As filed with the Securities and Exchange Commission on August 24, 1995.
1933 Act File No. 2-14486
1940 Act File No. 811-835
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 67
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30
BULL & BEAR GOLD INVESTORS LTD.
(Exact Name of Registrant as Specified in Charter)
11 Hanover Square
New York, New York 10005
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: 1-212-785-0900
Copies to:
WILLIAM J. MAYNARD R. DARRELL MOUNTS, ESQ.
Bull & Bear Advisers, Inc. Kirkpatrick & Lockhart
11 Hanover Square 1800 M Street, N.W.
New York, New York 10005-3401 South Lobby - Ninth Floor
(Name and Address of Washington, D.C. 20036-5891
Agent for Service)
It is proposed that this filing will become effective: August 28, 1995 pursuant
to Rule 485(b).
Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Notice required by Rule 24f- 2 for the fiscal year ended June 30,
1995 is expected to be filed on or about filed on August 25, 1995.
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C>
Proposed Maxi Proposed Maxi
Title of Securities Being Registered Amount of mum Offering mum Aggregate Amount of
Shares Being Price Per Unit(1) Offering Price(2) Registration
Registered Fee(2)
Shares of Common Stock of Bull & Bear 383,999 $14.02 $290,000 $100.00
Gold Investors Ltd., Par Value $0.01.
</TABLE>
(1) The fee for the above shares to be registered by this filing has been
computed on the basis of the price in effect on August 16, 1995 pursuant to Rule
457(d) under the Securities Act of 1933.
(2) Calculation of the proposed maximum aggregate offering price has been made
pursuant to Rule 24e- 2 under the Investment Company Act of 1940. During its
fiscal year ended June 30, 1995, Registrant redeemed or repurchased 36,708,963
shares. Registrant used 36,345,648 of the shares it redeemed or repurchased
during its fiscal year ended June 30 1995 for a reduction pursuant to paragraph
(c) of Rule 24f-2 under the Investment Company Act of 1940 (shares sold;
excluding shares issued in reinvestment of dividends). Registrant is using this
post-effective amendment to register the remaining 363,315 shares redeemed or
repurchased during its fiscal year ended June 30, 1995 plus 20,684 shares
($290,000/$14.02). During the current fiscal year, the Registrant has filed no
other post-effective amendments for the purpose of the reduction pursuant to
paragraph (a) of Rule 24e-2.
<PAGE>
BULL & BEAR GOLD INVESTORS LTD.
Contents of Registration Statement
This registration statement consists of the following papers and
documents.
Cover Sheet
Table of Contents
Cross Reference Sheets
Part A - Prospectus
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
BULL & BEAR GOLD INVESTORS LTD.
Cross Reference Sheet
Part A. Item No. Prospectus Caption
1 Cover Page
2 Expense Table
3 Financial Highlights
Performance Information
4 General
The Fund's Investment Program
Back Cover Page
Risk Factors
5 The Investment Manager
The Subadviser
Custodian and Transfer Agent
6 Cover Page
General
The Investment Manager
The Subadviser
Distributions and Taxes
Determination of Net Asset Value
Shareholder Services
Back Cover Page
7 How to Purchase Shares
Shareholder Services
Determination of Net Asset Value
Distribution of Shares
Back Cover Page
8 How to Redeem Shares
Determination of Net Asset Value
9 Not Applicable
<PAGE>
BULL & BEAR GOLD INVESTORS LTD.
Cross Reference Sheet
Part B. Item No. Statement of Additional Information Caption
10 Cover Page
11 Table of Contents
12 Not Applicable
13 Investment Restrictions
The Fund's Investment Program
Allocation of Brokerage
Options, Futures and Forward Currency
Contract Strategies
14 Officers and Directors
15 Officers and Directors
The Investment Manager
16 Officers and Directors
The Investment Manager
The Subadviser
Investment Management Agreement
Distribution of Shares
Custodian, Transfer and Dividend
Disbursing Agent
Auditors
17 Allocation of Brokerage
18 Not Applicable
19 Purchase of Shares
20 Distributions and Taxes
21 Not Applicable
22 Performance Information
23 Financial Statements
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
Bull & Bear Gold Investors seeks long term capital appreciation in
investments with the potential to provide a hedge against inflation and preserve
the purchasing power of the dollar. The Fund invests primarily in gold, platinum
and silver bullion and a global portfolio of securities of companies involved
directly or indirectly in mining, processing or dealing in gold or other
precious metals ("gold mining shares"). Income is a secondary objective. The
Fund may hold cash in foreign currencies and may invest in gold, platinum, and
silver coins. There is no assurance the Fund will achieve its objectives.
Bull & Bear Advisers, Inc. is the Fund's Investment Manager and Lion
Resource Management Limited is the Fund's Subadviser. Since August 1995, Mr.
Kjeld Thygesen, Managing Director of the Subadviser, has been a portfolio
manager of the Fund. Based in London (U.K.), the Subadviser is a part of Lion
Mining Group, which specializes in gold mining and resource company investment
management, corporate finance and consulting.
The Fund's investments may include foreign securities which may be highly
volatile and subject to risks relating to adverse political and economic
developments abroad, fluctuations in currency exchange rates, and differing
characteristics of foreign economies and markets. Investments in gold mining
shares and gold, platinum, and silver bullion are considered speculative and
subject to substantial price fluctuations and other risks. The Fund may also
borrow money from banks from time to time to purchase or carry securities. Such
borrowing is speculative and increases both investment opportunity and
investment risk. See "Risk Factors."
--------------------------------------------------------------------------------
NEWSPAPER LISTING. Shares of the Fund are sold at the
net asset value per share which is shown daily in the
mutual fund section of newspapers under the "Bull &
Bear Group" heading.
--------------------------------------------------------------------------------
This prospectus contains information you should know about the Fund before
you invest. Please keep it for future reference. The Fund's Statement of
Additional Information, dated August 28, 1995, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
prospectus. It is available at no charge by calling 1-800-847-4200. Fund shares
are not bank deposits or obligations of, or guaranteed or endorsed by any bank
or any affiliate of any bank, and are not Federally insured by, obligations of
or otherwise supported by the U.S. Government, the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Expense Table. The tables and example below are designed to help you understand
the various costs and expenses that you will bear directly or indirectly as an
investor in the Fund. A $2 monthly account fee is charged if your average
monthly balance is less than $500, unless you are in the Bull & Bear Automatic
Investment Program (see "How to Purchase Shares").
Shareholder Transaction Expenses
Sales Load Imposed on Purchases............................................NONE
Sales Load Imposed on Reinvested Dividends.................................NONE
Deferred Sales Load........................................................NONE
Redemption Fee within 30 days of purchase ................................1.00%
Redemption Fee after 30 days of purchase .................................NONE
Exchange Fees..............................................................NONE
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees...........................................................0.88%
12b-1 Fees................................................................1.00%
Other Expenses............................................................1.05%
Total Fund Operating Expenses.............................................2.93%
Example
You would pay the following expenses on a
$1,000 investment, assuming 5% annual return
and a redemption at the end of each time period:
1 year 3 years 5 years 10 years
$30 $91 $154 $325
The example set forth above assumes reinvestment of all dividends and other
distributions and uses an assumed 5% annual rate of return as required by the
Securities and Exchange Commission ("SEC"). The example is an illustration only
and should not be considered an indication of past or future returns and
expenses. Actual returns and expenses may be greater or less than those shown.
The percentages given for annual Fund expenses are based on the Fund's operating
expenses and average daily net assets during its fiscal year ended June 30,
1995. Long term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted by the National Association of
Securities Dealers, Inc.'s ("NASD") rules regarding investment companies. "Other
Expenses" includes amounts paid to the Fund's custodian and Transfer Agent and
reimbursable to the Investment Manager and the Distributor for certain
administrative and shareholder services, and does not include interest expense
from the Fund's bank borrowing.
Financial Highlights are presented below for a share of capital stock
outstanding throughout each period. The following information is supplemental to
the Fund's financial statements and report thereon of Tait, Weller & Baker,
independent accountants, appearing in the June 30, 1995 Annual Report to
Shareholders and incorporated by reference in the Statement of Additional
Information.
Years Ended June 30,
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
Net asset value at beginning of perio $15.71 $16.98 $11.62 $12.49 $13.36 $13.27 $14.31 $18.76 $ 9.98 $10.21
Income from investment operations:
Net investment income (loss) -- (.11) (.03) (.10) .03 .10 .02 .02 (.02) .02
Net realized and unrealized
investments (1.05) (1.13) 5.39 (.72) (.87) .12 (1.03) (3.08) 8.83 (.21)
Total from investment operations (1.13) (1.16) 5.36 (.82) (.84) .22 (1.01) (3.06) 8.81 (.19)
Less distributions:
Distributions from net investment
income --- --- --- (.05) (.03) (.13) (.03) --- (.03) (.04)
Distributions from net realized
gains (1.45) (.11) -- -- -- -- -- (.35) -- --
Distributions from paid-in-capital -- -- -- -- -- -- (1.04)(c) -- --
Total distributions (1.45) (.11) -- (.05) (.03) (.13) (.03) (1.39) (.03) (.04)
Net asset value at end of period $13.13 $15.71 $16.98 $11.62 12.49 $13.36 $13.27 $14.31 $18.76 $ 9.98
TOTAL RETURN (8.01)% (6.92)% 46.13% (6.57)% (6.23)% 1.51% (7.04)% (16.77)% 88.48% (1.87)%
RATIOS/SUPPLEMENTAL DATA
Net assets at end of period
(000's omitted) $29,007 $36,603 $47,489 $24,939 $33,133 $40,301 $37,791 $47,732 $62,256 $20,595
Ratio of expenses to average net
assets(a) 2.93% 2.57% 3.01% 2.96% 2.59% 2.62% 2.46% 2.33% 2.46% 2.39%
Ratio of net investment income
average net assets(b) (l0.01% (.68)% (.29)% (.63)% .34% .65% .17% .10% (.21)% .18%
Portfolio turnover rate 158% 129% 156% 97% 95% 65% 60% 52% 66% 32%
</TABLE>
(a) Ratio prior to reimbursement by the Investment Manager was 2.52% in 1987,
2.44% in 1988, and 2.70% in 1989. (b) Ratio prior to reimbursement by the
Investment Manager was (.27%) in 1987, (.01%) in 1988, and (.07%) in 1989. (c)
The distribution represents amounts required to be distributed to avoid
imposition of excise taxes on realized capital gains.
