
receive delivery from the counterparty. The Fund will commit to purchase such
securities only with the intention of actually acquiring the
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<PAGE> 19
securities, but the Fund may sell these securities before the settlement date if
it is deemed advisable. The Fund will not accrue income in respect of a security
purchased on a forward commitment basis prior to its stated delivery date. The
Fund will set aside in a segregated account permissible liquid assets at least
equal at all times to the amount of the purchase commitments.
Securities purchased on a forward commitment or when-issued basis are
subject to changes in value based on the public's perception of the
creditworthiness of the issuer and changes, real or anticipated, in the level of
interest rates. Securities purchased on a forward commitment or when-issued
basis may expose the Fund to risks because they may experience such fluctuations
prior to their actual delivery. Purchasing securities on a when-issued basis can
involve the additional risk that the yield available in the market when the
delivery takes place actually may be higher than that obtained in the
transaction itself. Purchasing securities on a forward commitment or when-
issued basis when the Fund is fully or almost fully invested may result in
greater potential fluctuation in the value of the Fund's net assets and its net
asset value per share.
BORROWING
The Fund may borrow money, including in connection with the entry into
reverse repurchase agreements described below, provided that it maintains
continuous asset coverage (that is, total assets including borrowings, less
liabilities exclusive of borrowings) of 300% of the amount borrowed. Interest
paid on borrowed funds will decrease the net earning of the Fund. If the Fund
makes additional investments while borrowings are outstanding, this may be
considered a form of leverage. The Fund will not make any additional investments
while borrowings exceed 5% of the Fund's total assets.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements with banks,
brokers or dealers. Reverse repurchase agreements involve the transfer by the
Fund of an underlying debt instrument in return for cash proceeds based on a
percentage of the value of the security. At an agreed upon future date, the Fund
repurchases the security at principal plus accrued interest. As a result of
these transactions, the Fund is exposed to greater potential fluctuations in the
value of its assets and its net asset value per share. These transaction will be
subject to interest costs which may or may not be recovered by appreciation of
the securities purchased; in certain cases, interest costs on the money borrowed
may exceed the return received on the securities purchased. To the extent the
Fund enters into reverse repurchase agreements, the Fund will maintain in a
segregated account permissible liquid assets equal to the aggregate amount of
its reverse repurchase obligations, plus accrued interest, in certain cases, in
accordance with releases promulgated by the SEC. The SEC views reverse
repurchase agreement transactions as collateralized borrowings by the Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment limitations and
fundamental policies. These policies and limitations cannot be changed by the
Fund without approval by the holders of a majority of the outstanding shares of
the Fund as defined in the 1940 Act. The Fund will not:
1. Purchase the securities of any issuer if such purchase
would cause the Fund to fail to meet the requirements of a "diversified
company" as defined under the 1940 Act, as amended, and as interpreted
or modified from time to time by any regulatory authority having
jurisdiction.*
2. Borrow money or issue senior securities, except as
permitted under the 1940 Act, as amended, and as interpreted or
modified from time to time by any regulatory authority having
jurisdiction.
3. Concentrate its investments in a particular industry, as
that term is used in the 1940 Act, as amended, and as interpreted or
modified from time to time by any regulatory authority having
jurisdiction. For purposes of this limitation, the U.S. Government, and
state or municipal governments and their political subdivisions, are
not considered members of any industry. In addition, this limitation
does not apply to investments in domestic banks.
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<PAGE> 20
4. Act as an underwriter of securities of other issuers,
except to the extent that, in connection with the disposition of
portfolio securities, it may be deemed an underwriter under applicable
laws.
5. Purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments, but this shall not
prevent the Fund from investing in securities or other instruments
backed by real estate or interests therein or in securities of
companies that deal in real estate or mortgages.
6. Purchase physical commodities or contracts relating to
physical commodities.
7. Make loans except as permitted under the 1940 Act, as
amended, and as interpreted or modified from time to time by any
regulatory authority having jurisdiction.
* As currently defined in the 1940 Act, "diversified company" means a management
company which meets the following requirements: at least 75% of the value of its
total assets is represented by cash and cash items (including receivables),
Government securities, securities of other investment companies and other
securities for the purposes of this calculation limited in respect of any one
issuer to an amount not greater in value than 5% of the value of the total
assets of such management company and not more than 10% of the outstanding
voting securities of such issuer.
In addition, as a non-fundamental policy which may be changed by the
Fund's Board of Directors without shareholder approval, the Fund will not invest
more than 10% of its net assets in illiquid securities.
PORTFOLIO TURNOVER
The Fund may attempt to increase yield by trading to take advantage of
changing money market conditions and trends or to take advantage of what are
believed to be disparities in yield relationships between different money market
instruments. This policy is expected to result in high portfolio turnover.
However, because brokerage commissions as such are not usually paid in
connection with the purchase or sale of the securities in which the Fund invests
and because the transactional costs are small, the high turnover is not expected
materially to affect the Fund's net asset value or yield. Securities with
maturities of less than one year are excluded from required portfolio turnover
rate calculations, and, therefore, the Fund's turnover rate for reporting
purposes will be zero.
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of HFI is responsible for the management and
supervision of the Fund. The directors and executive officers of HFI are listed
below, together with their business addresses and their principal occupations
during the past five years. Directors who are "interested persons" (as that term
is defined in the 1940 Act) of HFI are identified with an asterisk.
<TABLE>
<CAPTION>
NAME AND ADDRESS (AGE) POSITION WITH HFI PRINCIPAL OCCUPATIONS DURING THE PAST
- ---------------------- ----------------- -------------------------------------
FIVE YEARS AND OTHER AFFILIATIONS
---------------------------------
<S> <C> <C>
Donna Bates Boucher (50) Director President, The Bates Group, Inc., a public
8505 East Temple Drive #473 relations and marketing firm, since 1983.
Denver, CO 80237
Robert G. Bush (49) Director Manager/Principal, E.R.I.C. Forecasting
5723 S. Florence Street Publications, an investment consulting
Englewood, CO 80111 service, since 1998; prior thereto, an
investment manager with Corinthian Capital,
Denver Colorado, 1998; Senior Vice President
- Investments, with Morgan Stanley Dean
Witter from 1995 to 1997; Vice President -
Institutional sales, with AG Edwards and Co.
from 1992 to 1994.
</TABLE>
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<PAGE> 21
<TABLE>
<S> <C> <C>
John T. Hughes (62) Director Senior Vice President and Chief Investment
8515 East Orchard Road Officer, The Great-West Life & Annuity
Englewood, CO 80111 Insurance Company, since 1989.
Alan M. Scott (45)* Director Managing Director, Hanifen Imhoff, Inc.
1125 Seventeenth Street since August 1997. Prior thereto, head of
Suite 1600 fixed income sales for Hanifen Imhoff, Inc.
Denver, CO 80202 since 1987.
Howard Van Deusen(61)* Director Managing Director, Hanifen Imhoff, Inc.
1125 Seventeenth Street since 1997, prior to which he had been a Vice
Suite 1600 President of Hanifen Imhoff, Inc. since 1990.
Denver, CO 80202
Terry L. Maltarich (52) President Vice President of Hanifen Imhoff, Inc. and
1125 Seventeenth Street President of Hanifen, Imhoff Capital
Suite 1600 Services, Inc. since March 1999. Prior
Denver, CO 80202 thereto, portfolio manager for Colorado
National Bank from 1995 to 1998 and public
bond portfolio manager for Great-West Life
Assurance Company from 1990 to 1994.
Dennis M. Kortman (53) Secretary and Treasurer Chief Financial Officer of Hanifen Imhoff,
1125 Seventeenth Street Inc. since August 1998. Prior thereto,
Suite 1600 partner at Baird, Kurtz & Dobson, a public
Denver, CO 80202 accounting firm, from June 1995 to July
1998, and partner at McGladrey & Pullen LLP,
a public accounting firm, from June 1983 to
June 1995.
</TABLE>
- ----------------------------------
* Directors who are "interested persons," as defined in the 1940 Act, of the
Fund.
COMPENSATION
Fund directors have agreed to serve without compensation, except that
directors who are not employees or affiliates of the Fund will be reimbursed for
any expenses incurred in connection with attending Board meetings.
Under Minnesota law, each director owes certain fiduciary duties to the
Fund and to its shareholders. Minnesota law provides that a director "shall
discharge the duties of the position of director in good faith, in a manner the
director reasonably believes to be in the best interest of the corporation, and
with the care an ordinarily prudent person in a like position would exercise
under similar circumstances." Fiduciary duties of a director of a Minnesota
corporation include, therefore, both a duty of "loyalty" (to act in good faith
and in a manner reasonably believed to be in the best interest of the
corporation) and a duty of "care" (to act with the care an ordinarily prudent
person in a like position would exercise under similar circumstances). In 1987,
Minnesota enacted legislation which authorizes corporations to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of the fiduciary duty of "care."
Minnesota law does not, however, permit a corporation to eliminate or limit the
liability of a director (a) for any breach of the director's duty of "loyalty"
to the corporation or its shareholders, (b) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of the law,
(c) for authorizing a dividend, stock repurchase or redemption, or other
distribution in violation of Minnesota law or for violation of certain
provisions of Minnesota securities laws, or (d) for any transaction from which
the director derived an improper personal benefit. HFI's Articles of
Incorporation limit the liability of directors to the fullest extent permitted
by Minnesota law and the 1940 Act.
Minnesota law does not eliminate the duty of "care" imposed on a
director. It only authorizes a corporation to eliminate monetary liability for
violations of that duty. Further, Minnesota law does not permit elimination or
limitation of liability of "officers" to the corporation for breach of their
duties as officers. Minnesota
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<PAGE> 22
law does not permit elimination or limitation of the availability of equitable
relief, such as injunctive or rescissionary relief. These remedies, however, may
be ineffective in situations where shareholders become aware of such a breach
after a transaction has been consummated and rescission has become impractical.
Minnesota law does not permit elimination or limitation of a director's
liability under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended. The 1940 Act prohibits elimination or
limitation of a director's liability for acts involving willful malfeasance, bad
faith, gross negligence, or reckless disregard of the duties of a director.
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISOR
Hanifen, Imhoff Capital Services Inc. (the "Advisor"), 1125 17th
Street, Suite 1600, Denver, Colorado 80202, is a newly formed registered
investment adviser. Pursuant to an Investment Advisory Agreement between HFI, on
behalf of the Fund, and the Advisor (the "Advisory Agreement"), the Fund has
engaged the Advisor to act as investment advisor for and to manage the
investment of the Funds' assets. The Advisory Agreement requires the Fund to pay
the Advisor a monthly fee equal, on an annual basis, to 0.25% of the Fund's
average daily net assets. The Adviser has agreed to waive receipt of its fees
and/or assume the expenses of the Fund so that total annual Fund operating
expenses do not exceed 0.18% of the Fund's average daily net assets for the
current fiscal year. The Adviser may discontinue fee waivers and expense
assumptions at any time after the Fund's fiscal year end.