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Information relating to outstanding debt during the fiscal periods shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Amount of Debt Average Amount of Average Number of Average Amount of
Fiscal Years Ended Outstanding at End Debt Outstanding Shares Outstanding Debt Per Share
June 30 of Period During the Period During the Period During the Period
1995 $0 $464,223 2,446,903 $0.19
1994 0 232,392 2,820,198 0.08
1993 0 76,436 2,296,254 0.03
1992 0 104,041 2,398,765 0.04
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Transaction and Operating Expenses........................2 Distributions and Taxes...............................16
Financial Highlights......................................2 Determination of Net Asset Value......................17
General...................................................4 The Investment Manager................................18
The Fund's Investment Program.............................5 The Subadviser........................................18
Risk Factors..............................................7 Distribution of Shares................................18
How to Purchase Shares....................................9 Performance Information...............................19
Shareholder Services.....................................11 Capital Stock.........................................20
How to Redeem Shares.....................................14 Custodian and Transfer Agent..........................20
</TABLE>
GENERAL
Purpose of the Fund. The Fund is designed for investors seeking long term
capital appreciation through holdings of gold, platinum and silver bullion, a
global portfolio of gold mining shares, and other investments considered to be
inflation hedges.
Gold Investing. The Investment Manager and the Subadviser believe that
investments in gold, platinum and silver bullion and gold mining shares offer an
opportunity to achieve the long term capital appreciation necessary to protect
wealth against eroding monetary values. Modern history indicates that many
leading industrial nations are now pursuing policies with potentially
irreversible inflationary consequences worldwide. In these nations the leaders
of government, business, labor, and consumer groups are seeking increasingly
differing objectives, making the concerted efforts necessary to control
inflation more elusive than ever. As a result, political pressures to counteract
economic slowdowns have resulted in long term increases in government deficits
and high rates of growth of monetary reserves and credit, along with other
factors such as increases in wage and benefit payments exceeding increases in
productivity. These conditions have been major factors in the inflationary
cycles experienced over the past thirty years in the United States and abroad.
During periods of accelerating inflation or currency uncertainty, worldwide
investment demand for gold and gold mining shares tends to increase and during
periods of decelerating inflation and currency stability, it tends to decrease.
Other uncertain and unstable political and social conditions have also
stimulated demand for gold. The Investment Manager and the Subadviser believe
that the accelerating growth of monetary reserves and credit in industrial
markets may favorably affect gold and gold mining share prices.
Adding the Fund to Your Portfolio. Although investing in bullion, gold mining
shares and foreign securities may involve special considerations and additional
investment risks (see "Risk Factors"), the Investment Manager and the Subadviser
believe that investments in bullion and gold mining shares may offer greater
capital appreciation potential during inflationary and politically unstable
periods. Additionally, since the market action of gold mining shares has tended
to move independently of or against the market trends of other sectors of the
economy, adding an investment in the Fund to your portfolio may increase your
overall return and may reduce overall fluctuations in portfolio value. You
should not, however, consider a purchase of Fund shares to be a complete
investment program. There is no assurance that the Fund will achieve its
objectives.
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Gold Pro: 8/24/95, 9am
THE FUND'S INVESTMENT PROGRAM
In seeking to achieve its primary investment objective of long term capital
appreciation, the Fund will concentrate its investments in gold mining shares
and gold, platinum, and silver bullion. This means at least 25% will, and up to
100% of its assets may, be so invested. Normally, at least 65% of the Fund's
total assets will be invested in equity securities (including common stocks,
convertible securities and warrants) of companies involved directly or
indirectly in mining, processing or dealing in gold or other precious metals,
gold, platinum and silver bullion and gold coins. Currently, the Fund limits
bullion investments to less than 25% of its total assets.
The Fund may invest up to 35% of its total assets in securities of companies
that own or develop natural resources and other basic commodities, in securities
of selected growth companies, and securities issued by the U.S. Government, its
agencies or instrumentalities. Natural resources include ferrous and non-ferrous
metals (such as iron, aluminum and copper), strategic metals (such as uranium
and titanium), hydrocarbons (such as coal, oil and natural gases), chemicals,
forest products, real estate, food products and other basic commodities, which
historically have been produced and marketed profitably during periods of rising
inflation. Selected growth companies in which the Fund may invest typically have
earnings or tangible assets which are expected to grow faster than the rate of
inflation over time. The Investment Manager and the Subadviser believe that such
investments can also offer excellent opportunities to provide hedges against
inflation.
Options, Futures, and Forward Currency Contracts. The Fund may purchase call
options on securities that the Investment Manager intends to include in the
Fund's portfolio in order to fix the cost of a future purchase or to attempt to
enhance return by, for example, participating in an anticipated price increase
of a security. The Fund may purchase put options to hedge against a decline in
the market value of securities held in the Fund's portfolio or to attempt to
enhance return. The Fund may write (sell) covered put and call options on
securities in which it is authorized to invest. The Fund may purchase and write
covered straddles, purchase and write put and call options on stock and bond
indexes, and take positions in options on foreign currencies to hedge against
the risk of foreign exchange rate fluctuations on foreign securities the Fund
holds in its portfolio or that it intends to purchase. The Fund may purchase and
sell interest rate futures contracts, stock and bond index futures contracts and
foreign currency futures contracts, and may purchase put and call options and
write covered put and call options on such futures contracts.
The Fund may enter into forward currency contracts to set the rate at which
currency exchanges will be made for contemplated or completed transactions. The
Fund might also enter into forward currency contracts in amounts approximating
the value of one or more portfolio positions to fix the U.S. dollar value of
those positions. For example, when the Investment Manager believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar, the Fund may enter into a forward contract to sell, for
a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The Fund has no specific limitation on the percentage of
assets it may commit to foreign currency exchange contracts, except that it will
not attempt to enter into a forward contract if the amount of assets set aside
to cover the contract would impede portfolio management or the Fund's ability to
meet redemption requests.
Fixed Income Securities. When seeking to achieve its secondary objective of
income, the Fund will normally invest in investment grade fixed income
securities. Investment grade securities are those rated in the top four
categories by a nationally recognized statistical rating organization such as
Standard & Poor's or Moody's Investors Service, Inc., ("Moody's") or, if
unrated, are determined by the Investment Manager to be of comparable quality.
Moody's considers securities in the fourth highest category to have speculative
characteristics. Such securities may include long, intermediate and short
5
<PAGE>
Gold Pro: 8/24/95, 9am
maturities, depending on the Investment Manager's evaluation of market patterns
and trends. The Fund may invest for temporary defensive purposes in high grade
fixed income securities. The Fund may invest up to 35% of its assets in fixed
income securities rated below investment grade, although it has no current
intention of investing more than 5% of its assets in such securities during the
coming year. The Fund may also invest without limit in unrated securities if
such securities offer, in the Investment Manager's opinion, the opportunity for
a high overall return by reason of their yield, discount at purchase, or
potential for capital appreciation without undue risk. Securities rated below
investment grade and many unrated securities may be considered predominantly
speculative and subject to greater market fluctuations and risks of loss of
income and principal than higher rated fixed income securities. The market value
of fixed income securities usually is affected by changes in the level of
interest rates. An increase in interest rates tends to reduce the market value
of such investments, and a decline in interest rates tends to increase their
value. In addition, fixed income securities with longer maturities, which tend
to produce higher yields, are subject to potentially greater capital
appreciation and depreciation than obligations with shorter maturities.
Fluctuations in the market value of fixed income securities subsequent to their
acquisition do not affect cash income from such securities but are reflected in
the Fund's net asset value.
Lending. Pursuant to an arrangement with its custodian bank, the Fund may lend
up to one third of its total assets to other parties. If the Fund engages in
lending transactions, it will enter into lending agreements that require that
the loans be continuously secured by cash, securities issued or guaranteed by
the U.S. government, its agencies or instrumentalities, or any combination of
cash and such securities, as collateral equal at all times to at least the
market value of the assets lent. To the extent of such activities, the custodian
will apply credits against its custodial charges. There are risks to the Fund of
delay in receiving additional collateral and risks of delay in recovery of, and
failure to recover, the assets lent should the borrower fail finan cially or
otherwise violate the terms of the lending agreement. Loans will be made only to
borrowers deemed by the Investment Manager to be of good standing and when, in
the Investment Manager's judgment, the consideration which can be earned
currently from such lending transactions justifies the attendant risk. Any loan
made by the Fund will provide that it may be terminated by either party upon
reasonable notice to the other party.
Other Information. The Fund is "non-diversified," as defined in the Investment
Company Act of 1940 (the "1940 Act"), but intends to continue to qualify as a
regulated investment company for Federal income tax purposes. This means, in
general, that more than 5% of the Fund's total assets may be invested in the
securities of one issuer (including a foreign government), but only if at the
close of each quarter of the Fund's taxable year, the aggregate amount of such
holdings is less than 50% of the value of its total assets and no more than 25%
of the value of its total assets is invested in the securities of a single
issuer. To the extent that the Fund's portfolio at times may include the
securities of a smaller number of issuers than if it were "diversified," as
defined in the 1940 Act, the Fund will at such times be subject to greater risk
with respect to its portfolio securities than an investment company that invests
in a broader range of securities, in that changes in the financial condition or
market assessment of a single issuer may cause greater fluctuation in the Fund's
total return. The Fund may invest (i) up to 15% of its net assets in illiquid
securities, including repurchase agreements with a maturity of more than seven
days and (ii) up to 10% of its total assets in restricted securities. In
addition to the Fund's fundamental investment objectives and concentration
policy, the Fund has adopted certain investment restrictions set forth in the
Statement of Additional Information that are fundamental and may not be changed
without shareholder approval. The Fund's other investment policies are not
fundamental and may be changed by the Board of Directors without shareholder
approval. For the fiscal years ended June 30, 1995 and 1994 the Fund's portfolio
turnover rate was 158% and 129%, respectively. A higher portfolio turnover rate
involves correspondingly greater transaction costs and increases the potential
for short term capital gains and taxes.
6
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RISK FACTORS
Because of the following considerations, Fund shares should be considered
speculative and are not a complete investment program. Risks in the Fund's
investment policies include:
1. Price Fluctuations in Bullion. The value of the Fund's investments may be
affected by changes in the price of gold, platinum, and silver. Gold, platinum,
and silver have been subject to substantial price fluctuations over short
periods of time. The prices have been influenced by industrial and commercial
demand, investment and speculation, and monetary and fiscal policies of central
banks and governmental and international agencies. Price fluctuations in bullion
have also caused large price fluctuations in gold mining shares.
2. Concentration of Source of Supply and Control of Sales. Currently, there are
only six major producers of gold: the Republic of South Africa ("South Africa"),
the United States, Australia, the Commonwealth of Independent States (the "CIS,"
formerly the Union of Soviet Socialist Republics), Canada, and China. As South
Africa and the CIS are two major producers of gold and platinum, changes in
political, social and economic conditions affecting either country pose certain
risks to the Fund's investments. The social upheaval and related economic
difficulties in South Africa and the CIS, may, from time to time, influence the
price of gold and platinum and the share values of mining companies involved in
South Africa and the CIS and elsewhere. Investors should understand the special
considerations and risks related to such an investment emphasis, and its
potential effect on the Fund's per share value. South Africa depends
predominantly on gold sales for the foreign exchange necessary to finance its
imports, and its sales policy is necessarily subject to national economic and
political developments.
3. Concentration. As a matter of fundamental investment policy, the Fund
concentrates its investments in gold mining shares and in gold, platinum, and
silver bullion. Such concentration involves additional investment risks,
increased problems of liquidity, and causes the value of Fund shares to
fluctuate more than if it invested in a greater number of industries.
4. Borrowing. The Fund may borrow money from banks (including its custodian
bank) to purchase and carry securities and will pay interest thereon. Such
borrowing is referred to as leverage, is speculative, and increases both
investment opportunity and investment risk. If the investment income on
securities purchased with borrowed money exceeds the interest paid on the
borrowing, the Fund's income will be correspondingly higher. If the investment
income fails to cover the Fund's costs, including interest on borrowings, or if
there are losses, the net asset value of the Fund's shares will decrease faster
than would otherwise be the case. The 1940 Act requires the Fund to maintain
asset coverage of at least 300% for all such borrowings, and should such asset
coverage at any time fall below 300%, the Fund will be required to reduce its
borrowing within three days to the extent necessary to meet the requirements of
the 1940 Act. To reduce its borrowing the Fund might be required to sell
securities at a disadvantageous time. Interest on money borrowed is an expense
the Fund would not otherwise incur, and it may therefore have little or no
investment income during periods of substantial borrowings.
5. Tax or Currency Laws. Changes in tax or currency laws of the United States or
foreign countries, such as imposition of withholding taxes or other taxes or of
exchange controls on foreign currencies, may inhibit or increase the cost of the
Fund's pursuit of its investment program.
6. Unpredictable International Monetary Policies, Economic and Political
Conditions. Under unusual international monetary or political conditions, the
Fund's assets might be less liquid and the change in value of its assets more
volatile than would be the case with other investments. In particular, because
7
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Gold Pro: 8/24/95, 9am
the price of gold and platinum may be affected by unpredictable international
monetary policies and economic conditions there may be greater likelihood of a
more dramatic impact upon the market prices of securities of companies mining,
processing or dealing in gold and other precious metals than would occur in
other industries.
7. Foreign Securities, Markets and Currencies. You should understand and
consider carefully the substan tial risks involved in foreign investing.
Investing in foreign securities, which are generally denominated in foreign
currencies, and utilization of forward contracts on foreign currencies involve
certain considerations comprising both risk and opportunity not typically
associated with investing in U.S. securities. These considerations include:
fluctuations in currency exchange rates; restrictions on foreign investment and
repatriation of capital; costs of converting foreign currency into U.S. dollars;
greater price volatility and trading illiquidity; less public information on
issuers of securities; difficulty in enforcing legal rights outside of the
United States; lack of uniform accounting, auditing and financial reporting
standards; the possible imposition of foreign taxes, exchange controls, and
currency restrictions; and the possible greater political, economic, and social
instability of developing as well as developed countries including without
limitation nationalization, expropriation of assets, and war. Furthermore,
individual foreign economies may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross national product, rate of inflation,
capital reinvestment, resource self-sufficiency, and balance of payments
position. These risks are often heightened when the Fund's investments are
concentrated in a small number of countries. In addition, because transactional
and custodial expenses for foreign securities are generally higher than for
domestic securities, the Fund's expense ratio can be expected to be higher than
for investment companies investing exclusively in domestic securities.
The Fund may invest in securities of issuers located in emerging market
countries. The risks of investing in foreign securities may be greater with
respect to securities of issuers in, or denominated in the currencies of,
emerging market countries. The economies of emerging market countries generally
are heavily dependent upon international trade and accordingly, have been and
may continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. These economies
also have been and may continue to be adversely affected by economic conditions
in the countries with which they trade. The securities markets of emerging
market countries are substantially smaller, less developed, less liquid and more
volatile than the securities markets of the U.S. and other developed countries.
Disclosure and regulatory standards in many respects are less stringent in
emerging market countries than in the U.S. and other major markets. There also
may be a lower level of monitoring and regulation of emerging markets and the
activities of investors in such markets, and enforcement of existing regulations
may be extremely limited. Investing in local markets, particularly in emerging
market countries, may require the Fund to adopt special procedures, seek local
government approvals or take other actions, each of which may involve additional
costs to the Fund. Certain emerging markets countries may also restrict
investment opportunities in issuers in industries deemed important to national
interests.
The Fund may purchase securities on U.S. and foreign stock exchanges or in
the over-the-counter market. Foreign stock markets are generally not as
developed or efficient as those in the United States. In most foreign markets
volume and liquidity are less than in the United States and, at times,
volatility of price can be greater than in the United States. Fixed commissions
on some foreign stock exchanges are higher than the negotiated commissions on
U.S. exchanges. There is generally less government supervision and regulation of
foreign stock exchanges, brokers and companies than in the United States. If the
Fund invests in countries in which settlement of transactions is subject to
delay, the Fund's ability to purchase and sell portfolio securities at the time
it desires may be hampered. Delays in settlement practices in foreign countries
may also affect the Fund's liquidity, making it more difficult to meet
redemption requests, or require the Fund to maintain a greater portion of its
assets in money market instruments in order to meet such requests. Some of the
securities in which the Fund invests may not be widely traded, and the Fund's
position in such securities
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may be substantial in relation to the market for such securities. Accordingly,
it may be difficult for the Fund to dispose of such securities at prevailing
market prices in order to meet redemption requests.
Since investment in foreign securities usually involves foreign currencies
and since the Fund may temporarily hold cash in bank deposits in foreign
currencies in order to facilitate portfolio transactions, the value of the
Fund's assets as measured in U.S. dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange control
regulations. For example, if the value of the U.S. dollar decreases relative to
a foreign currency in which a Fund investment is denominated or which is
temporarily held by the Fund to facilitate portfolio transactions, the value of
such Fund assets and the Fund's net asset value per share will increase, all
else being equal. Conversely, an increase in the value of the U.S. dollar
relative to such a foreign currency will result in a decline in the value of
such Fund assets and its net asset value per share. The Fund may incur
additional costs in connection with conversions of currencies and securities
into U.S. dollars. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis, or through entering into
forward contracts. The Fund generally will not enter into a forward contract
with a term of greater than one year.
The Fund may hold a portion or all of its cash in the form of foreign
currencies. Since investments in foreign currencies, bullion and coins do not
yield income, the Fund may not achieve its secondary objective during periods
when it holds significant positions in such investments. The Fund purchases or
sells gold, platinum, and silver bullion primarily of standard weight at the
best available prices in the New York bullion market (see "Determination of Net
Asset Value"). The Investment Manager retains discretion, however, to purchase
or sell bullion in other markets, including foreign markets, if better prices
can be obtained.
8. Options, Futures, and Forward Currency Contracts. Strategies with options,
financial futures, and forward currency contracts may be limited by market
conditions, regulatory limits and tax considerations, and the Fund might not
employ any of the strategies described above. There can be no assurance that any
strategy used will be successful. The loss from investing in futures
transactions is potentially unlimited. Options and futures may fail as hedging
techniques in cases where price movements of the securities underlying the
options and futures do not follow the price movements of the portfolio
securities subject to the hedge. Gains and losses on investments in options and
futures depend on the Investment Manager's ability to predict correctly the
direction of stock prices, interest rates, and other economic factors. In
addition, the Fund will likely be unable to control losses by closing its
position where a liquid secondary market does not exist and there is no
assurance that a liquid secondary market for hedging instruments will always
exist. It also may be necessary to defer closing out hedged positions to avoid
adverse tax consequences. The percentage of the Fund's assets set aside to cover
its obligations under options, futures, or forward currency contracts could
impede effective portfolio management or the ability to meet redemption or other
current obligations.
HOW TO PURCHASE SHARES
The Fund's shares are sold on a continuing basis at the net asset value per
share next determined after receipt and acceptance of the order by Investor
Service Center (see "Determination of Net Asset Value"). The minimum initial
investment is $1,000 for regular and gifts/transfers to minors custody accounts,
and $500 for Bull & Bear retirement plans, which include Individual Retirement
Accounts ("IRAs"), SEP-IRAs, rollover IRAs, profit sharing and money purchase
plans, and 403(b) plan accounts. The minimum subsequent investment is $100. The
initial investment minimums are waived if you elect to invest $100 or more each
month in the Fund through the Bull & Bear Automatic Investment Program (see
"Additional Investments" below).
Initial Investment. The Account Application that accompanies this prospectus
should be completed, signed and, with a check or other negotiable bank draft
payable to Gold Investors, mailed to Investor Service Center,
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Box 419789, Kansas City, MO 64141-6789. Initial investments also may be made by
having your bank wire money, as set forth below, in order to avoid mail delays.
Additional Investments. Additional investments may be made conveniently at any
time by any one or more of the following methods:
o Bull & Bear Automatic Investment Program. With the Bull & Bear Automatic
Investment Program, you can establish a convenient and affordable long term
investment program through one or more of the Plans explained below. Each
Plan is designed to facilitate an automatic monthly investment of $100 or
more into your Fund account.
The Bull & Bear Bank Transfer Plan lets you purchase Fund shares on a
certain day each month by transferring electronically a specified
dollar amount from your regular checking account, NOW account, or bank
money market deposit account.
In the Bull & Bear Salary Investing Plan, part or all of your salary
may be invested electronically in Fund shares on each pay date,
depending upon your employer's direct deposit program.
The Bull & Bear Government Direct Deposit Plan allows you to deposit
automatically part or all of certain U.S. Government payments into your
Fund account. Eligible U.S. Government payments include Social
Security, pension benefits, military or retirement benefits, salary,
veteran's benefits and most other recurring payments.
For more information concerning these Plans, or to request the necessary
authorization form(s), please call Investor Service Center, 1-800-847-4200. You
may modify or terminate the Bank Transfer Plan at any time by written notice
received at least 10 days prior to the scheduled investment date. To modify or
terminate the Salary Investing Plan or Government Direct Deposit Plan, you
should contact, respectively, your employer or the appropriate U.S. government
agency. The Fund reserves the right to redeem any account if participation in
the Program is terminated and the account's value is less than $500. The Program
does not assure a profit or protect against loss in a declining market, and you
should consider your ability to make purchases when prices are low.
o Check. Mail a check or other negotiable bank draft ($100 minimum), made
payable to Gold Investors, together with a Bull & Bear FastDeposit form to
Investor Service Center, Box 419789, Kansas City, MO 64141-6789. If you do
not use that form, please send a letter indicating the Fund and account
number to which the subsequent investment is to be credited, and name(s) of
the registered owner(s).
o Electronic Funds Transfer (EFT). With EFT, you may purchase additional
shares of the Fund quickly and simply, just by calling Investor Service
Center, 1-800-847-4200. We will contact the bank you designate on your
Account Application or Authorization Form to arrange for the EFT, which is
done through the Automated Clearing House system, to your Fund account. For
requests received by 4 p.m., eastern time, the investment will be credited
to your Fund account ordinarily within two business days. There is a $100
minimum for each EFT investment. Your designated bank must be an Automated
Clearing House member and any subsequent changes in bank account
information must be submitted in writing with a voided check or
deposit slip.
o Federal Funds Wire. You may wire money, by following the procedures set
forth below, to receive that day's net asset value per share.