Pursuant to the Advisory Agreement, the Advisor manages the Fund's
portfolio of investments in accordance with the stated policies of the Fund,
subject to the approval of the Board of Directors. The Advisor is also
responsible for monitoring the performance of the various organizations
providing services to the Fund, including the Fund's distributor, administrator,
custodian, and transfer agent, and for periodically reporting to HFI's Board of
Directors on the performance of such organizations. The Advisory Agreement
requires the Advisor to arrange, if requested by HFI, for officers or employees
of the Advisor to serve without compensation from HFI as directors, officers, or
employees of HFI if duly elected to such positions. The Advisor will, at its own
expense, furnish the Fund with the necessary personnel, office facilities, and
equipment to service the Fund's investments and to discharge its duties as
investment advisor of the Fund.
In addition to the investment advisory fee, the Fund pays all of its
expenses that are not expressly assumed by the Advisor or any other organization
with which the Fund may enter into an agreement for the performance of services.
The Fund is liable for such nonrecurring expenses as may arise, including
litigation to which the Fund may be a party. HFI may have an obligation to
indemnify its directors and officers with respect to such litigation. The
Advisor will be liable to the Fund under the Advisory Agreement for any
negligence or willful misconduct by the Advisor other than liability for
investments made by the Advisor in accordance with the explicit direction of the
Board of Directors or the investment objective and policies of the Fund. The
Advisor has agreed to indemnify the Fund with respect to any loss, liability,
judgment, cost or penalty that the Fund may suffer due to a breach of the
Advisory Agreement by the Advisor.
The Advisory Agreement will terminate automatically in the event of its
assignment. In addition, the Agreement is terminable at any time without penalty
by the Board of Directors of the HFI or by vote of a majority of the Fund's
outstanding voting securities on not more than 60 days' written notice to HFI,
and by HFI on 60 days' notice to the Fund. The Agreement has an initial term of
two years, and thereafter shall continue in effect from year to year only so
long as such continuance is specifically approved at least annually by either
the Board of Directors of HFI or by vote of a majority of the Fund's outstanding
voting securities, provided that in either event such continuance is also
approved by the vote of a majority of directors who are not parties to the
Agreement or interested persons of such parties cast in person at a meeting
called for the purpose of voting on such approval.
The Advisor may, at its option, waive any or all of its fees or
reimburse Fund expenses from time to time. Any such waiver or reimbursement is
voluntary and may be discontinued at any time unless as otherwise set forth in
the Prospectus. The Advisor also may absorb or reimburse expenses of the Fund
from time to time, in its discretion, while retaining the ability to be
reimbursed by the Fund for such amounts prior to the end of the fiscal year.
This
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<PAGE> 23
practice would have the effect of lowering the Fund's overall expense ratio and
of increasing yield to investors, or the converse, at the time such amounts are
absorbed or reimbursed, as the case may be.
DISTRIBUTOR
Hanifen, Imhoff Inc., 1125 17th Street South, Suite 1600, Denver,
Colorado 80202 (the "Distributor" ) serves as the distributor for the shares of
the Fund pursuant to a Distribution Agreement between the Distributor and HFI.
The Advisor is a wholly owned subsidiary of the Distributor. Under the
Distribution Agreement, the Distributor has agreed to act as the principal
underwriter for the Fund in the sale and distribution to the public of Fund
shares, either through dealers or otherwise. The Distributor has agreed to offer
such shares for sale at all times when such shares are available for sale and
may lawfully be offered for sale and sold. As compensation for its services, the
Distributor receives shareholder servicing fees pursuant to the Fund's
Shareholder Services Plan discussed below. See "Shareholder Services Plan." In
addition, the Advisor may pay the Distributor for providing shareholder services
from the Advisor's own assets. The Distributor may use part or all of such
payments and shareholder servicing fees to pay securities dealers, banks or
other financial institutions in respect of these services.
The Distribution Agreement provide that it will continue in effect for
a period of more than one year from the date of its execution only so long as
such continuance is specifically approved at least annually by the vote of a
majority of the Board members of HFI and by the vote of the majority of those
Board members of HFI who are not interested persons of HFI and who have no
direct or indirect financial interest in the operation of HFI's Shareholder
Services Plan or in any agreement related to such plan.
CUSTODIAN; ADMINISTRATOR; TRANSFER AGENT; COUNSEL; ACCOUNTANTS
Union Bank of California, 475 Sansome Street, 15th Floor, San
Francisco, California 94111 (the "Custodian") acts as custodian of the Fund's
assets and portfolio securities. The Custodian takes no part in determining the
investment policies of the Fund or in deciding which securities are purchased or
sold by the Fund. The duties of the Custodian are limited to receiving and
safeguarding the assets and securities of the Fund and to delivering or
disposing of them pursuant to the Fund's order. The Fund compensates the
Custodian at such rates and at such times as the Fund and the Custodian may
agree on in writing from time to time, and the Custodian is granted a lien for
unpaid compensation upon any cash or securities held by it for the Fund.
American Data Services, Inc., Hauppauge Corporate Center, 150 Motor
Parkway, Hauppauge, New York 11788-0312, acts as the Fund's administrator,
transfer agent and dividend disbursing agent.
Dorsey & Whitney LLP, 220 South Sixth Street, Minneapolis, Minnesota
55402, is independent general counsel for the Funds.
Baird, Kurtz & Dobson, 1700 Lincoln Street, Suite 3400, Denver,
Colorado 80203, serves as the Fund's independent auditors, providing audit
services, including audits of the annual financial statements and assistance and
consultation in connection with SEC filings.
SHAREHOLDER SERVICES PLAN
The Fund has adopted a Shareholder Services Plan (the "Plan") pursuant
to which the Fund pays the Distributor a shareholder servicing fee at an annual
rate of 0.25% of the average daily net assets of the Fund, which fee may be used
by the Distributor to provide compensation for shareholder servicing activities
with respect to the Fund's shares. The shareholder servicing fee is intended to
compensate the Distributor for ongoing servicing and/or maintenance of
shareholder accounts and may be used by the Distributor to provide compensation
to institutions through which shareholders hold their shares for ongoing
servicing and/or maintenance of shareholder accounts. This fee is calculated and
paid each month based on average daily net assets of the Fund for that month.
The Plan is a "compensation-type" plan under which the Distributor is entitled
to receive the shareholder servicing fee regardless of whether its actual
shareholder servicing expenses are more or less than the amount of the fee. The
Plan recognizes that the Advisor may pay the Distributor for shareholder
services from the Advisor's own assets.
-10-
<PAGE> 24
The Adviser also may make such advertising and promotional expenditures, using
its own resources, as it from time to time deems appropriate.
A quarterly report of the amount expended under the Plan, and the
purposes for which such expenditures were incurred, must be made to the Board of
Directors for its review. In addition, the Plan provides that material
amendments of the Plan must be approved by Board members who are not "interested
persons" (as defined in the 1940 Act) of the Fund and have no direct or indirect
financial interest in the operation of the Plan by vote cast in person at a
meeting called for the purpose of considering such amendments. The Plan is
subject to annual approval by such vote of the Board members cast in person at a
meeting called for the purpose of voting on the Plan. The Plan is terminable at
any time by vote of a majority of the Board members who are not "interested
persons" and have no direct or indirect financial interest in the operation of
the Plan.
PORTFOLIO TRANSACTIONS
As the Fund's portfolio is exclusively composed of debt, rather than
equity securities, most of the Fund's portfolio transactions are effected with
dealers without the payment of brokerage commissions but at net prices, which
usually include a spread or markup. In effecting such portfolio transactions on
behalf of the Fund, the Advisor seeks the most favorable net price consistent
with the best execution. The Advisor may, however, select a dealer to effect a
particular transaction without communicating with all dealers who might be able
to effect such transaction because of the volatility of the money market and the
desire of the Advisor to accept a particular price for a security because the
price offered by the dealer meets guidelines for profit, yield, or both. The
Fund may authorize the Advisor to place brokerage orders with some brokers who
help distribute the Fund's shares, if the Advisor reasonably believes that
transaction quality and commissions, if any, are comparable to that available
from other qualified brokers.
Decisions with respect to placement of the Fund's portfolio
transactions are made by the Advisor. The primary consideration in making these
decisions is efficiency in executing orders and obtaining the most favorable net
prices for the Fund. Most Fund transactions are with the issuer or with major
dealers acting for their own account and not as brokers. When consistent with
these objectives, business may be placed with broker-dealers who furnish
investment research services to the Advisor. Such research services would
include advice, both directly and in writing, as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities, as well as
analyses and reports concerning issues, industries, securities, economic factors
and trends, portfolio strategy, and the performance of accounts.
These research services may allow the Advisor to supplement its own
investment research activities and enable the Advisor to obtain the views and
information of individuals and research staffs of many different securities
firms prior to making investment decisions for the Fund. To the extent portfolio
transactions are effected with broker-dealers who furnish research services, the
Advisor would receive a benefit, which is not capable of evaluation in dollar
amounts, without providing any direct monetary benefit to the Fund from these
transactions.
The Advisor has not entered into any formal or informal agreements with
any broker-dealers, and does not maintain any "formula" that must be followed in
connection with the placement of Fund portfolio transactions in exchange for
research services provided to the Advisor. The Advisor may, from time to time,
maintain an informal list of broker-dealers that will be used as a general guide
in the placement of Fund business in order to encourage certain broker-dealers
to provide the Advisor with research services, which the Advisor anticipates
will be useful to it. Any list, if maintained, would be merely a general guide,
which would be used only after the primary criteria for the selection of
broker-dealers (discussed above) has been met, and, accordingly, substantial
deviations from the list could occur. While it is not expected that the Fund
will pay brokerage commissions, if it does, the Advisor would authorize the Fund
to pay an amount of commission for effecting a securities transaction in excess
of the amount of commission another broker-dealer would have charged only if the
Advisor determined 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-dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Advisor with respect to the Fund.
-11-
<PAGE> 25
The Fund does not effect brokerage transactions in its portfolio
securities with any broker-dealer affiliated directly or indirectly with its
Advisor or Distributor unless such transactions, including the frequency
thereof, the receipt of commissions payable in connection therewith, and the
selection of the affiliated broker-dealer effecting such transactions are not
unfair or unreasonable to the shareholders of the Fund, as determined by the
Board of Directors. Any transactions with an affiliated broker-dealer must be on
terms that are both at least as favorable to the Fund as such Fund can obtain
elsewhere and at least as favorable as such affiliate broker-dealer normally
gives to others.
When two or more clients of the Advisor are simultaneously engaged in
the purchase or sale of the same security, the prices and amounts are allocated
in accordance with a formula considered by the Advisor to be equitable to each
client. In some cases, this system could have a detrimental effect on the price
or volume of the security as far as each client is concerned. In other cases,
however, the ability of the clients to participate in volume transactions will
produce better executions for each client.
CAPITAL STOCK
Each share of the Fund's common stock is fully paid, nonassessable, and
transferable. Shares may be issued as either full or fractional shares.
Fractional shares have pro rata the same rights and privileges as full shares.
Shares of the Fund have no preemptive or conversion rights. Each share of the
Fund has one vote. The shares do not have cumulative voting rights.