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Investing by Wire. For an initial investment by wire, you must first telephone
Investor Service Center, 1-800- 847-4200, to give the name(s) under which the
account is to be registered, tax identification number, the name of the bank
sending the wire, and to be assigned a Bull & Bear Gold Investors account
number. You may then purchase shares by requesting your bank to transmit
immediately available funds ("Federal funds") by wire to: United Missouri Bank
NA, ABA #10-10-00695; for Account 98-7052-724-3; Gold Investors. Your account
number and name(s) must be specified in the wire as they are to appear on the
account registration. You should then enter your account number on your
completed Account Application and promptly forward it to Investor Service
Center, Box 419789, Kansas City, MO 64141-6789. This service is not available on
days when the Federal Reserve wire system is closed. Subsequent investments by
wire may be made at any time without having to call Investor Service Center by
simply following the same wiring procedures.
Shareholder Accounts. When you invest in the Fund, your account will be credited
with all full and fractional shares (to three decimal places), together with any
dividends that are paid in additional shares (see "Distributions and Taxes").
Stock certificates will be issued only for full shares when requested in
writing. In order to facilitate redemptions and exchanges and provide
safekeeping, we recommend that you do not request certificates. You will receive
transaction confirmations upon purchasing or selling shares, and quarterly
statements.
When Orders are Effective. The purchase price for Fund shares is the net asset
value of such shares next determined after receipt and acceptance by Investor
Service Center of a purchase order in proper form. All purchases are accepted
subject to collection at full face value in Federal funds. Checks must be drawn
in U.S. dollars on a U.S. bank. The Fund reserves the right to reject any order.
Accounts are charged $30 by the Transfer Agent for submitting checks for
investment which are not honored by the investor's bank. The Fund may in its
discretion waive or lower the investment minimums.
SHAREHOLDER SERVICES
You may modify or terminate your participation in any of the Fund's special
plans or services at any time. Shares or cash should not be withdrawn from any
tax-advantaged retirement plan described below, however, without consulting a
tax adviser concerning possible adverse tax consequences. Additional information
regarding any of the following services is available from the Fund's
Distributor, Investor Service Center, 1-800- 847-4200.
Electronic Funds Transfer (EFT). You automatically have the privilege of linking
your bank account designated on your Account Application or Authorization Form
and your Fund account through Bull & Bear's EFT service. With EFT, you use the
Automated Clearing House system to electronically transfer money quickly and
safely between your bank and Fund accounts. EFT may be used for purchasing and
redeeming Fund shares, direct deposit of dividends into your bank account, the
Automatic Investment Program, the Systematic Withdrawal Plan, and systematic IRA
distributions. You may decline this privilege by checking the indicated box on
the Account Application. Any subsequent changes in bank account information must
be submitted in writing (and the Transfer Agent may require the signature to be
guaranteed), with a voided check or deposit slip.
Dividend Sweep Privilege. You may elect to have automatically invested either
all dividends or all dividends and capital gain distributions paid by the Fund
in any other Bull & Bear Fund. Shares of the other Bull & Bear Fund will be
purchased at the current net asset value calculated on the payment date. For
more information concerning this privilege and the other Bull & Bear Funds, or
to request a Dividend Sweep Authorization Form, please call Investor Service
Center, 1-800-847-4200. You may cancel this privilege by mailing written
notification to Investor Service Center, Box 419789, Kansas City, MO 64141-6789.
To select a new Fund after cancellation, you must submit a new Authorization
Form. Enrollment in or cancellation of this privilege is
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generally effective three business days following receipt. This privilege is
available only for existing accounts and may not be used to open new accounts.
Systematic Withdrawal Plan. If you own Fund shares with a value of at least
$20,000 you may elect an automatic monthly or quarterly withdrawal of cash from
your Fund account in fixed or variable amounts, subject to a minimum amount of
$100. Under the Systematic Withdrawal Plan, all dividends and other
distributions, if any, are reinvested in the Fund.
Assignment. Fund shares may be transferred to another owner. Instructions are
available from Investor Service Center, 1-800-847-4200.
Exchange Privilege. You may exchange at least $500 worth of shares of the Fund
for shares of any Bull & Bear Fund listed below (provided the registration is
exactly the same, the shares may be sold in your state of residence, and the
exchange may otherwise legally be made).
To exchange shares, please call Investor Service Center toll-free at
1-800-847-4200 between 9 a.m. and 5 p.m. eastern time on any business day of the
Fund and provide the following information: account registration including
address and number; taxpayer identification number; percentage, number, or
dollar value of shares to be redeemed; name and, if different, the account
number of the Bull & Bear Fund to be purchased; and your identity and telephone
number. The other Bull & Bear Funds are:
o Bull & Bear Dollar Reserves is a high quality money market fund investing in
U.S. Government securities. Income is generally free from most state and
local income taxes. Free unlimited check writing ($250 minimum per check).
Pays monthly dividends.
o Bull & Bear U.S. Government Securities Fund invests for a high level of
current income, liquidity, and safety of principal. Free unlimited check
writing ($250 minimum per check). Pays monthly dividends.
o Bull & Bear Municipal Income Fund invests for the highest possible income
exempt from Federal income tax consistent with preservation of principal.
Free unlimited check writing ($250 minimum per check). Pays monthly
dividends.
o Bull & Bear Global Income Fund seeks a high level of income from a global
portfolio of primarily investment grade fixed income securities. Free
unlimited check writing ($250 minimum per check). Pays monthly dividends.
o Bull & Bear Quality Growth Fund seeks growth of capital and income from a
portfolio of common stocks of large, quality companies with potential for
significant growth of earnings and dividends.
o Bull & Bear U.S. and Overseas Fund invests worldwide for the highest
possible total return.
o Bull & Bear Special Equities Fund invests aggressively for maximum capital
appreciation.
Exchange requests received between 9 a.m. and 4 p.m. eastern time on any
business day of the Fund will be effected at the net asset values of the Fund
and the other Bull & Bear Fund as determined at the close of that business day.
Exchange requests received between 4 p.m. and 5 p.m. eastern time on any
business day of the Fund will be effected at the net asset values of the Fund
and the other Bull & Bear Fund as determined at the close of the next business
day of the Fund. The Fund is designed as a long term investment, and short term
trading is discouraged. Accordingly, if shares of the Fund held for 30 days or
less are redeemed or exchanged, the Fund will deduct a redemption fee equal to
one percent of the net asset
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value of shares redeemed or exchanged. The fee will be retained by the Fund and
used to offset the transaction costs that short term trading imposes on the Fund
and its shareholders. If an account contains shares with different holding
periods (i.e. some shares held 30 days or less, some shares held 31 days or
more), the shares with the longest holding period will be redeemed first to
determine if the Fund's redemption fee applies. If you are unable to reach
Investor Service Center at the above telephone number you may, in emergencies,
call 1-212-363-1100 or communicate by fax to 1-212-363-1103 or cable to the
address BULLNBEAR NEWYORK. Exchanges may be difficult or impossible to implement
during periods of rapid changes in economic or market conditions. Exchange
privileges may be terminated or modified by the Fund without notice. For tax
purposes, exchanges are treated as a redemption and purchase of shares. A free
prospectus containing more complete information including charges, expenses and
performance, on any of the Funds listed above is available from Investor Service
Center, 1-800-847-4200. The other Fund's prospectus should be read carefully
before exchanging shares. You may give exchange instructions to Investor Service
Center by telephone without further documentation. If you have requested share
certificates, this procedure may be utilized only if, prior to giving telephone
instructions, you deliver the certificates to the Transfer Agent for deposit
into your account.
o Bull & Bear Securities (Discount Brokerage Account) Transfers. If you have
an account at Bull & Bear Securities, Inc., an affiliate of the Investment
Manager and a wholly-owned subsidiary of Bull & Bear Group, Inc. offering
discount brokerage services, you may access your investment in any Bull &
Bear Fund to pay for securities purchased in your brokerage account and have
proceeds of securities sold in your brokerage account used to purchase
shares of any Bull & Bear Fund. You may request a Discount Brokerage Account
Application from Bull & Bear Securities, Inc., 1-800-262-5800.
Tax-Advantaged Retirement Plans. These plans provide an opportunity to set aside
money for retirement in a tax-advantaged account in which earnings can be
compounded without incurring a tax liability until the money and earnings are
withdrawn. Contributions may be fully or partially deductible for Federal income
tax purposes as noted below. Information on any of the plans described below is
available from Investor Service Center, 1-800-847-4200.
The minimum investment to establish a Bull & Bear IRA or other retirement
plan is $500. Minimum subsequent investments are $100. The initial investment
minimums are waived if you elect to invest $100 or more each month in the Fund
through the Bull & Bear Automatic Investment Program. There are no set-up fees
for any Bull & Bear Retirement Plans. Subject to change on 30 days' notice, the
plan custodian charges Bull & Bear IRAs a $10 annual fiduciary fee, $10 for each
distribution prior to age 59 1/2, and a $20 plan termination fee; however, the
annual fiduciary fee is waived if your IRA has assets of $10,000 or more or if
you invest regularly through the Bull & Bear Automatic Investment Program.
|X| Individual Retirement Accounts. Anyone with earned income who is less than
age 70 1/2at the end of the tax year, even if also participating in another
type of retirement plan, may establish an IRA and contribute each year up
to $2,000 or 100% of earned income, whichever is less, and an aggregate of
up to $2,250 when a non-working spouse is also covered in a separate
spousal account. If each spouse has at least $2,000 of earned income each
year, they may contribute up to $4,000 annually. Employers may also make
contributions to an IRA on behalf of an individual under a Simplified
Employee Pension Plan ("SEP") in any amount up to 15% of up to $150,000 of
compensation. Generally, taxpayers may contribute to an IRA during the tax
year and through the next year until the income tax return for that year is
due, without regard to extensions. Thus, most individuals may contribute
for the 1995 tax year from January 1, 1995 through April 15, 1996.
Deductibility. IRA contributions are fully deductible for most taxpayers.
For a taxpayer who is an active participant in an employer-maintained re-
tirement plan (or whose spouse is), a portion of IRA contributions
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is deductible if adjusted gross income (before the IRA deductions) is
$40,000-$50,000 (if married) and $25,000-$35,000 (if single). Only IRA
contributions by a taxpayer who is an active participant in an
employer-maintained retirement plan (or whose spouse is) and has adjusted
gross income of more than $50,000 (if married) and $35,000 (if single) will
not be deductible at all. An eligible individual may establish a Bull & Bear
IRA under the prototype plan available through the Fund, even though such
individual or spouse actively participates in an employer-maintained
retirement plan.
o IRA Transfer and Rollover Accounts. Special forms are available from
Investor Service Center, 1-800- 847-4200, which make it easy to transfer or
roll over IRA assets to a Bull & Bear IRA. An IRA may be transferred from
one financial institution to another without adverse tax consequences.
Similarly, no taxes need be paid on a lump-sum distribution which you may
receive as a payment from a qualified pension or profit sharing plan due to
retirement, job termination or termination of the plan, so long as the
assets are put into an IRA Rollover account within 60 days of the receipt
of the payment. Withholding for Federal income tax purposes is required at
the rate of 20% for "eligible rollover distributions" made from any
retirement plan (other than an IRA) that are not directly transferred to an
"eligible retirement plan," such as a Bull & Bear Rollover Account.
o Profit Sharing and Money Purchase Plans. These Plans provide an opportunity
to accumulate earnings on a tax-deferred basis by permitting corporations,
self-employed individuals (including partners) and their employees generally
to contribute (and deduct) up to $30,000 annually or, if less, 25% (15% for
profit sharing plans) of compensation or self-employment earnings of up to
$150,000. Corporations and partnerships, as well as all self-employed
persons, are eligible to establish these Plans. In addition, a person who is
both salaried and self-employed, such as a college professor who serves as a
consultant, may adopt these retirement plans based on self-employment
earnings.
|X| Section 403(b) Accounts. Section 403(b)(7) of the Internal Revenue Code of
1986, as amended ("Code"), permits the establishment of custodial accounts
on behalf of employees of public school systems and certain tax-exempt
organizations. A participant in such a plan does not pay taxes on any
contributions made by the participant's employer to the participant's
account pursuant to a salary reduction agreement, up to a maximum amount,
or "exclusion allowance." The exclusion allowance is generally computed by
multiplying the participant's years of service times 20% of the
participant's compensation included in gross income received from the
employer (reduced by any amount previously contributed by the employer to
any 403(b) account for the benefit of the participant and excluded from the
participant's gross income). However, the exclusion allowance may not
exceed the lesser of 25% of the participant's compensation (limited as
above) or $30,000. Contributions and subsequent earnings thereon are not
taxable until withdrawn, when they are received as ordinary income.
HOW TO REDEEM SHARES
Generally, you may redeem by any of the methods explained below. Requests
for redemption should include the following information: your account
registration information including address, account number and taxpayer
identification number; dollar value, number or percentage of shares to be
redeemed; how and to where the proceeds are to be sent; if applicable, the
bank's name, address, ABA routing number, bank account registration and account
number, and a contact person's name and telephone number; and your daytime
telephone number.
By Mail. You may request that the Fund redeem any amount of shares by submitting
a written request to Investor Service Center, Box 419789, Kansas City, MO
64141-6789, signed by the record owner(s). If the written request is sent to the
Fund, it will be forwarded to the above address. If stock certificates have been
issued for shares being redeemed, they must accompany the written request.
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By Telephone. You may telephone Investor Service Center, 1-800-847-4200 to
expedite redemption of Fund shares if share certificates have not been issued.
You may redeem as little as $250 worth of shares by requesting Bull & Bear's
Electronic Funds Transfer (EFT) service. With EFT, you can redeem Fund shares
quickly and conveniently because Investor Service Center will contact the bank
designated on your Account Application or Authorization Form to arrange for the
electronic transfer of your redemption proceeds (through the Automated Clearing
House system) to your bank account. EFT proceeds are ordinarily available in
your bank account within two business days.
If you are redeeming $1,000 or more worth of shares, you may request that
the proceeds be mailed to your address of record or mailed or wired to your
authorized bank.
Telephone requests received on Fund business days by 4 p.m. eastern time will be
redeemed from your account that day, and if after, on the next Fund business
day. Any subsequent changes in bank account information must be submitted in
writing, signature guaranteed, with a voided check or deposit slip. If you are
unable to reach Investor Service Center at the above telephone number you may,
in emergencies, call 1-212- 363-1100 or communicate by fax to 1-212-363-1103 or
cable to the address BULLNBEAR NEWYORK. Redemptions by telephone may be
difficult or impossible to implement during periods of rapid changes in economic
or market conditions.
Check Writing Access. You may exchange a minimum of $500 at any time by
toll-free telephone call into Bull & Bear Dollar Reserves, Bull & Bear's money
market fund, offering free personalized checks, a $250 check writing minimum
($100 minimum for Bull & Bear Securities Performance PlusSM discount brokerage
accounts), and no limit on the number of checks that may be written. A signature
card, which should be submitted for the check writing privilege, and a free Bull
& Bear Dollar Reserves prospectus containing more complete information including
yield, charges and expenses is available from Investor Service Center, 1-800-
847-4200. Please read the prospectus carefully before exchanging.
Redemption Price and Fees. The redemption price is the net asset value per share
next determined after receipt of the redemption request in proper form. The Fund
is designed as a long term investment, and short term trading is discouraged.
Accordingly, if shares of the Fund held for 30 days or less are redeemed or
exchanged, the Fund will deduct a redemption fee equal to one percent of the net
asset value of shares redeemed or exchanged. The fee will be retained by the
Fund and used to offset the transaction costs that short term trading imposes on
the Fund and its shareholders. If an account contains shares with different
holding periods (i.e. some shares held 30 days or less, some shares held 31 days
or more), the shares with the longest holding period will be redeemed first to
determine if the Fund's redemption fee applies. Shares acquired through the
Dividend Sweep Privilege and the reinvestment of dividends and capital gains or
redeemed under the Systematic Withdrawal Plan are exempt from the redemption
fee. Registered broker/dealers, investment advisers, banks, and insurance
companies may open accounts and redeem shares by telephone or wire and may
impose a charge for handling purchases and redemptions when acting on behalf of
others.
Redemption Payment. Payment for shares redeemed will be made as soon as
possible, ordinarily within seven days after receipt of the redemption request
in proper form. The right of redemption may not be suspended, or date of payment
delayed more than seven days, except for any period (i) when the New York Stock
Exchange is closed or trading thereon is restricted as determined by the SEC;
(ii) under emergency circumstances as determined by the SEC that make it not
reasonably practicable for the Fund to dispose of securities owned by it or
fairly to determine the value of its assets; or (iii) as the SEC may otherwise
permit. The mailing of proceeds on redemption requests involving any shares
purchased by personal, corporate, or government check or EFT transfer is
generally subject to a ten business day delay to allow the check or
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transfer to clear. The ten day clearing period does not affect the trade date on
which a purchase or redemption order is priced, or any dividends and capital
gain distributions to which you may be entitled through the date of redemption.
The clearing period does not apply to purchases made by wire. Due to the
relatively higher cost of maintaining small accounts, the Fund reserves the
right, upon 60 days' notice, to redeem any account, other than IRA and other
Bull & Bear prototype retirement plan accounts, worth less than $500 except if
solely from market action, unless an investment is made to restore the minimum
value.
Telephone Privileges. You automatically have all telephone privileges to, among
other things, authorize purchases, redemptions and exchanges, with EFT or by
other means, unless declined on the Account Application or otherwise in writing.
Neither the Fund nor Investor Service Center shall be liable for any loss or
damage for acting in good faith upon instructions received by telephone and
believed to be genuine. The Fund employs reasonable procedures to confirm that
instructions communicated by telephone are genuine and if it does not, it may be
liable for losses due to unauthorized or fraudulent transactions. These
procedures include requiring personal identification prior to acting upon
telephone instructions, providing written confirmation of such transactions, and
tape recording telephone conversations. The Fund may modify or terminate any
telephone privileges or shareholder services (except as noted) at any time
without notice.
Signature Guarantees. No signature guarantees are required when payment is to be
made to you at your address of record. If the redemption proceeds are to be paid
to a non-shareholder of record, or to an address other than your address of
record, or the shares are to be assigned, the Transfer Agent may require that
your signature be guaranteed by an entity acceptable to the Transfer Agent, such
as a commercial bank or trust company or member firm of a national securities
exchange or of the NASD. A notary public may not guarantee signatures. The
Transfer Agent may require further documentation, and may restrict the mailing
of redemption proceeds to your address of record within 30 days of such address
being changed unless you provide a signature guarantee as described above.
DISTRIBUTIONS AND TAXES
Distributions. The Fund pays dividends annually to its shareholders from its net
investment income, if any. The Fund also makes an annual distribution to its
shareholders out of any net realized capital gains, after offsetting any capital
loss carryover, and any net realized gains from foreign currency transactions.
Dividends and other distributions, if any, are declared and payable to
shareholders of record on a date in December of each year. Such distributions
may be paid in January of the following year in which event they will be deemed
received by the shareholders on the preceding December 31 for tax purposes. The
Fund may also make an additional distribution following the end of its fiscal
year out of any undistributed income and capital gains.
Dividends and other distributions are made in additional Fund shares or
shares of other Bull & Bear Funds pursuant to the Dividend Sweep Privilege,
unless you elect to receive cash on the Account Application or so elect
subsequently by calling Investor Service Center, 1-800-847-4200. For Federal
income tax purposes, dividends and other distributions are treated in the same
manner whether received in additional shares of the Fund or another Bull & Bear
Fund or in cash. Any election will remain in effect until you notify Investor
Service Center to the contrary.
Taxes. The Fund intends to continue to qualify for treatment as a regulated
investment company under the Code so that it will be relieved of Federal income
tax on that part of its investment company taxable income (generally consisting
of net investment income, net short term capital gains, and net gains from
certain foreign currency transactions) and net capital gain (the excess of net
long term capital gain over net short term capital loss) that is distributed to
its shareholders.
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Dividends paid by the Fund from its investment company taxable income
(whether paid in cash or in additional Fund shares) generally are taxable to
shareholders, other than shareholders that are not subject to tax on their
income, as ordinary income to the extent of the Fund's earnings and profits; a
portion of those dividends may be eligible for the corporate dividends-received
deduction. Distributions by the Fund of its net capital gain (whether paid in
cash or in additional Fund shares) when designated as such by the Fund, are
taxable to the shareholders as long term capital gains, regardless of how long
they have held their Fund shares. The Fund notifies its shareholders following
the end of each calendar year of the amounts of dividends and capital gain
distributions paid (or deemed paid) that year and of any portion of those
dividends that qualifies for the corporate dividends-received deduction.