Consequently, the holders of more than 50% of the shares voting for the election
of directors are able to elect all of the directors if they choose to do so.
HFI currently issues one series of common stock, which is the common
stock of the Fund. However, the Board of Directors of HFI is entitled under
HFI's Articles of Incorporation to issue other series of HFI's common stock
without shareholder approval. Each share of a series is entitled to participate
pro rata in any dividends and other distributions of such series and all shares
of a series have equal rights in the event of liquidation of that series. If HFI
issued additional series of shares, shares of each series of HFI would vote
together on some issues, such as the election of directors. On issues affecting
only a particular series or, in the event that any series issues multiple
classes of shares, a particular class, the shares of that series or class would
vote as a separate series or class. Examples of such issues would be proposals
to alter a fundamental investment restriction pertaining to a series or to
approve, disapprove or alter a distribution plan pertaining to a class.
As of ____________, 1999, shares of the Fund had not yet been publicly
offered and all of the Fund's outstanding shares were owned by ____________. As
a result _______, controlled the Fund as of such date.
NET ASSET VALUE AND PUBLIC OFFERING PRICE
The public offering price of the shares of the Fund equals the Fund's
net asset value. No sales charges are assessed on Fund share purchases. The Fund
is open for business and its net asset value per share is calculated on every
day the New York Stock Exchange is open for business. The New York Stock
Exchange is not open for business on the following holidays (or on the nearest
Monday or Friday if the holiday falls on a weekend): New Year's Day, Martin
Luther King, Jr. Day, Washington's Birthday (observed), Good Friday, Memorial
Day (observed), Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day. Each year the New York Stock Exchange may designate different dates for the
observance of these holidays as well as designate other holidays for closing in
the future. To the extent that the securities of the Fund are traded on days
that the Fund is not open for business, the Funds' net asset value per share may
be affected on days when investors may not purchase or redeem shares.
On ____________, 1999, the net asset value per share for the Fund was
calculated as follows:
Net Assets ($ ) = Net Asset Value Per Share
- -----------------------------------------------
Shares Outstanding ( ) ($1.00)
------------------------
-12-
<PAGE> 26
VALUATION OF PORTFOLIO SECURITIES
The Fund's portfolio securities are valued on the basis of the
amortized cost method of valuation. This involves valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
The Board of Directors has established, as a particular responsibility
within the overall duty of care owed to Fund shareholders, procedures designed
to stabilize, to the extent reasonably possible, the Funds' price per share as
computed for the purpose of sales and redemptions at $1.00 per share. Such
procedures include review of the Fund's portfolio holdings by the Directors at
such intervals as they may deem appropriate to determine whether the Fund's net
asset value calculated by using available market quotations deviates from $1.00
per share and, if so, whether such deviation may result in material dilution or
is otherwise unfair to existing shareholders. In the event the directors
determine that such a deviation exists, they will take such corrective action as
they regard as necessary and appropriate, such as selling portfolio instruments
prior to maturity to realize capital gains or losses or to shorten average
portfolio maturity, withholding dividends, or establishing a net asset value per
share by using available market quotations.
TAXES
The Fund intends to elect each year to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). If so qualified, the Fund will not be liable for federal
income taxes to the extent it distributes its taxable income to its
shareholders.
It is expected that none of the distributions of the Fund's net
investment income will qualify for the dividends received deduction available to
corporations under the Code.
Ordinarily, distributions and redemption proceeds earned by Fund
shareholders are not subject to withholding of federal income tax. However, the
Fund is required to withhold 31% of a shareholder's distributions and redemption
proceeds upon the occurrence of certain events specified in Section 3406 of the
Code and regulations promulgated thereunder. These events include the failure of
a Fund shareholder to supply the Fund with such shareholder's taxpayer
identification number, and the failure of a Fund shareholder who is otherwise
exempt from withholding to properly document such shareholder's status as an
exempt recipient. Additionally, distributions may be subject to state and local
income taxes, and the treatment thereunder may differ from the federal income
tax consequences discussed above.
Under the Code, the Fund will be subject to a non-deductible excise tax
equal to 4% of the excess, if any, of the amount of investment income and
capital gains required to be distributed pursuant to the Code for each calendar
year over the amount actually distributed. In order to avoid this excise tax,
the Fund generally must declare dividends by the end of each calendar year
representing 98% of the Fund's ordinary income for such calendar year and 98% of
its capital gain net income, if any, for the twelve-month period ending October
31 of the same calendar year. The excise tax is not imposed, however, on
undistributed income that is already subject to corporate income tax.
The foregoing is a general and abbreviated summary of the Code and
Treasury regulations in effect as of the date of this Statement of Additional
Information. The foregoing relates solely to federal income tax law applicable
to "U.S. persons," i.e., U.S. citizens and residents and U.S. domestic
corporations, partnerships, trusts and estates. Shareholders who are not U.S.
persons are encouraged to consult a tax adviser regarding the income tax
consequences of acquiring shares of the Fund.
-13-
<PAGE> 27
CALCULATION OF PERFORMANCE DATA
The Fund may issue current yield quotations. The yield of the Fund
refers to the income generated by an investment in the Fund over a seven-day
period. This income is then annualized. That is, the amount of income generated
by the investment during that week is assumed to be generated each week over a
52 week period and is shown as a percentage of the investment. Simple yields are
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of a recent seven calendar day period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then multiplying the base period return by
365/7. The resulting yield figure will be carried to at least the nearest
hundredth of one percent.
The Fund's effective yield is calculated similarly but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested. The effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. Effective yields are
computed by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of a recent seven calendar day period, subtracting a hypothetical
charge reflecting deductions from shareholder accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and then compounding the base period return by
adding 1, raising the sum to a power equal to 365 divided by 7, and subtracting
1 from the result, according to the following formula:
Effective Yield = [(Base Period Return +1)365/7] -1
When calculating the foregoing yield or effective yield quotations, the
calculation of net change in account value will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, and all fees, other
than nonrecurring accounts or sales charges, that are charged to all shareholder
accounts in proportion to the length of the base period. Realized gains and
losses from the sale of securities and unrealized appreciation and depreciation
are excluded from the calculation of yield and effective yield.
Yield information may be useful in reviewing the Fund's performance and
for providing a basis for comparison with other investment alternatives.
However, the Fund's yield fluctuates, unlike investments which pay a fixed yield
for a stated period of time. Yields for the Fund are calculated on the same
basis as other money market funds as required by applicable regulations.
Investors should give consideration to the quality and maturity of the portfolio
securities of the respective investment companies when comparing investment
alternatives.
Investors should recognize that in periods of declining interest rates
the Fund's yields will tend to be somewhat higher than prevailing market rates,
and in periods of rising interest rates the Fund's yields will tend to be
somewhat lower. Also, when interest rates are falling, the inflow of net new
money to the Fund from the continuous sale of its shares will likely be invested
in portfolio instruments producing lower yields than the balance of the Fund's
portfolio, thereby reducing the current yield of the Fund. In periods of rising
interest rates, the opposite can be expected to occur
In addition to advertising yield, comparative performance information
may be used from time to time in advertising the Fund's shares, including data
from Lipper Analytical Services, Inc., Morningstar, Inc., IBC's Money Fund
Report and other industry publications and other entities or organizations which
track the performance of investment companies. Performance information for the
Fund also may be compared to various unmanaged indices. Unmanaged indices do not
reflect deductions for administrative and management costs and expenses. The
Fund may also include in advertisements and communications to Fund shareholders
evaluations of the Fund published by nationally recognized ranking services and
by financial publications that are nationally recognized, such as Barron's,
Business Week, Forbes, Institutional Investor, Investor's Daily, Money,
Kiplinger's Personal Finance Magazine, Morningstar Mutual Fund Values, The New
York Times, USA Today and The Wall Street Journal.
-14-
<PAGE> 28
COMMERCIAL PAPER AND BOND RATINGS
COMMERCIAL PAPER RATINGS
Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, Inc. ("Standard & Poor's"), commercial paper ratings are graded into
four categories, ranging from "A" for the highest quality obligations to "D" for
the lowest. Issues assigned the A rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further defined with
the designation 1, 2 and 3 to indicate the relative degree of safety. The "A-1"
designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess
overwhelming safety characteristics will be denoted with a plus sign
designation.
Moody's Investors Service, Inc. ("Moody's") commercial paper ratings
are opinions of the ability of the issuers to repay punctually promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation that such obligations are exempt from registration under
the Securities Act of 1933, and it does not represent that any specific note is
a valid obligation of a rated issuer or issued in conformity with any applicable
law. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
<TABLE>
<S> <C>
PRIME-1................................... Superior capacity for repayment
PRIME-2................................... Strong capacity for repayment
PRIME-3................................... Acceptable capacity for repayment
</TABLE>
CORPORATE BOND RATINGS
Standard & Poor's ratings for corporate bonds include the following:
Bonds rated "AAA" have the highest rating assigned by Standard & Poor's
to a debt obligation. Capacity to pay interest and repay principal is
extremely strong.
Bonds rated "AA" have a very strong capacity to pay interest and repay
principal and differ from the highest-rated issues only in small
degree.
Moody's ratings for corporate bonds include the following:
Bonds rated "Aaa" are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Bonds rated "Aa" are judged to be of high quality by all standards.
Together with the Aaa group, they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in Aaa securities, or
fluctuation of protective elements may be of greater amplitude, or
there may be other elements present that make the long-term risks
appear somewhat larger than the Aaa securities.
-15-
<PAGE> 29
FINANCIAL STATEMENTS
-16-
<PAGE> 30
PART C
HICAPS Funds, Inc.
OTHER INFORMATION
Item 23. Exhibits
The Fund is filing the following exhibits:
(a) Articles of Incorporation (1)
(b) Bylaws (1)
(c) Instruments Defining Rights of Security Holders - not applicable
(d) Investment Advisory Agreement (2)
(e)(i) Distribution Agreement (2)
(e)(ii) Form of Selected Dealer Agreement (2)
(f) Bonus or Profit Sharing Contracts - not applicable
(g) Custody Agreement (2)
(h) Other Material Contracts - not applicable
(i) Opinion and Consent of Dorsey & Whitney LLP (2)
(j) Consent of Baird, Kurtz & Dobson (2)
(k) Omitted Financial Statements - not applicable
(l) Initial Capital Agreements - not applicable
(m) Service Plan (2)
(n) Rule 18f-3 Plan - not applicable
- --------------------
(1) Filed herewith.
(2) To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with the Fund
The following is a list of all persons directly or indirectly
controlled by or under common control with the Fund:
No person is directly or indirectly controlled by or under common
control with the Registrant.
Item 25. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Fund is
insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person, or underwriter for their own protection.