Any dividend or other distribution paid by the Fund will reduce the net
asset value of Fund shares by the amount of the distribution. Furthermore, such
distribution, although similar in effect to a return of capital, will be subject
to taxes.
The Fund's investments in gold, platinum and silver bullion and coins may
cause it to fail certain income or asset tests that must be satisfied to qualify
as a regulated investment company under the Code. Accordingly, the Investment
Manager will endeavor to manage the Fund's portfolio so that (1) income and
gains derived from investments in bullion and coins (and any other
"non-qualified" income) will not exceed 10% of the Fund's gross annual income
and (2) less than 50% of the value of the Fund's total assets as of the close of
each quarter of its taxable year will be invested in bullion and coins (and any
other "non-qualified assets"). If the Fund did not qualify for taxation as a
regulated investment company, it would be required to pay Federal income tax on
its net income, which would reduce the amount available for distribution to
shareholders.
The Fund is required to withhold 31% of all dividends, capital gain
distributions and redemption proceeds payable to any individuals and certain
other noncorporate shareholders who do not provide the Fund with a correct
taxpayer identification number. Such withholding also is required with respect
to shareholders who are otherwise subject to backup withholding.
The foregoing is only a summary of some of the important Federal income tax
considerations generally affecting the Fund and its shareholders; see the
Statement of Additional Information for a further discussion. Since other
Federal, state and local tax considerations may apply, you should consult your
tax adviser.
DETERMINATION OF NET ASSET VALUE
The value of a share of the Fund is based on the value of its net assets.
The Fund's net assets are the total of the Fund's investments and all other
assets minus any liabilities. The value of one share is determined by dividing
the net assets by the total number of shares outstanding. This is referred to as
"net asset value per share," and is determined as of the close of regular
trading on the New York Stock Exchange (currently, 4 p.m. eastern time, unless
weather, equipment failure or other factors contribute to an earlier closing)
each business day of the Fund. A business day of the Fund is any day on which
the New York Stock Exchange is open for trading. The following are not business
days of the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Portfolio securities and other assets of the Fund are valued primarily on
the basis of market quotations, if readily available. Foreign securities, if
any, are valued on the basis of quotations from a primary market in which they
are traded and are translated from the local currency into U.S. dollars using
current exchange rates. Securities and other assets for which quotations are not
readily available will be valued at fair value as determined in good faith by or
under the direction of the Board of Directors.
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THE INVESTMENT MANAGER AND SUBADVISER
Bull & Bear Advisers, Inc. (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including regularly furnishing advice with respect to portfolio transactions.
The Investment Manager also furnishes or obtains on behalf of the Fund all
services necessary for the proper conduct of the Fund's business and
administration. The Investment Manager retains final discretion in the
investment and reinvestment of the Fund's assets, subject to the control and
oversight of the Board of Directors. The Investment Manager is authorized to
place portfolio transactions with Bull & Bear Securities, Inc., an affiliate of
the Investment Manager, and may allocate brokerage transactions by taking into
account the sales of shares of the Fund and the other Bull & Bear Funds. The
Investment Manager may also allocate transactions to broker/dealers that remit a
portion of their commissions as a credit against the Fund's expenses.
For its services, the Investment Manager receives an investment management
fee, payable monthly, based on the average daily net assets of the Fund, at the
annual rate of 1% on the first $10 million, 7/8 of 1% over $10 million up to $30
million, 3/4 of 1% over $30 million up to $150 million, 5/8 of 1% over $150
million up to $500 million, and 1/2 of 1% over $500 million. This fee is higher
than that paid by most investment companies. From time to time, the Investment
Manager may reimburse all or part of this fee to improve the Fund's total
return. The Investment Manager provides certain administrative services to the
Fund at cost. During the fiscal year ended June 30, 1995, the investment
management fees paid by the Fund represented approximately 0.88% of its average
daily net assets. The Investment Manager is a wholly owned subsidiary of Bull &
Bear Group, Inc. ("Group"). Group, a publicly owned company whose securities are
listed on Nasdaq and traded in the over-the-counter market, is a New York based
manager of mutual funds and discount brokerage services. Bassett S. Winmill may
be deemed a controlling person of Group and, therefore, may be deemed a
controlling person of the Investment Manager.
The Investment Manager has entered into a subadvisory agreement with the
Subadviser for certain subadvisory services. The Subadviser advises and consults
with the Investment Manager regarding the selection, clearing and safekeeping of
the Fund's portfolio investments and assists in pricing and generally monitoring
such investments. The Subadviser also provides the Investment Manager with
advice as to allocating the Fund's portfolio assets among various countries,
including the United States, and among equities, bullion, and other types of
investments, including recommendations of specific investments. The Investment
Manager, not the Fund, pays the Subadviser monthly a percentage of the
Investment Manager's net fees based upon the Fund's performance and its total
net assets ranging from five to fifty percent. The Subadviser, whose principal
business address is 7 - 8 Kendrick Mews, London, U.K. SW7 3HG, is a
majority-owned subsidiary of Lion Mining Group, which is controlled by Andrew F.
Malim. Although the Subadviser has not served directly as an investment adviser
to a U.S. mutual fund, the Managing Director of the Subadviser, Kjeld Thygesen,
has been the portfolio manager of another U.S. mutual fund since January 1992.
Effective as of the date hereof, Mr. Thygesen will serve as the Fund's portfolio
manager together with the Investment Manager's Investment Policy Committee. Mr.
Thygesen has been a Managing Director of Lion Mining Group since 1989.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement between the Fund and Investor Service
Center, Inc., 11 Hanover Square, New York, NY 10005 (the "Distributor"), the
Distributor acts as the Fund's principal agent for the sale of Fund shares. The
Fund has also adopted a plan of distribution (the "Plan") pursuant to Rule 12b-1
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under the 1940 Act. Pursuant to the Plan, the Fund pays the Distributor monthly
a distribution fee in an amount of three-quarters of one percent per annum of
the Fund's average daily net assets and a service fee in an amount of
one-quarter of one percent per annum of the Fund's average daily net assets. The
service fee portion is intended to cover personal services provided to Fund
shareholders and maintenance of shareholder accounts. The distribution fee
portion is intended to cover all other activities and expenses primarily
intended to result in the sale of the Fund's shares. These fees may be retained
by the Distributor or passed through to brokers, banks and others who provide
services to their customers who are Fund shareholders at the rate of 0.35% on
such customer balances. The Fund will pay the fees to the Distributor until
either the Plan is terminated or not renewed. In that event, the Distributor's
expenses in excess of fees received or accrued through the termination day will
be the Distributor's sole responsibility and not obligations of the Fund. During
the period they are in effect, the Distribution Agreement and Plan obligate the
Fund to pay fees to the Distributor as compensation for its service and
distribution activities. If the Distributor's expenses exceed the fees, the Fund
will not be obligated to pay any additional amount to the Distributor. If the
Distributor's expenses are less than such fees, it may realize a profit. Certain
other advertising and sales materials may be prepared to promote the sale of
Fund shares and shares of one or more other Bull & Bear Funds. In such cases,
the expenses will be allocated among the Funds involved based on the inquiries
resulting from the materials or other factors deemed appropriate by the Board of
Directors. The costs of personnel and facilities of the Distributor to respond
to inquiries by shareholders and prospective shareholders will also be allocated
based on such relative inquiries or other factors. There is no certainty that
the allocation of any of the foregoing expenses will precisely allocate to the
Fund costs commensurate with the benefits it receives, and it may be that the
other Funds and Bull & Bear Securities, Inc. will benefit therefrom.
PERFORMANCE INFORMATION
From time to time the Fund may advertise its "average annual total return"
or "total return" (which may be referred to as cumulative total return or
cumulative growth) over specified periods. Average annual total return is
calculated pursuant to a standardized formula which assumes a hypothetical
$10,000 investment in the Fund was redeemed at the end of a stated period of
time, after giving effect to the reinvestment of dividends and distributions
during the period. The return is expressed as a percentage rate which, if
applied on a compounded annual basis, would result in the redeemable value of
the investment at the end of the period. Total return is computed on a per share
basis, assumes the reinvestment of dividends and distributions, and is
calculated by combining the income and principal changes for a specified period
and dividing by the net asset value per share at the beginning of the period.
Advertisements may show total return as a percentage rate or as the value of a
hypothetical investment at the end of the period. The Fund's performance may be
compared to the performance of broad groups of comparable mutual funds, or the
performance of unmanaged indexes of comparable securities. The Fund's total
return is based upon historical performance information and is not intended to
indicate future performance. Additional information regarding the Fund's
performance is available in the Fund's Annual Report to Shareholders, which is
available at no charge upon request to Investor Service Center, 1-800-847-4200..
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CAPITAL STOCK
The Fund, a non-diversified open-end management investment company organized
as a Maryland corporation in 1987, commenced investment operations in January
1988 when it merged with Bull & Bear Gold Investors Ltd. (formerly Golconda
Investors Ltd.), a New York corporation. The Fund is authorized to issue up to
500,000,000 shares of common stock ($.01 par value). The Fund's stock is freely
assignable by way of pledge (as, for example, for collateral purposes), gift,
settlement of an estate and also by an investor to another investor. Each share
has equal dividend, voting, liquidation and redemption rights with every other
share. The shares have no preemptive, conversion or cumulative voting rights and
they are not subject to further call or assessment. The Board of Directors of
the Fund may establish additional series or classes of shares, although it has
no current intention of doing so.
The Fund's By-Laws provide that there will be no annual meeting of
shareholders in any year except as required by law. In practical effect, this
means that the Fund will not hold an annual meeting of shareholders in years in
which the only matters which would be submitted to shareholders for their
approval are the election of Directors and ratification of the Directors'
selection of accountants, although holders of 10% of the Fund's shares may call
a meeting at any time. There will normally be no meetings of shareholders for
the purpose of electing Directors unless fewer than a majority of the Directors
holding office have been elected by shareholders. Shareholder meetings will be
held in years in which shareholder vote on the Fund's investment management
agreement, plan of distribution, or fundamental investment objective, policies
or restrictions is required by the 1940 Act.
CUSTODIAN AND TRANSFER AGENT
Investors Bank & Trust Company, 89 South Street, Boston, MA 02111, acts as
custodian of the Fund's assets and may appoint one or more subcustodians
provided such subcustodianship is in compliance with the rules and regulations
promulgated under the 1940 Act. The Fund may maintain a portion of its assets in
foreign countries pursuant to such subcustodianships and related foreign
depositories. Utilization of such arrangements and depositories will increase
the Fund's expenses (see the special considerations involving foreign securities
discussed above). All of the Fund's gold, platinum, and silver bullion is held
by Wilmington Trust Company, Rodney Square North, Wilmington, DE 19890. The
custodian also performs certain accounting services for the Fund.
The Fund's transfer and dividend disbursing agent is DST Systems, Inc., Box
419789, Kansas City, MO 64141-6789. The Distributor provides certain shareholder
administration services to the Fund and is reimbursed its cost by the Fund. The
costs of facilities, personnel and other related expenses are allocated among
the Bull & Bear Funds based on the relative number of inquiries and other
factors.
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[Left Side of Back Cover Page]
GOLD
INVESTORS
-----------------------------------------------------
11 Hanover Square
New York, NY 10005
1-800-847-4200 1-212-363-1100
E-Mail: [email protected]
-----------------------------------------------------
Call toll-free for Fund performance,
telephone purchases, exchanges among the
Bull & Bear Funds and to obtain information concerning your account.
1-800-847-4200 1-212-363-1100
-----------------------------------------------------
[Right Side of Back Cover Page]
GOLD
INVESTORS
---------------------------------------------------------
Seeks Long Term Capital
Appreciation in Investments
with the Potential to
Provide a Hedge Against
Inflation and Preserve
the Purchasing Power
of the Dollar
Electronic Funds Transfers
Automatic Investment Program
Retirement Plans: IRA, SEP-IRA,
Qualified Profit Sharing/Money
Purchase, 403(b), Keogh
---------------------------------------------------------
Minimum Initial Investment:
Regular Accounts, $1,000;
IRAs, $500; Automatic
Investment Program, $100
Minimum Subsequent Investments:
$100
---------------------------------------------------------
Prospectus
August 28, 1995
BULL & BEAR
-----------------------------------------
Performance Driven(R)
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-------- COMPARISON OF HEADERS
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-HEADER-
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Statement of Additional Information August 28, 1995
BULL & BEAR GOLD INVESTORS LTD.
11 Hanover Square
New York, NY 10005
1-800-847-4200
1-212-363-1100
This Statement of Additional Information regarding Bull & Bear Gold
Investors Ltd. (the "Fund") is not a prospectus and should be read in
conjunction with the Fund's prospectus dated August 28, 1995. The prospectus is
available to prospective investors without charge upon request to Investor
Service Center, Inc., the Fund's Distributor, by calling 1-800-847-4200.
TABLE OF CONTENTS
THE FUND'S INVESTMENT PROGRAM...........................................2
INVESTMENT RESTRICTIONS.................................................5
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES...............7
THE BULL & BEAR FUNDS..................................................15
OFFICERS AND DIRECTORS.................................................15
THE INVESTMENT MANAGER.................................................17
INVESTMENT MANAGEMENT AGREEMENT........................................17
THE SUBADVISER AND THE SUBADVISORY AGREEMENT..........................18
PERFORMANCE INFORMATION................................................19
DISTRIBUTION OF SHARES.................................................23
DETERMINATION OF NET ASSET VALUE.......................................24
PURCHASE OF SHARES.....................................................25
ALLOCATION OF BROKERAGE................................................25
DISTRIBUTIONS AND TAXES................................................27
REPORTS TO SHAREHOLDERS................................................29
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT......................29
AUDITORS ..............................................................29
FINANCIAL STATEMENTS...................................................29
APPENDIX--DESCRIPTIONS OF BOND RATINGS.................................30
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THE FUND'S INVESTMENT PROGRAM
The following information supplements the information concerning the
investment objectives, policies and limitations of the Fund found in the
Prospectus.
Metal-Indexed Notes and Precious Metals. The Fund may invest in notes,
the principal amount or redemption price of which is indexed to and thus varies
directly with, changes in the market price of gold bullion or other precious
metals ("Metal-Indexed Notes"). It is expected that the value of Metal-Indexed
Notes will be as volatile as the price of the underlying metal.
The Fund will only purchase Metal-Indexed Notes which are rated, or are
issued by issuers that have outstanding debt obligations rated, investment grade
(that is, rated in one of the top four rating categories by any nationally
recognized statistical rating organization) or commercial paper rated in the top
rating category by any nationally recognized statistical rating organization or
of issuers that the Investment Manager has determined to be of similar
creditworthiness. Debt obligations rated in the fourth highest rating category
by a nationally recognized statistical rating organization are considered to
have some speculative characteristics. The Metal-Indexed Notes might be backed
by a bank letter of credit, performance bond, or might be otherwise secured, and
any such additional credit support, which would be held by the Fund's custodian,
would be taken into account in determining the creditworthiness of the
securities. The Fund may purchase unsecured Metal-Indexed Notes if the issuer
thereof met the Fund's credit standards without any such additional credit
support. While the principal amount or redemption price of Metal-Indexed Notes
would vary with the price of the resource, such securities would not be secured
by a pledge of the resource or any other security interest in or claim on the
resource. In the case of Metal-Indexed Notes not backed by a performance bond,
letter of credit or similar credit support, it is expected that such securities
generally would not be secured by any other specific assets.
The Fund anticipates that if Metal-Indexed senior securities were to be
purchased, they would be issued by precious metals or commodity brokers or
dealers, by mining companies, by commercial banks or by other financial
institutions. Such issuers would issue notes to hedge their inventories and
reserves of the resource, or to borrow money at a relatively low cost (which
would include the nominal rate of interest paid on Metal-Indexed Notes,
described below, and the cost of hedging the issuer's precious metals exposure).
The Fund would not purchase a Metal-Indexed Note issued by a broker or dealer if
as a result of such purchase more than 5% of the value of the Fund's total
assets would be invested in the securities of such issuer. The Fund might
purchase Metal-Indexed Notes from brokers or dealers which are not also
securities brokers or dealers. Precious metals or commodity brokers or dealers
are not subject to supervision or regulation by any governmental authority or
self-regulatory organization in connection with the issuance of Metal-Indexed
Notes.
Until recently, there were no Metal-Indexed Notes outstanding and
consequently there is no secondary trading market for such securities. Although
a limited secondary market might develop among institutional traders, there is
no assurance that such a market will develop. No public market is expected to
develop, since the Fund expects that Metal- Indexed Notes will not be registered
under the Securities Act of 1933, and therefore disposition of such securities,
other than to the issuer thereof (as described below) would be dependent upon
the availability of an exemption from such registration.
Metal-Indexed Notes purchased by the Fund will generally have
maturities of one year or less. Such notes, however, will be subject to being
called for redemption by the issuer on relatively short notice. In addition, it
is expected that the Metal-Indexed Notes will be subject to being put by the
Fund to the issuer or to a stand-by broker meeting the credit standards set
forth above, with payments being received by the Fund on no more than 7 days
notice. A stand-by broker may be a securities broker-dealer, in which case the
Fund's investment will be limited by applicable regulations of the SEC. The put
feature of the Metal-Indexed Notes will ensure liquidity even in the absence of
a secondary trading market. The securities will be repurchased upon exercise of
the holder's put at the price determined in the manner described above, less
repurchase fees, if any, which are not expected to exceed 1% of the redemption
or repurchase proceeds. Depending on the terms of the particular Metal-Indexed
Notes, there might be a period of as long as 5 days between the date that the
Fund notifies the issuer of the exercise of the put and determination of the
sale price.
It is expected that any Metal-Indexed Notes which the Fund might
purchase will bear interest or pay preferred dividends at relatively nominal
rates under 2% per annum. The Fund's holdings of such senior securities
therefore would not generate any appreciable current income, and the return from
such senior securities would be primarily from
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any profit on the sale or maturity thereof at a time when the price of the
relevant precious metal is higher than it was when the senior securities were
purchased. The Fund will not invest in Metal-Indexed Notes that are not publicly
traded until it is certain how the Internal Revenue Service would characterize
income derived from such notes.
Foreign Securities. Because the Fund may invest in foreign securities,
investment in the Fund involves investment risks of adverse political and
economic developments that are different from an investment in a fund which
invests only in the securities of U.S. issuers. Such risks may include adverse
movements in the market value of foreign securities during days on which the
Fund's net asset value per share is not determined (see "Determination of Net
Asset Value"), the possible imposition of withholding taxes by foreign
governments on dividend or interest income payable on the securities held in the
portfolio, possible seizure or nationalization of foreign deposits, the possible
establishment of exchange controls, or the adoption of other foreign
governmental restrictions which might adversely affect the payment of dividends
or principal and interest on securities in the portfolio.
The Fund may invest in foreign securities by purchasing American
Depository Receipts ("ADRs"), European Depository Receipts ("EDRs") or other
securities convertible into securities of issuers based in foreign countries.
These securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement.
Borrowing. The Fund may incur overdrafts at its custodian bank from
time to time in connection with redemptions and/or the purchase of portfolio
securities. In lieu of paying interest to the custodian bank, the Fund may
maintain equivalent cash balances prior or subsequent to incurring such
overdrafts. If cash balances exceed such overdrafts, the custodian bank may
credit interest thereon against fees.
Illiquid Assets. The Fund may not purchase or otherwise acquire any
security or invest in a repurchase agreement if, as a result, (a) more than 15%
of the Fund's net assets (taken at current value) would be invested in illiquid
assets, including repurchase agreements not entitling the holder to payment of
principal within seven days, or (b) more than 10% of the Fund's total assets
would be invested in securities that are illiquid by virtue of restrictions on
the sale of such securities to the public without registration under the
Securities Act of 1933 ("1933 Act"). The term "illiquid assets" for this purpose
includes securities that cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the Fund has valued the
securities.
Illiquid restricted securities may be sold by the Fund only in
privately negotiated transactions or in a public offering with respect to which
a registration statement is in effect under the 1933 Act. Such securities
include those that are subject to restrictions contained in the securities laws
of other countries. Where registration is required, the Fund may be obligated to
pay all or part of the registration expenses and a considerable period may
elapse between the time of the decision to sell and the time the Fund may be
permitted to sell a security under an effective registration statement. If,
during such a period, adverse market conditions were to develop, the Fund might
obtain a less favorable price than prevailed when it decided to sell. Securities
that are freely marketable in the country where they are principally traded, but
would not be freely marketable in the U.S., are not included within the meaning
of the term "illiquid assets."
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including private
placements, repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. These instruments are often
restricted securities because the securities are either themselves exempt from
registration or sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional restricted securities markets may
provide both readily ascertainable values for restricted securities and the
ability to liquidate an investment in order to satisfy share redemption orders
on a timely basis. Such markets might include automated systems for the trading,
clearance and settlement of unregistered securities of domestic and foreign
issuers, such as the PORTAL System sponsored by the National Association of
Securities Dealers, Inc. An insufficient number of qualified buyers interested
in purchasing
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Gold SAI 8/24/95, 9am
certain restricted securities held by the Fund, however, could affect adversely
the marketability of such portfolio securities, and the Fund might be unable to
dispose of such securities promptly or at favorable prices.