The Articles of Incorporation and Bylaws of the Registrant provide that
the Registrant shall indemnify such persons for such expenses and liabilities,
in such manner and under such
1
<PAGE> 31
circumstances, to the full extent permitted by Section 302A.521, Minnesota
Statutes, as now enacted or hereafter amended, provided that no such
indemnification may be made if it would be in violation of Section 17(h) of the
Investment Company Act of 1940, as now enacted or hereafter amended. Section
302A.521 of the Minnesota Statutes, as now enacted, provides that a corporation
shall indemnify a person made or threatened to be made a party to a proceeding
of the person against judgments, penalties, fines, settlements, and reasonable
expenses, including attorneys' fees and disbursements, incurred by the person in
connection with the proceeding if, with respect to the acts or omissions of the
person complained of in the proceeding, the person has not been indemnified by
another organization for the same judgments, penalties, fines, settlements, and
reasonable expenses incurred by the person in connection with the proceeding
with respect to the same acts or omissions; acted in good faith, received no
improper personal benefit and the Minnesota Statutes dealing with directors'
conflicts of interest, if applicable, have been satisfied; in the case of a
criminal proceeding, had no reasonable cause to believe that the conduct was
unlawful; and reasonably believed that the conduct was in the best interests of
the corporation or, in certain circumstances, reasonably believed that the
conduct was not opposed to the best interests of the corporation.
Insofar as the indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers, and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant will comply with the indemnification requirements of
Investment Company Act Releases 7221 (June 9, 1972) and 11330 (September 2,
1980).
Item 26. Business and Other Connections of the Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature that each investment adviser, and each director, officer or
partner of the adviser, is or has been engaged within the last two fiscal years
for his or her own account or in the capacity of director, officer, employee,
partner or trustee.
Information on the business of the Adviser is described in the
Statement of Additional Information.
The officers and directors of the Adviser, and information on their
employment during the last two fiscal years, are as follows:
2
<PAGE> 32
<TABLE>
<CAPTION>
NAME POSITION WITH ADVISER EMPLOYMENT DURING THE PAST TWO YEARS
- ---- --------------------- ------------------------------------
<S> <C> <C>
Alan M. Scott Director Managing Director, Hanifen
Imhoff, Inc. since August
1997.
Michael F. Imhoff Director Managing Director of Fixed
Income Capital Markets for
Hanifen, Imhoff Inc. since
August 1997.
Terry Maltarich President and Director Vice President of Hanifen
Imhoff, Inc. and President of
Hanifen, Imhoff Capital
Services, Inc. since March
1999. Prior thereto, portfolio
manager for Colorado
National Bank from 1995 to
1998.
Howard Van Deusen Secretary and Director Managing Director, Hanifen
Imhoff, Inc. since August
1997.
</TABLE>
Item 27. Principal Underwriters
(a) State the name of each investment company (other than the Fund) for
which each principal underwriter currently distributing the Fund's securities
also acts as a principal underwriter, depositor, or investment adviser.
None.
(b) Provide the information required by the following table for each
director, officer, or partner of each principal underwriter named in response to
Item 20.
<TABLE>
<CAPTION>
Name and Positions and Offices Positions and Offices
Address with Underwriter with Fund
- --------------------------- ----------------------------- ----------------------
<S> <C> <C>
Walter F. Imhoff Chairman of the Board None
14032 East IDA Place President, Board of Directors
Greenwood Village, CO 80111
</TABLE>
3
<PAGE> 33
<TABLE>
<S> <C> <C>
Warren N. Eckloff, Jr. Managing Director, Executive None
6356 Tufts Avenue Vice President, Secretary of
Cherry Hills Village, CO 80111 the Board of Directors
Gerard F. Hallaren Managing Director, Executive None
6391 South Zenobia Court Vice President and Member of
Littleton, CO 80126 the Board of Directors
Michael F. Imhoff Managing Director, Executive None
9132 South Roundtree Drive Vice President, Treasurer of
Littleton, CO 80126 the Board of Directors
John Kucera Managing Director, Executive None
6178 South Alton Way Vice President, Assistant
Greenwood Village, CO 80111 Secretary of the Board of
Directors
Barry Philip Ollman Principal, Member of the None
9555 Poundstone Place Board of Directors
Greenwood Village, CO 80111
Alan M. Scott Managing Director, Executive Director
936 Detroit Street Vice President, Member of
Denver, CO 80206 the Board of Directors
James C. Sepenzis Principal, Member of the None
4660 South Franklin Street Board of Directors
Engelwood, CO 80110
Howard C. Van Deusen Managing Director, Executive Director
3272 Fourth Street Vice President, Member of
Boulder, CO 80304 the Board of Directors
Christopher Diiorio Managing Director None
4891 Christensen Drive
Littleton, CO 80123
Dennis M. Kortman Managing Director and Chief None
45 Riviera Court Financial Officer
Columbine Valley, CO 80123
Toby J. Petersen Managing Director None
2578 South Medinah Drive
Evergreen, CO 80439
</TABLE>
4
<PAGE> 34
<TABLE>
<S> <C> <C>
Gary Akers Senior Vice President None
1359 Bristol Park Place
Lake Mary, FL 32746
David Bell Senior Vice President None
10316 King Court
Westminster, CO 80030
Steve Bell Managing Director and None
15463 West 73rd Avenue Senior Vice President
Arvada, CO 80007
Keith Douglass Managing Director and None
3001 South Emerson Senior Vice President
Englewood, CO 80110
Mark C. Koza Senior Vice President None
4 Goshawk Lane
Littleton, CO 80127
Jeffrey T. Larson Managing Director and None
855 Bentley Green Circle Senior Vice President
Winter Springs, FL 32708
David Margarone Senior Vice President None
104 - 8th Street East
Tierra Verde, FL 33715
Ernie Perez Senior Vice President None
7540 East Harvard, #102
Denver, CO 80231
Lester A. Willson Senior Vice President None
2806 South Fig Street
Lakewood, CO 80228
Jeffrey L. Beach Principal None
1616 Marmot Lane
Evergreen, CO 80439
Cindy Heigman Principal None
3333 East Bayaud Avenue, #813
Denver, CO 80209
Christian Jensen Principal None
2 Finch
Littleton, CO 80127
</TABLE>
5
<PAGE> 35
<TABLE>
<S> <C> <C>
William V. Dunn Principal None
330 Grape Street
Denver, CO 80220
Bennie W. Hasten Principal None
366 Elm Street
Denver, CO 80220
Russell T. Welty Principal None
391 South Race Street
Denver, CO 80203
John R. Buck Vice President None
5941 South Dayton Court
Engelwood, CO 80111
David Cheung Vice President and None
4013 West 103rd Avenue Compliance Officer
Westminster, CO 80030
Gary Clark Vice President None
1470 South Quebec Way, #33
Denver, CO 80231
Sam Ezrol Vice President None
16431 Quail Ridge Court
Morrison, CO 80465
Debra Freeman Vice President None
5405 East Knoll Place
Highlands Ranch, CO 80125
Timothy P. Gaudette Vice President None
2601 Dahlia Street
Denver, CO 80207
Dennis Goldman Vice President None
2510 Juniper Avenue, #3
Boulder, CO 80304
Daniel Hemminger Vice President None
3524 Vallejo
Denver, CO 80211
Ralph D. Janitell Vice President None
7726 South Flanders Street
Aurora, CO 80016
</TABLE>
6
<PAGE> 36
<TABLE>
<S> <C> <C>
Fred Koch Vice President None
764 Gilpin Street
Denver, CO 80218
Stacey Lucas Vice President and Manager- None
6310 East 121st Drive Human Resources
Brighton, CO 80601
Terry Maltarich Vice President None
9322 South Crestmore Way
Highlands Ranch, CO 80126
Deidre Marrin Vice President None
3100 Cherry Creek Dr. S., #1203
Denver, CO 80209
Jojy Mathew Vice President None
7476 East Arkansas Ave., #207
Denver, CO 80231
Jon Moellenberg Vice President None
3890 South Skyline Drive
Evergreen, CO 80439
Ronald D. New Vice President None
980 Simms Street, #9115
Golden, CO 80401
Susan Roushey Vice President and None
9360 West Ute Drive Controller
Littleton, CO 80123
Ed Stull Vice President None
6239 Donegal Drive
Orlando, FL 32819
Andy Vietor Vice President None
9071 East Mississippi Ave., #32F
Denver, CO 80231
Michale Crisler Assistant Vice President None
6732 West Coal Mine Ave., #165
Littleton, CO 80123
Lawrence Marx, IV Assistant Vice President None
239 Ash Street
Denver, CO 80220
</TABLE>
7
<PAGE> 37
<TABLE>
<S> <C> <C>
Carlos Pereda Assistant Vice President None
1630 Oneco Avenue
Winter Park, FL 32789
Lorie Robinson Assistant Vice President None
6544 West Iowa Place
Lakewood, CO 80232
Gerald J. Spethman, Jr. Assistant Vice President None
4322 North 143rd Street
Omaha, NE 68164
</TABLE>
(c) Provide the information required by the following table for all commissions
and other compensation received, directly or indirectly, from the Fund during
the last fiscal year by each principal underwriter who is not an affiliated
person of the Fund or any affiliated person of an affiliated person.
Not applicable.
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical
possession of each account, book, or other document required to be maintained by
section 31(a) and the rules under that section.
The physical possession of the accounts, books, and other documents
required to be maintained by Section 31(a) of the Investment Company Act of 1940
and Rules 3la-1 to 3la-3 promulgated thereunder is maintained by the Fund's
administrator, American Data Services, Inc., Hauppauge Corporate Center, 150
Motor Parkway, Hauppauge, New York 11788-0132.
Item 29. Management Services
Provide a summary of the substantive provisions of any
management-related service contract not discussed in Part A or B, disclosing the
parties to the contract and the total amount paid and by whom for the Fund for
the last three fiscal years.
All contracts were discussed in Parts A and B.
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement with
certified financial statements showing the initial capital received before
accepting subscriptions from more than 25 persons if the Fund intends to raise
its initial capital under section 14(a)(3).
Not applicable.
8
<PAGE> 38
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement on Form N-1A to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Denver and State of Colorado on the 20th day of
October 1999
HICAPS FUNDS, INC.
(Registrant)
By /s/ Terry L. Maltarich
------------------------------
Terry L. Maltarich, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Terry L. Maltarich President (principal October 20, 1999
- --------------------------------
Terry L. Maltarich executive officer)
/s/ Michael F. Imhoff Treasurer (principal financial October 20, 1999
- --------------------------------
Michael F. Imhoff and accounting officer)
Donna Bates Boucher* Director
Robert G. Bush* Director
John T. Hughes* Director
Alan M. Scott* Director
Howard Van Deusen* Director
*By /s/ Terry L. Maltarich
- -------------------------------- October 20, 1999
Terry L. Maltarich, Attorney-in-Fact
</TABLE>
<PAGE> 1
EXHIBIT 99.a
ARTICLES OF INCORPORATION
OF
HICAPS FUNDS, INC.
For the purpose of forming a corporation pursuant to the provisions of
Minnesota Statutes, Chapter 302A, the following Articles of Incorporation are
adopted:
1. The name of this corporation is HICAPS Funds, Inc.
2. This corporation shall have general business purposes and
shall have unlimited power to engage in and do any lawful act concerning any and
all lawful businesses for which corporations may be organized under the
Minnesota Statutes, Chapter 302A. Without limiting the generality of the
foregoing, this corporation shall have specific power:
(a) To conduct, operate and carry on the business of a
so-called "open-end" management investment company pursuant to
applicable state and federal regulatory statutes, and exercise all the
powers necessary and appropriate to the conduct of such operations.
(b) To purchase, subscribe for, invest in or otherwise
acquire, and to own, hold, pledge, mortgage, hypothecate, sell,
possess, transfer or otherwise dispose of, or turn to account or
realize upon, and generally deal in, all forms of securities of every
kind, nature, character, type and form, including but not limited to,
shares, stocks, bonds, debentures, notes, scrip, participation
certificates, rights to subscribe, warrants, options, certificates of
deposit, bankers' acceptances, repurchase agreements, commercial paper,
choses in action, evidences of indebtedness, certificates of
indebtedness and certificates of interest of any and every kind and
nature whatsoever, secured and unsecured, issued or to be issued, by
any corporation, company, partnership (limited or general),
association, trust, entity or person, public or private, whether
organized under the laws of the United States, or any state,
commonwealth, territory or possession thereof, or organized under the
laws of any foreign country, or any state, province, territory or
possession thereof, or the United States government or any agency or
instrumentality thereof.
(c) In the above provisions of this Article 2, purposes shall
also be construed as powers and powers shall also be construed as
purposes, and the enumeration of specific purposes or powers shall not
be construed to limit other statements of purposes or to limit purposes
or powers which the corporation may otherwise have under applicable
law, all of the same being separate and cumulative, and all of the same
may be carried on, promoted and pursued, transacted or exercised in any
place whatsoever.
3. This corporation shall have perpetual existence.
4. The location and post office address of the registered office
of the corporation in Minnesota is National Registered Agents, Inc., 1295
Bandana Boulevard North, Suite 300, St. Paul, Minnesota 55108.
5. The incorporator is Kathleen L. Prudhomme, 220 South Sixth
Street, Minneapolis, Minnesota 55402-1498.
6. The initial directors shall be Donna Bates Boucher,
Robert G. Bush, John T. Hughes, Alan M. Scott and Howard Van Deusen.
1
<PAGE> 2
7. The total authorized number of shares of this corporation is
ten trillion (10,000,000,000,000), all of which shall be common shares of the
par value of $.01 each. Of said common shares, 100,000,000,000 shares may be
issued in the series of common shares hereby designated as "Series A Common
Shares." Of such Series A Common Shares, 50,000,000,000 shares may be issued in
the class hereby designated as "Series A, Class One Common Shares;" and the
balance of 50,000,000,000 Series A Common Shares may be issued in one or more
additional classes with such designations, preferences and relative,
participating, optional or other special rights, or qualifications, limitations
or restrictions thereof, as shall be stated or expressed in a resolution or
resolutions providing for the issue of such class as may be adopted from time to
time by the Board of Directors of this corporation pursuant to the authority
hereby vested in the Board of Directors;
The balance of 9,900,000,000,000 shares may be issued in such other
series with such designations, preferences and relative, participating, optional
or other special rights, or qualifications, limitations or restrictions thereof,
as shall be stated or expressed in a resolution or resolutions providing for the
issue of such series of common shares as may be adopted from time to time by the
Board of Directors of this corporation pursuant to the authority hereby vested
in the Board of Directors. The shares of any series hereafter established may be
classified by the Board of Directors into one or more classes with such relative
rights and preferences as shall be stated or expressed in a resolution or
resolutions providing for the issue of such class or classes as may be adopted
from time to time by the Board of Directors of the corporation pursuant to the
authority hereby vested in the Board of Directors and Minnesota Statutes Section
302A.401, Subd. 3, or any successor provision.
The Board of Directors, from time to time, may select names for any
series or class of the corporation, without the authorization or approval of the
holders of shares of any series or class of the corporation. Unless and until
the Board of Directors selects different names, the Series A, Class One shares
designated in paragraph (a) above shall be known as HICAPS Money Market Fund.
Shares of any series or class of the corporation may be issued to the
holders of shares of another series or class of this corporation, whether to
effect a stock dividend or split or otherwise, without the authorization or
approval of the holders of shares of any series or class of the corporation. The
corporation may issue and sell any of its shares in fractional denominations to
the same extent as its whole shares, and shares and fractional denominations
shall have, in proportion to the relative fractions represented thereby, all the
rights of whole shares, including, without limitation, the right to vote, the
right to receive dividends and distributions, and the right to participate upon
liquidation of the corporation. The Series A Common Shares evidence, and each
other series of common shares which the Board of Directors may establish, as
provided herein, may evidence, if the Board of Directors shall so determine by
resolution, an interest in a separate and distinct portion of the corporation's
assets, which takes the form of a separate portfolio of investment securities,
cash and other assets. Authority to establish such other separate portfolios is
hereby vested in the Board of Directors of this corporation, and such other
separate portfolios may be established by the Board of Directors without the
authorization or approval of the holders of any series or class of shares of
this corporation. The shares of each class within a series may be subject to
such charges and expenses (including by way of example, but not by way of
limitation, such front-end and deferred sales charges as may be permitted under
the Investment Company Act of 1940, as amended (the "1940 Act") and rules of the
National Association of Securities Dealers, Inc. ("NASD"), expenses under Rule
12b-1 plans, administration plans, service plans, or other plans or
arrangements, however designated) adopted from time to time by the Board of
Directors of the corporation in accordance, to the extent applicable, with the
1940 Act, which charges and expenses may differ from those applicable to another
class within such series, and all of the charges and expenses to which a class
is subject shall be borne by such class and shall be appropriately reflected (in
the manner determined by the Board of Directors) in determining the net asset
value and the amounts payable with respect to dividends and distributions on,
and redemptions or liquidations of, the shares of such class. Subject to
compliance with the requirements of the 1940 Act, the Board of Directors
2
<PAGE> 3
shall have the authority to provide that shares of any class shall be
convertible (automatically, optionally or otherwise) into shares of one or more
other classes of the same series in accordance with such requirements and
procedures as may be established by the Board of Directors.
8. The shareholders of each series or class of common shares of
this corporation:
(a) shall not have the right to cumulate votes for the
election of directors; and
(b) shall have no preemptive right to subscribe to any issue
of shares of any series or class of this corporation now
or hereafter made.
9. The shareholders of Series A Common Shares shall have the
following rights and preferences:
(a) On any matter submitted to a vote of shareholders of this
corporation, all common shares of this corporation then issued and
outstanding and entitled to vote, irrespective of series or class,
shall be voted in the aggregate and not by series or class, except: (i)
when otherwise required by Minnesota Statutes, Chapter 302A, in which
case shares will be voted by individual series or class; (ii) when
otherwise required by the 1940 Act or the rules adopted thereunder, in
which case shares shall be voted by individual series or class; and
(iii) when the matter does not affect the interests of a particular
series or class, in which case only shareholders of the series or
classes affected shall be entitled to vote thereon and shall vote by
individual series or class.
(b) All consideration received by this corporation for the
issue or sale of shares of any series or class, together with all
assets, income, earnings, profits and proceeds derived therefrom
(including all proceeds derived from the sale, exchange or liquidation
thereof and, if applicable, any assets derived from any reinvestment of
such proceeds in whatever form the same may be) shall become part of
the assets of the portfolio to which the shares of that series or class
relate, for all purposes, subject only to the rights of creditors, and
shall be so treated upon the books of account of this corporation. Such
assets, income, earnings, profits and proceeds (including any proceeds
derived from the sale, exchange or liquidation thereof and, if
applicable, any assets derived from any reinvestment of such proceeds
in whatever form the same may be) are herein referred to as "assets
belong to" a series or class of the common shares of this corporation.
(c) Assets of this corporation not belonging to any particular
series or class are referred to herein as "General Assets." General
Assets shall be allocated to each series or class in proportion to the
respective net assets belonging to such series or class. The
determination of the Board of Directors shall be conclusive as to the
amount of assets, as to the characterization of assets as those
belonging to a series or class or as General Assets, and as to the
allocation of General Assets.
(d) The assets belonging to a particular series or class of
common share shall be charged with the liabilities incurred
specifically on behalf of such series or class of common shares
("Special Liabilities"). Such assets shall also be charged with a share
of the general liabilities of this corporation ("General Liabilities")
in proportion to the respective net assets belonging to such series or
class of common shares. The determination of the Board of Directors
shall be conclusive as to the amount of liabilities, including accrued
expenses and reserves, as to the characterization of any liability as a
Special Liability or General Liability, and as to the allocation of
General Liabilities.
(e) The Board of Directors may, to the extent permitted by
Minnesota Statutes, Chapter 302A, and in the manner provided herein,
declare and pay dividends or distributions in shares or
3
<PAGE> 4
cash on any or all classes or series of common shares, the amount of
such dividends and the payment thereof being wholly in the discretion
of the Board of Directors. Dividends or distributions on shares of any
series or class of common shares shall be paid only out of the
earnings, surplus or other lawfully available assets belonging to such
series or class (including, for this purpose, any General Assets
allocated to such series or class).
(f) In the event of the liquidation or dissolution of this
corporation, holders of the shares of any series or class shall have
priority over the holders of any other series or class with respect to,
and shall be entitled to receive, out of the assets of this corporation
available for distribution to holders of shares, the assets belonging
to such series or class of common shares and the General Assets
allocated to such series or class of common shares, and the assets so
distributable to the holders of the shares of any series or class shall
be distributed among such holders in proportion to the number of shares
of such series or class held by them and recorded on the books of this
corporation.
10. The following additional provisions, when consistent with law,
are hereby established for the management of the business, for the conduct of
the affairs of the corporation, and for the purpose of describing certain
specific powers of the corporation and of its directors and shareholders.
(a) In furtherance and not in limitation of the powers
conferred by statute and pursuant to these Articles of Incorporation,
the Board of Directors is expressly authorized to do the following:
(1) to make, adopt, alter, amend and repeal Bylaws of
the corporation unless reserved to the shareholders by the
Bylaws or by the laws of the State of Minnesota, subject to
the power of the shareholders to change or repeal such Bylaws;
(2) to distribute, in its discretion, for any fiscal
year (in the year or in the next fiscal year) as ordinary
dividends and as capital gains distributions, respectively,
amounts sufficient to enable the corporation and each series
or class thereof to qualify under the Internal Revenue Code as
a regulated investment company to avoid any liability for
federal income tax in respect of such year. Any distribution
or dividend paid to shareholders from any capital source shall
be accompanied by a written statement showing the source or
sources of such payment;
(3) to authorize, subject to such vote, consent, or
approval of shareholders and other conditions, if any, as may
be required by any applicable statute, rule or regulation, the
execution and performance by the corporation of any agreement
or agreements with any person, corporation, association,
company, trust, partnership (limited or general) or other
organization whereby, subject to the supervision and control
of the Board of Directors, any such other person, corporation,
association, company, trust, partnership (limited or general),
or other organization shall render managerial, investment
advisory, distribution, transfer agent, accounting and/or
other services to the corporation (including, if deemed
advisable, the management or supervision of the investment
portfolios of the corporation) upon such terms and conditions
as may be provided in such agreement or agreements;
(4) to authorize any agreement of the character
described in subparagraph (3) of this paragraph (a) with any
person, corporation, association, company, trust, partnership
(limited or general) or other organization, although one or
more of the members of the Board of Directors or officers of
the corporation may be the other party to any such agreement
or an officer, director, shareholder, or member of such other
party, and no such
4
<PAGE> 5
agreement shall be invalidated or rendered voidable by reason
of the existence of any such relationship;
(5) to allot and authorize the issuance of the
authorized but unissued shares of any series or class of this
corporation;
(6) to accept or reject subscriptions for shares of
any series or class made after incorporation; and
(7) to fix the terms, conditions and provisions of
and authorize the issuance of options to purchase or subscribe
for shares of any series or class including the option price
or prices at which shares may be purchased or subscribed for.
(b) The determination as to any of the following matters made
by or pursuant to the direction of the Board of Directors consistent
with these Articles of Incorporation and in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
duties, shall be final and conclusive and shall be binding upon the
corporation and every holder of shares of its capital stock: namely,
the amount of the assets, obligations, liabilities and expenses of each
series or class of the corporation; the amount of the net income of
each series or class of the corporation from dividends and interest for
any period and the amount of assets at any time legally available for
the payment of dividends in each series or class; the amount of paid-in
surplus, other surplus, annual or other net profits, or net assets in
excess of capital, undivided profits, or excess of profits over losses
on sales of securities of each series or class; the amount, purpose,
time of creation, increase or decrease, alteration or cancellation of
any reserves or charges and the propriety thereof (whether or not any
obligation or liability for which such reserves or charges shall have
been created shall have been paid or discharged); the market value, or
any sale, bid or asked price to be applied in determining the market
value, of any security owned or held by or in each series or class of
the corporation; the fair value of any other asset owned by or in each
series or class of the corporation; the number of shares of each series
or class of the corporation issued or issuable; any matter relating to
the acquisition, holding and disposition of securities and other assets
by each series or class of the corporation; and any question as to
whether any transaction constitutes a purchase of securities on margin,
a short sale of securities, or an underwriting of the sale of, or
participation in any underwriting or selling group in connection with
the public distribution of, any securities.
(c) The Board of Directors or the shareholders of the
corporation may adopt, amend, affirm or reject investment policies and
restrictions upon investment or the use of assets of each series or
class of the corporation and may designate some such policies as
fundamental and not subject to change other than by a vote of a
majority of the outstanding voting securities, as such phrase is
defined in the 1940 Act, of the affected series or class of the
corporation.
(d) The corporation shall indemnify such persons for such
expenses and liabilities, in such manner, under such circumstances, and
to the full extent permitted by Section 302A.521 of the Minnesota
Statutes, as now enacted or hereafter amended, provided, however, that
no such indemnification may be made if it would be in violation of
Section 17(h) of the 1940 Act, as now enacted or hereafter amended.
(e) Except as required by the 1940 Act, any action which might
be taken at a meeting of the Board of Directors, or any duly
constituted committee thereof, may be taken without a meeting if done
in writing and signed by a majority of the directors or committee
members.
5
<PAGE> 6
(f) To the fullest extent permitted by the Minnesota Business
Corporation Act, as the same exists or may hereafter be amended (except
as prohibited by the 1940 Act, as the same exists or may hereafter be
amended), a director of this corporation shall not be liable to this
corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director.
IN WITNESS WHEREOF, the undersigned has executed these
Articles of Incorporation on October 18, 1999.
Kathleen L. Prudhomme
---------------------
Kathleen L. Prudhomme
6
<PAGE> 1
EXHIBIT 99.b
BYLAWS
OF
HICAPS FUNDS, INC.
ARTICLE I.
SERIES NAMES, OFFICES, CORPORATE SEAL
Section 1.01. Names of Series. The names of the series represented by
the series of shares designated in the corporation's articles of incorporation
shall be as follows:
Series A, Class One: HICAPS Money Market Fund.
Section 1.02. Registered Office. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or resolution of the directors filed with the Secretary of State of Minnesota
changing the registered office.
Section 1.03. Other Offices. The corporation may have such other
offices, within or without the State of Minnesota, as the directors shall, from
time to time, determine.
Section 1.04. No Corporate Seal. The corporation shall have no
corporate seal.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 2.01. Place and Time of Meeting. Except as provided otherwise
by Minnesota Statutes Chapter 302A, meetings of the shareholders may be held at
any place, within or without the State of Minnesota, designated by the directors
and, in the absence of such designation, shall be held at the registered office
of the corporation in the State of Minnesota. The directors shall designate the
time of day for each meeting and, in the absence of such designation, every
meeting of shareholders shall be held at ten o'clock a.m.
Section 2.02. Regular Meetings. Annual meetings of shareholders are not
required by these Bylaws. Regular meetings shall be held only with such
frequency and at such times and places as provided in and required by Minnesota
Statutes Section 302A.431 and the Investment Company Act of 1940.
Section 2.03. Special Meetings. Special meetings of the shareholders
may be held at any time and for any purpose and may be called by the Chairman of
the Board, the President, any two directors, or by one or more shareholders
holding ten percent (10%) or more of the shares entitled to vote on the matters
to be presented to the meeting.
Section 2.04. Quorum, Adjourned Meetings. The holders of ten percent
(10%) of the shares outstanding and entitled to vote shall constitute a quorum
for the transaction of business at any regular or special meeting. In case a
quorum shall not be present at a meeting, those present in person or by proxy
shall adjourn the meeting to such
<PAGE> 2
day as they shall, by majority vote, agree upon without further notice other
than by announcement at the meeting at which such adjournment is taken. If a
quorum is present, a meeting may be adjourned from time to time without notice
other than announcement at the meeting. At adjourned meetings at which a quorum
is present, any business may be transacted which might have been transacted at
the meeting as originally noticed. If a quorum is present, the shareholders may
continue to transact business until adjournment notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Each shareholder, unless the Articles of Incorporation provide
otherwise, shall have one vote for each share having voting power registered in
his name on the books of the corporation. Except as otherwise specifically
provided by these Bylaws or as required by provisions of the Investment Company
Act of 1940 or other applicable laws, all questions shall be decided by a
majority vote of the number of shares entitled to vote and represented at the
meeting at the time of the vote. If the matter(s) to be presented at a regular
or special meeting relates only to particular series or classes of the
corporation, then only the shareholders of such series or classes are entitled
to vote on such matter(s).
Section 2.06. Voting - Proxies. The right to vote by proxy shall be
governed by the relevant provisions of the Minnesota Statutes, as the same may
be amended from time to time.
Section 2.07. Closing of Books. The Board of Directors may fix a time,
not exceeding sixty (60) days preceding the date of any meeting of shareholders,
as a record date for the determination of the shareholders entitled to notice
of, and to vote at, such meeting, notwithstanding any transfer of shares on the
books of the corporation after any record date so fixed. The Board of Directors
may close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for determination of the shareholders entitled to notice of, and to
vote at, any meeting of shareholders, the record date shall be the thirtieth
(30th) day preceding the date of such meeting.
Section 2.08. Notice of Meetings. There shall be mailed to each
shareholder entitled to vote at a meeting, shown by the books of the corporation
to be a holder of record of voting shares, at his address as shown by the books
of the corporation, a notice setting out the date, time and place of each
regular meeting and each special meeting, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of adjournment, which notice shall be mailed within the period required
by law. Every notice of any special meeting shall state the purpose or purposes
for which the meeting has been called, pursuant to Section 2.03, and the
business transacted at all special meetings shall be confined to the purpose
stated in such notice.
Section 2.09. Waiver of Notice. Notice of any regular or special
meeting may be waived either before, at or after such meeting orally or in a
writing signed by each shareholder or representative thereof entitled to vote
the shares so represented. A
- 2 -
<PAGE> 3
shareholder, by his attendance at any meeting of shareholders, shall be deemed
to have waived notice of such meeting, except where the shareholder objects at
the beginning of the meeting to the transaction of business because the item may
not lawfully be considered at that meeting and does not participate at that
meeting in the consideration of the item at that meeting.
Section 2.10. Written Action. Any action which might be taken at a
meeting of the shareholders may be taken without a meeting if done in writing
and signed by all of the shareholders entitled to vote on that action. If the
action to be taken relates to particular series or classes of the corporation,
then only shareholders of such series or classes are entitled to vote on such
action.
ARTICLE III.
DIRECTORS
Section 3.01. Number, Qualification and Term of Office. Until the first
meeting of shareholders, the number of directors shall be the number named in
the Articles of Incorporation. Thereafter, the number of directors shall be
established by resolution of the shareholders (subject to the authority of the
Board of Directors to increase or decrease the number of directors as permitted
by law). In the absence of such shareholder resolution, the number of directors
shall be the number last fixed by the shareholders, the Board of Directors or
the Articles of Incorporation. Directors need not be shareholders. Each of the
directors shall hold office until the regular meeting of shareholders next held
after his election and until his successor shall have been elected and shall
qualify, or until the earlier death, resignation, removal or disqualification of
such director.
Section 3.02. Election of Directors. Except as otherwise provided in
Sections 3.11 and 3.12 hereof, the directors shall be elected at the regular
shareholders' meeting. In the event that directors are not elected at a regular
shareholders' meeting, then directors may be elected at a special shareholders'
meeting, provided that the notice of such meeting shall contain mention of such
purpose. At each shareholders' meeting for the election of directors, the
directors shall be elected by a majority of the votes validly cast at such
election. Each holder of shares of each series or class of stock of the
corporation shall be entitled to vote for directors and shall have equal voting
power for each share of each series or class of the corporation.
Section 3.03. General Powers.
(a) Except as otherwise permitted by statute, the property, affairs and
business of the corporation shall be managed by the Board of Directors, which
may exercise all the powers of the corporation except those powers vested solely
in the shareholders of the corporation by statute, the Articles of Incorporation
or these Bylaws, as amended.
(b) All acts done by any meeting of the directors or by any person
acting as a director, so long as his successor shall not have been duly elected
or appointed, shall,
- 3 -
<PAGE> 4
notwithstanding that it be afterwards discovered that there was some defect in
the election of the directors or such person acting as aforesaid or that they or
any of them were disqualified, be as valid as if the directors or such other
person, as the case may be, had been duly elected and were or was qualified to
be directors or a director of the corporation.
Section 3.04. Power to Declare Dividends.
(a) The Board of Directors, from time to time as they may deem
advisable, may declare and pay or ratify dividends in cash or other property of
the corporation, out of any source available for dividends, to the shareholders
of each series or class of stock of the corporation according to their
respective rights and interests in the investment portfolio of the corporation
issuing such series or class of stock.
(b) The Board of Directors shall cause to be accompanied by a written
statement any dividend payment wholly or partly from any source other than
(i) the accumulated and accrued undistributed net income of each series
or class (determined in accordance with generally accepted
accounting practice and the rules and regulations of the Securities
and Exchange Commission then in effect) and not including profits
or losses realized upon the sale of securities or other properties;
or
(ii) the net income of each series or class so determined for the
current or preceding fiscal year.
Such statement shall adequately disclose the source or sources of such payment
and the basis of calculation and shall be in such form as the Securities and
Exchange Commission may prescribe.
(c) Notwithstanding the above provisions of this Section 3.04, the
Board of Directors may at any time declare and distribute pro rata among the
shareholders of each series or class of stock a "stock dividend" out of the
authorized but unissued shares of stock of each series or class, including any
shares previously purchased by a series or class of the corporation.
Section 3.05. Board Meetings. Meetings of the Board of Directors may be
held from time to time at such time and place within or without the State of
Minnesota as may be designated in the notice of such meeting.
Section 3.06. Calling Meetings, Notice. A director may call a board
meeting by giving two (2) days notice to all directors of the date, time and
place of the meeting; provided that if the day or date, time and place of a
board meeting have been announced at a previous meeting of the board, no notice
is required.
Section 3.07. Waiver of Notice. Notice of any meeting of the Board of
Directors may be waived by any director either before, at or after such meeting
orally or
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in a writing signed by such director. A director, by his attendance and
participation in the action taken at any meeting of the Board of Directors,
shall be deemed to have waived notice of such meeting, except where the director
objects at the beginning of the meeting to the transaction of business because
the item may not lawfully be considered at that meeting and does not participate
at that meeting in the consideration of the item at that meeting.
Section 3.08. Quorum. A majority of the directors holding office
immediately prior to a meeting of the Board of Directors shall constitute a
quorum for the transaction of business at such meeting; provided however,
notwithstanding the above, if the Board of Directors is taking action pursuant
to the Investment Company Act of 1940, as now enacted or hereafter amended, a
majority of directors who are not "interested persons" (as defined by the
Investment Company Act of 1940, as now enacted or hereafter amended) of the
corporation shall constitute a quorum for taking such action.
Section 3.09. Advance Consent or Opposition. A director may give
advance written consent or opposition to a proposal to be acted on at a meeting
of the Board of Directors. If such director is not present at the meeting,
consent or opposition to a proposal does not constitute presence for purposes of
determining the existence of a quorum, but consent or opposition shall be
counted as a vote in favor of or against the proposal and shall be entered in
the minutes or other record of action at the meeting, if the proposal acted on
at the meeting is substantially the same or has substantially the same effect as
the proposal to which the director has consented or objected. This procedure
shall not be used to act on any investment advisory agreement or on any plan of
distribution adopted under Rule 12b-1 of the Investment Company Act of 1940, as
amended.
Section 3.10. Conference Communications. Any or all directors may
participate in any meeting of the Board of Directors, or of any duly constituted
committee thereof, by any means of communication through which the directors may
simultaneously hear each other during such meeting. For the purposes of
establishing a quorum and taking any action at the meeting, such directors
participating pursuant to this Section 3.10 shall be deemed present in person at
the meeting, and the place of the meeting shall be the place of origination of
the conference communication. This procedure shall not be used to act on any
investment advisory agreement or on any plan of distribution adopted under Rule
12b-1 of the Investment Company Act of 1940, as amended.
Section 3.11. Vacancies; Newly Created Directorships. Vacancies in the
Board of Directors of this corporation occurring by reason of death,
resignation, removal or disqualification shall be filled for the unexpired term
by a majority of the remaining directors of the Board although less than a
quorum; newly created directorships resulting from an increase in the authorized
number of directors by action of the Board of Directors as permitted by Section
3.01 may be filled by a two-thirds (2/3) vote of the directors serving at the
time of such increase; and each person so elected shall be a director until his
successor is elected by the shareholders at their next regular or special
meeting; provided, however, that no vacancy can be filled as provided above if
prohibited by the provisions of the Investment Company Act of 1940.
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Section 3.12. Removal. The entire Board of Directors or an individual
director may be removed from office, with or without cause, by a vote of the
shareholders holding a majority of the shares entitled to vote at an election of
directors. In the event that the entire Board or any one or more directors be so
removed, new directors shall be elected at the same meeting, or the remaining
directors may, to the extent vacancies are not filled at such meeting, fill any
vacancy or vacancies created by such removal. A director named by the Board of
Directors to fill a vacancy may be removed from office at any time, with or
without cause, by the affirmative vote of the remaining directors if the
shareholders have not elected directors in the interim between the time of the
appointment to fill such vacancy and the time of the removal.
Section 3.13. Committees. A resolution approved by the affirmative vote
of a majority of the Board of Directors may establish committees having the
authority of the Board in the management of the business of the corporation to
the extent provided in the resolution. A committee shall consist of one or more
persons, who need not be directors, appointed by affirmative vote of a majority
of the directors present. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Board of
Directors.
A majority of the members of the committee present at a meeting is a
quorum for the transaction of business, unless a larger or smaller proportion or
number is provided in a resolution approved by the affirmative vote of a
majority of the directors present.
Section 3.14. Written Action. Any action which might be taken at a
meeting of the Board of Directors, or any duly constituted committee thereof,
may be taken without a meeting if done in writing and signed by all of the
directors or committee members. Any action, other than an action requiring
shareholder approval, which might be taken at a meeting of the Board of
Directors, or any duly constituted committee thereof, may be taken without a
meeting if done in writing and signed by a majority of all of the directors or
committee members.
Section 3.15. Compensation. Directors shall receive such fixed sum per
meeting attended or such fixed annual sum as shall be determined, from time to
time, by resolution of the Board of Directors. All directors shall receive their
expenses, if any, of attendance at meetings of the Board of Directors or any
committee thereof. Nothing herein contained shall be construed to preclude any
director from serving this corporation in any other capacity and receiving
proper compensation therefor.
ARTICLE IV.
OFFICERS AND CHAIRMAN OF THE BOARD OF DIRECTORS
Section 4.01. Number. The officers of the corporation shall consist of
the President, one or more Vice Presidents (if desired by the Board), a
Secretary, a Treasurer and such other officers and agents as may, from time to
time, be elected by the Board of Directors. Any number of offices may be held by
the same person.
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Section 4.02. Election, Term of Office and Qualifications. The Board of
Directors shall elect, from within or without their number, the officers
referred to in Section 4.01 of these Bylaws, each of whom shall have the powers,
rights, duties, responsibilities and terms in office provided for in these
Bylaws or a resolution of the Board not inconsistent therewith. The President
and all other officers who may be directors shall continue to hold office until
the election and qualification of their successors, notwithstanding an earlier
termination of their directorship.
Section 4.03. Resignation. Any officer (or the Chairman of the Board of
Directors) may resign his office at any time by delivering a written resignation
to the corporation. Unless otherwise specified therein, such resignation shall
take effect upon delivery.
Section 4.04. Removal and Vacancies. Any officer (or the Chairman of
the Board of Directors) may be removed from his office by a majority of the
Board of Directors with or without cause. Such removal, however, shall be
without prejudice to the contract rights of the person so removed. If there be a
vacancy among the officers (or the Chairman of the Board of Directors) of the
corporation by reason of death, resignation or otherwise, such vacancy shall be
filled for the unexpired term by the Board of Directors.
Section 4.05. Chairman of the Board. The Board of Directors may elect
one of its members as Chairman of the Board. The Chairman of the Board, if one
is elected, shall preside at all meetings of the shareholders and directors and
shall have such other duties as may be prescribed, from time to time, by the
Board of Directors. The Chairman of the Board of Directors will under no
circumstances be deemed to be an "officer" of the corporation, and an individual
serving as Chairman of the Board of Directors will not be deemed to be an
"affiliated person" with respect to the corporation (under the Investment
Company Act of 1940, as amended) solely by virtue of such person's position as
Chairman of the Board of Directors of the corporation.
Section 4.06. President. The President shall have general active
management of the business of the corporation. In the absence of the Chairman of
the Board, he shall preside at all meetings of the shareholders and directors.
He shall be the chief executive officer of the corporation and shall see that
all orders and resolutions of the Board of Directors are carried into effect. He
shall be ex officio a member of all standing committees. He may execute and
deliver, in the name of the corporation, any deeds, mortgages, bonds, contracts
or other instruments pertaining to the business of the corporation and, in
general, shall perform all duties usually incident to the office of the
President. He shall have such other duties as may, from time to time, be
prescribed by the Board of Directors.
Section 4.07. Vice President. Each Vice President shall have such
powers and shall perform such duties as may be specified in the Bylaws or
prescribed by the Board of Directors or by the President. In the event of
absence or disability of the President, Vice Presidents shall succeed to his
power and duties in the order designated by the Board of Directors.
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Section 4.08. Secretary. The Secretary shall be secretary of, and shall
attend, all meetings of the shareholders and Board of Directors and shall record
all proceedings of such meetings in the minute book of the corporation. He shall
give proper notice of meetings of shareholders and directors. He shall perform
such other duties as may, from time to time, be prescribed by the Board of
Directors or by the President.
Section 4.09. Treasurer. The Treasurer shall be the chief financial
officer and shall keep accurate accounts of all money of the corporation
received or disbursed. He shall deposit all moneys, drafts and checks in the
name of, and to the credit of, the corporation in such banks and depositories as
a majority of the Board of Directors shall, from time to time, designate. He
shall have power to endorse, for deposit, all notes, checks and drafts received
by the corporation. He shall disburse the funds of the corporation, as ordered
by the Board of Directors, making proper vouchers therefor. He shall render to
the President and the directors, whenever required, an account of all his
transactions as Treasurer and of the financial condition of the corporation, and
shall perform such other duties as may, from time to time, be prescribed by the
Board of Directors or by the President.
Section 4.10. Assistant Secretaries. At the request of the Secretary,
or in his absence or disability, any Assistant Secretary shall have power to
perform all the duties of the Secretary, and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the Secretary. The Assistant
Secretaries shall perform such other duties as from time to time may be assigned
to them by the Board of Directors or the President.
Section 4.11. Assistant Treasurers. At the request of the Treasurer, or
in his absence or disability, any Assistant Treasurer shall have power to
perform all the duties of the Treasurer, and when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform such other duties as from time to time may be
assigned to them by the Board of Directors or the President.
Section 4.12. Compensation. The officers (and the Chairman of the Board
of Directors) of this corporation shall receive such compensation for their
services as may be determined, from time to time, by resolution of the Board of
Directors.
Section 4.13. Surety Bonds. The Board of Directors may require any
officer or agent of the corporation to execute a bond (including, without
limitation, any bond required by the Investment Company Act of 1940 and the
rules and regulations of the Securities and Exchange Commission) to the
corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his duties
to the corporation, including responsibility for negligence and for the
accounting of any of the corporation's property, funds or securities that may
come into his hands. In any such case, a new bond of like character shall be
given at least every six years, so that the dates of the new bond shall not be
more than six years subsequent to the date of the bond immediately preceding.
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ARTICLE V.
SHARES AND THEIR TRANSFER AND REDEMPTION
Section 5.01. Certificate for Shares.
(a) The corporation may have certificated or uncertificated shares, or
both, as designated by resolution of the Board of Directors. Every owner of
certificated shares of the corporation shall be entitled to a certificate, to be
in such form as shall be prescribed by the Board of Directors, certifying the
number of shares of the corporation owned by him. Within a reasonable time after
the issuance or transfer of uncertificated shares, the corporation shall send to
the new shareholder the information required to be stated on certificates.
Certificated shares shall be numbered in the order in which they shall be issued
and shall be signed, in the name of the corporation, by the President or a Vice
President and by the Secretary or an Assistant Secretary or by such officers as
the Board of Directors may designate. Such signatures may be by facsimile if
authorized by the Board of Directors. Every certificate surrendered to the
corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 5.08.
(b) In case any officer, transfer agent or registrar who shall have
signed any such certificate, or whose facsimile signature has been placed
thereon, shall cease to be such an officer (because of death, resignation or
otherwise) before such certificate is issued, such certificate may be issued and
delivered by the corporation with the same effect as if he were such officer,
transfer agent or registrar at the date of issue.
Section 5.02. Issuance of Shares. The Board of Directors is authorized
to cause to be issued shares of the corporation up to the full amount authorized
by the Articles of Incorporation in such series or classes and in such amounts
as may be determined by the Board of Directors and as may be permitted by law.
No shares shall be allotted except in consideration of cash or other property,
tangible or intangible, received or to be received by the corporation under a
written agreement, of services rendered or to be rendered to the corporation
under a written agreement, or upon a share dividend. At the time of such
allotment of shares, the Board of Directors making such allotments shall state,
by resolution, their determination of the fair value to the corporation in
monetary terms of any consideration other than cash for which shares are
allotted. No shares of stock issued by the corporation shall be issued, sold or
exchanged by or on behalf of the corporation for any amount less than the net
asset value per share of the shares outstanding as determined pursuant to
Article X hereunder.
Section 5.03. Redemption of Shares. Upon the demand of any shareholder,
this corporation shall redeem any share of stock issued by it held and owned by
such shareholder at the net asset value thereof as determined pursuant to
Article X hereunder. The Board of Directors may suspend the right of redemption
or postpone the date of payment during any period when: (a) trading on the New
York Stock Exchange is restricted or such Exchange is closed for other than
weekends or holidays; (b) the Securities
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and Exchange Commission has by order permitted such suspension; or (c) an
emergency as defined by rules of the Securities and Exchange Commission exists,
making disposal of portfolio securities or valuation of net assets of the
corporation not reasonably practicable.
If the value of such shareholder's interest in the corporation falls
below the required minimum investment, as may be set from time to time by the
Board of Directors, the corporation's officers are authorized, in their
discretion and on behalf of the corporation, to redeem such shareholder's entire
interest and remit such amount, provided that such a redemption will only be
effected by the corporation following: (a) a redemption by a shareholder, which
causes the value of such shareholder's interest in the corporation to fall below
the required minimum investment; (b) the mailing by the corporation to such
shareholder of a "notice of intention to redeem"; and (c) the passage of at
least sixty (60) days from the date of such mailing, during which time the
shareholder will have the opportunity to make an additional investment in the
corporation to increase the value of such shareholder's account to at least the
required minimum investment.
Section 5.04. Transfer of Shares. Transfer of shares on the books of
the corporation may be authorized only by the shareholder named in the
certificate, or the shareholder's legal representative, or the shareholder's
duly authorized attorney-in-fact, and upon surrender of the certificate or the
certificates for such shares or a duly executed assignment covering shares held
in unissued form. The corporation may treat as the absolute owner of shares of
the corporation the person or persons in whose name shares are registered on the
books of the corporation.
Section 5.05. Registered Shareholders. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof and accordingly shall not be bound to recognize any
equitable or other claim to or interest in such share on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by the laws of Minnesota.
Section 5.06. Transfer of Agents and Registrars. The Board of Directors
may from time to time appoint or remove transfer agents and/or registrars of
transfers of shares of stock of the corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates representing shares of capital stock thereafter issued
shall be countersigned by one of such transfer agents or by one of such
registrars of transfers or by both and shall not be valid unless so
countersigned. If the same person shall be both transfer agent and registrar,
only one countersignature by such person shall be required.
Section 5.07. Transfer Regulations. The shares of stock of the
corporation may be freely transferred, and the Board of Directors may from time
to time adopt rules and regulations with reference to the method of transfer of
shares of stock of the corporation.
Section 5.08. Lost, Stolen, Destroyed and Mutilated Certificates. The
holder of any stock of the corporation shall immediately notify the corporation
of any loss, theft,
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destruction or mutilation of any certificate therefor, and the Board of
Directors may, in its discretion, cause to be issued to him a new certificate or
certificates of stock, upon the surrender of the mutilated certificate or in
case of loss, theft or destruction of the certificate upon satisfactory proof of
such loss, theft or destruction. A new certificate or certificates of stock will
be issued to the owner of the lost, stolen or destroyed certificate only after
such owner, or his legal representatives, gives to the corporation and to such
registrar or transfer agent as may be authorized or required to countersign such
new certificate or certificates a bond, in such sum as they may direct, and with
such surety or sureties, as they may direct, as indemnity against any claim that
may be made against them or any of them on account of or in connection with the
alleged loss, theft or destruction of any such certificate.
ARTICLE VI.
DIVIDENDS
Section 6.01. The net investment income of each series or class of the
corporation will be determined, and its dividends shall be declared and made
payable at such time(s), as the Board of Directors shall determine; dividends
shall be payable to shareholders of record as of the date specified or ratified
by the Board of Directors.
It shall be the policy of each series or class of the corporation to
qualify for and elect the tax treatment applicable to regulated investment
companies under the Internal Revenue Code, so that such series or class will not
be subjected to federal income tax on such part of its income or capital gains
as it distributes to shareholders.
ARTICLE VII.
BOOKS AND RECORDS, AUDIT, FISCAL YEAR
Section 7.01. Share Register. The Board of Directors of the corporation
shall cause to be kept at its principal executive office, or at another place or
places within the United States determined by the Board:
(1) a share register not more than one year old, containing the
names and addresses of the shareholders and the number and
series or class of shares held by each shareholder; and
(2) a record of the dates on which certificates or transaction
statements representing shares were issued.
Section 7.02. Other Books and Records. The Board of Directors shall
cause to be kept at its principal executive office, or, if its principal
executive office is not in Minnesota, shall make available at its registered
office within ten days after receipt by an officer of the corporation of a
written demand for them made by a shareholder or other person authorized by
Minnesota Statutes Section 302A.461, originals or copies of the
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documents required by Minnesota Statutes Section 302A.461, Subd. 2, as the same
may be amended from time to time, or any successor provision.
Section 7.03. Audit; Accountant.
(a) The Board of Directors shall cause the records and books of account
of the corporation to be audited at least once in each fiscal year and at such
other times as it may deem necessary or appropriate.
(b) The corporation shall employ an independent public accountant or
firm of independent public accountants as its Accountant to examine the accounts
of the corporation and to sign and certify financial statements filed by the
corporation. The Accountant's certificates and reports shall be addressed both
to the Board of Directors and to the shareholders.
(c) A majority of the members of the Board of Directors shall select
the Accountant annually within a reasonable period before or after the beginning
of the corporation's fiscal year. Such selection shall be submitted for
ratification or rejection at the next succeeding regular shareholders' meeting.
If such meeting shall reject such selection, the Accountant shall be selected by
majority vote, either at the meeting at which the rejection occurred or at a
subsequent meeting of shareholders called for the purpose.
(d) Any vacancy occurring between annual meetings, due to the death,
resignation or otherwise of the Accountant, may be filled by the Board of
Directors.
Section 7.04. Fiscal Year. The fiscal year of the corporation shall be
determined by the Board of Directors.
ARTICLE VIII.
INDEMNIFICATION OF CERTAIN PERSONS
Section 8.01. The corporation shall indemnify such persons, for such
expenses and liabilities, in such manner, under such circumstances, and to such
extent as permitted by Section 302A.521 of the Minnesota Statutes, as now
enacted or hereafter amended, provided, however, that no such indemnification
may be made if it would be in violation of Section 17(h) of the Investment
Company Act of 1940, as now enacted or hereinafter amended.
ARTICLE IX.
VOTING OF STOCK HELD
Section 9.01. Unless otherwise provided by resolution of the Board of
Directors, the President, any Vice President, the Secretary or the Treasurer,
may from time to time appoint an attorney or attorneys or agent or agents of the
corporation, in the name
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and on behalf of the corporation, to cast the votes which the corporation may be
entitled to cast as a stockholder or otherwise in any other corporation or
association, any of whose stock or securities may be held by the corporation, at
meetings of the holders of the stock or other securities of any such other
corporation or association, or to consent in writing to any action by any such
other corporation or association, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed on behalf of the corporation, such written
proxies, consents, waivers or other instruments as it may deem necessary or
proper; or any of such officers may themselves attend any meeting of the holders
of stock or other securities of any such corporation or association and thereat
vote or exercise any or all other rights of the corporation as the holder of
such stock or other securities of such other corporation or association, or
consent in writing to any action by any such other corporation or association.
ARTICLE X.
VALUATION OF NET ASSET VALUE
10.01. The net asset value per share of each series or class of stock
of the corporation shall be determined in good faith by or under supervision of
the officers of the corporation as authorized by the Board of Directors as often
and on such days and at such time(s) as the Board of Directors shall determine,
or as otherwise may be required by law, rule, regulation or order of the
Securities and Exchange Commission.
ARTICLE XI.
CUSTODY OF ASSETS
Section 11.01. All securities and cash owned by this corporation shall,
as hereinafter provided, be held by or deposited with a bank or trust company
having (according to its last published report) not less than Two Million
Dollars ($2,000,000) aggregate capital, surplus and undivided profits (the
"Custodian").
This corporation shall enter into a written contract with the custodian
regarding the powers, duties and compensation of the Custodian with respect to
the cash and securities of this corporation held by the Custodian. Said contract
and all amendments thereto shall be approved by the Board of Directors of this
corporation. In the event of the Custodian's resignation or termination, the
corporation shall use its best efforts promptly to obtain a successor Custodian
and shall require that the cash and securities owned by this corporation held by
the Custodian be delivered directly to such successor Custodian.
ARTICLE XII.
AMENDMENTS
Section 12.01. These Bylaws may be amended or altered by a vote of the
majority of the Board of Directors at any meeting provided that notice of such
proposed
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amendment shall have been given in the notice given to the directors of such
meeting. Such authority in the Board of Directors is subject to the power of the
shareholders to change or repeal such bylaws by a majority vote of the
shareholders present or represented at any regular or special meeting of
shareholders called for such purpose, and the Board of Directors shall not make
or alter any Bylaws fixing a quorum for meetings of shareholders, prescribing
procedures for removing directors or filling vacancies in the Board of
Directors, or fixing the number of directors or their classifications,
qualifications or terms of office, except that the Board of Directors may adopt
or amend any Bylaw to increase or decrease their number.
ARTICLE XIII.
MISCELLANEOUS
Section 13.01. Interpretation. When the context in which words are used
in these Bylaws indicates that such is the intent, singular words will include
the plural and vice versa, and masculine words will include the feminine and
neuter genders and vice versa.
Section 13.02. Article and Section Titles. The titles of Articles and
Sections in these Bylaws are for descriptive purposes only and will not control
or alter the meaning of any of these Bylaws as set forth in the text.
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