The Board of Directors of the Fund has delegated the function of making
day-to-day determinations of liquidity to Bull & Bear Advisers, Inc. (the
"Investment Manager") pursuant to guidelines approved by the Board. The
Investment Manager takes into account a number of factors in reaching liquidity
decisions, including (1) the frequency of trades and quotes for the security,
(2) the number of dealers willing to purchase or sell the security and the
number of other potential purchasers, (3) dealer undertakings to make a market
in the security, and 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). The Investment Manager
monitors the liquidity of restricted securities in the Fund's portfolio and
reports periodically on such decisions to the Board of Directors.
Convertible Securities. The Fund may invest in convertible securities
which are bonds, debentures, notes, preferred stocks or other securities that
may be converted into or exchanged for a specified amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive interest
generally paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged.
Convertible securities have unique investment characteristics in that they
generally (i) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (ii) are less subject to fluctuation in
value than the underlying stock since they have fixed income characteristics and
(iii) provide the potential for capital appreciation if the market price of the
underlying common stock increases.
The value of a convertible security is a function of its "investment
value" (determined by its yield comparison with the yields of other securities
of comparable maturity and quality that do not have a conversion privilege) and
its "conversion value" (the security's worth, at market value, if converted into
the underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value and
generally the conversion value decreases as the convertible security approaches
maturity. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. In addition, a
convertible security will sell at a premium over its conversion value determined
by the extent to which investors place value on the right to acquire the
underlying common stock while holding a fixed income security.
The Fund will exchange or convert the convertible securities held in
its portfolio into shares of the underlying common stock when, in the Investment
Manager's opinion, the investment characteristics of the underlying common
shares will assist the Fund in achieving its investment objectives. Otherwise,
the Fund may hold or trade convertible securities. In selecting convertible
securities for the Fund, the Investment Manager evaluates the investment
characteristics of the convertible security as a fixed income instrument and the
investment potential of the underlying equity security for capital appreciation.
In evaluating these matters with respect to a particular convertible security,
the Investment Manager considers numerous factors, including the economic and
political outlook, the value of the security relative to other investment
alternatives, trends in the determinants of the issuer's profits, and the
issuer's management capability and practices.
Preferred Securities. The Fund may invest in preferred stocks of U.S.
and foreign issuers that, in the Investment Manager's judgment, offer potential
for growth of capital and income. Such equity securities involve greater risk of
loss of income than debt securities because issuers are not obligated to pay
dividends. In addition, equity securities are subordinate to debt securities,
and are more subject to changes in economic and industry conditions and in the
financial condition of the issuers of such securities.
Lower Rated Debt Securities. The Fund is authorized to invest up to 35%
of its total assets in debt securities rated below investment grade, although it
has no current intention of investing more than 5% of its total assets in such
securities during the coming year. Ratings of investment grade or better include
the four highest ratings of Standard & Poor's ("S&P") (AAA, AA, A, or BBB) and
Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, or Baa). Moody's
considers securities rated Baa to have speculative characteristics. Changes in
economic conditions or other circumstances are more likely to lead to a weakened
capacity for such securities to make principal and interest
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Gold SAI 8/24/95, 9am
payments than is the case for higher grade debt securities. Debt securities
rated below investment grade are deemed by these rating agencies to be
predominantly speculative with respect to the issuers' capacity to pay interest
and repay principal and may involve major risk exposure to adverse conditions.
Debt securities rated lower than B may include securities that are in default or
face the risk of default with respect to principal or interest.
Ratings of debt securities represent the rating agencies' opinions
regarding their quality, are not a guarantee of quality and may be reduced after
the Fund has acquired the security. The Investment Manager will consider such an
event in determining whether the Fund should continue to hold the security but
is not required to dispose of it. Credit ratings attempt to evaluate the safety
of principal and interest payments and do not evaluate the risks of fluctuations
in market value. Also, rating agencies may fail to make timely changes in credit
ratings in response to subsequent events, so that an issuer's current financial
condition may be better or worse than the rating indicates. See the Appendix to
this Statement of Additional Information for further information regarding S&P's
and Moody's ratings.
Lower rated debt securities generally offer a higher current yield than
that available from higher grade issues. However, lower rated securities involve
higher risks, in that they are especially subject to adverse changes in general
economic conditions and in the industries in which the issuers are engaged, to
adverse changes in the financial condition of the issuers and to price
fluctuations in response to changes in interest rates. During periods of
economic downturn or rising interest rates, highly leveraged issuers may
experience financial stress which could adversely affect their ability to make
payments of interest and principal and increase the possibility of default. In
addition, the market for lower rated securities has expanded rapidly in recent
years, and its growth paralleled a long economic expansion. In the past, the
prices of many lower rated debt securities declined substantially, reflecting an
expectation that many issuers of such securities might experience financial
difficulties. As a result, the yields on lower rated debt securities rose
dramatically, but such higher yields did not reflect the value of the income
stream that holders of such securities expected, but rather the risk that
holders of such securities could lose a substantial portion of their value as a
result of the issuers' financial restructuring or default. There can be no
assurance that such decline in price will not recur. The market for lower rated
debt securities may be thinner and less active than that for higher quality
securities, which may limit the Fund's ability to sell such securities at their
fair value in response to changes in the economy or the financial markets.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may also decrease the value and liquidity of lower rated securities,
especially in a thinly traded market.
INVESTMENT RESTRICTIONS
The Fund has adopted the following fundamental investment restrictions
that may not be changed without the approval of the lesser of (a) 67% or more of
the voting securities of the Fund present at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy or (b) more than 50% of the outstanding voting securities
of the Fund. Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the percentage occurs immediately after, and is caused by, an acquisition
of securities or assets of, or borrowing by, the Fund. The Fund may not:
(1) Borrow money, except to the extent permitted by the Investment Company
Act of 1940 ("1940 Act");
(2) Underwrite the securities of other issuers, except to the extent that
the Fund may be deemed to be an underwriter under the Federal
securities laws in connection with the disposition of the Fund's
authorized investments;
(3) Purchase or sell real estate, provided that the Fund may invest in
securities (excluding limited partnership interests) secured by real
estate or interests therein or issued by companies which invest in real
estate or interests therein;
(4) Purchase or sell commodities (other than precious metals) or commodity
futures contracts, although it may enter into (a) financial, foreign
currency, and precious metals futures contracts and options thereon,
(b) options on foreign currencies and precious metals, and (c) forward
contracts on foreign currencies and precious metals;
(5) Lend its assets, provided however, that the following are not
prohibited: (a) the making of time or demand deposits with banks, (b)
the purchase of debt securities such as bonds, debentures, commercial
paper, repurchase agreements and short term obligations in accordance
with the Fund's investment objectives and policies, and (c) engaging in
securities, precious metals, and other asset loan transactions up to
one-third of the Fund's total assets; or
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(6) Issue senior securities as defined in the 1940 Act. The following will
not be deemed to be senior securities prohibited by this provision: (a)
evidences of indebtedness that the Fund is permitted to incur, (b) the
issuance of additional series or classes of securities that the Board
of Directors may establish, (c) the Fund's futures, options, and
forward transactions, and (d) to the extent consistent with the 1940
Act and applicable rules and policies adopted by the Securities and
Exchange Commission, (i) the establishment or use of a margin account
with a broker for the purpose of effecting securities transactions on
margin and (ii) short sales.
The Fund's Board of Directors has established the following
non-fundamental investment limitations that may be changed by the Board without
shareholder approval:
(i) The Fund's investments in warrants, valued at the lower of cost or
market, may not exceed 5% of the value of its net assets, which amount
may include warrants which are not listed on the New York or American
Stock Exchange provided that such warrants, valued at the lower of cost
or market, do not exceed 2% of the Fund's net assets;
(ii) The Fund may not invest in interests in oil, gas or other mineral
exploration or development programs or leases, although it may invest
in the securities of issuers which invest in or sponsor such programs
or such leases;
(iii) The Fund may not invest more than 5% of its assets in securities of
companies having a record of less than three years continuous
operations (including operations of predecessors);
(iv) The Fund may not purchase or otherwise acquire any security or invest
in a repurchase agreement if, as a result, (a) more than 15% of the
Fund's net assets (taken at current value) would be invested in
illiquid assets, including repurchase agreements not entitling the
holder to payment of principal within seven days, or (b) more than 10%
of the Fund's total assets would be invested in securities that are
illiquid by virtue of restrictions on the sale of such securities to
the public without registration under the 1933 Act;
(v) The Fund may not make short sales of securities, except (a) the Fund
may buy and sell options, futures contracts, options on futures
contracts, and forward contracts, and (b) the Fund may sell "short
against the box" where, by virtue of its ownership of other securities,
the Fund owns or has the right to obtain securities equivalent in kind
and amount to the securities sold and, if the right is conditional, the
sale is made upon the same conditions;
(vi) The Fund may not purchase securities on margin, except that the Fund
may obtain such short term credits as are necessary for the clearance
of transactions, and provided that margin payments and other deposits
made in connection with transactions in options, futures contracts,
forward contracts and other derivative instruments shall not be deemed
to constitute purchasing securities on margin;
(vii) The Fund may not purchase or retain securities of any issuer if to the
knowledge of the Fund, those officers or Directors of the Fund or its
investment manager who each own beneficially more than 1/2 of 1% of the
securities of an issuer, own beneficially more than 5% of the
securities of that issuer;
(viii) The Fund may not purchase the securities of any investment company
except (a) by purchase in the open market where no commission or profit
to a sponsor or dealer results from such purchase, provided that
immediately after such purchase no more than: 10% of the Fund's total
assets are invested in securities issued by investment companies, 5% of
the Fund's total assets are invested in securities issued by any one
investment company, or 3% of the voting securities of any one such
investment company are owned by the Fund, and (b) when such purchase is
part of a plan of merger, consolidation, reorganization or acquisition
of assets;
(ix) The Fund may not invest more than 25% of its total assets in precious
metals;
(x) With respect to options transactions, (a) the Fund will write only
covered options and each such option will remain covered so long as the
Fund is obligated under the option; (b) the Fund will not write call or
put options having aggregate exercise prices greater than 25% of its
net assets; and (c) the Fund may purchase a put or call option,
including any straddles or spreads, only if the value of its premium,
when aggregated with the premiums on all other options held by the
Fund, does not exceed 5% of the Fund's total assets; or
(xi) With respect to financial and foreign currency futures and related
options (including options traded on a commodities exchange), the Fund
will not purchase or sell futures contracts or related options other
than for bona fide hedging purposes if, immediately thereafter, the sum
of the amount of initial margin deposits on the
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Fund's existing futures positions and related options and premiums paid
for related options would exceed 5% of the Fund's total assets.
OPTIONS, FUTURES AND FORWARD CURRENCY CONTRACT STRATEGIES
Regulation of the Use of Options, Futures and Forward Currency Contract
Strategies. As discussed in the Prospectus, the Investment Manager may engage in
certain options strategies to attempt to enhance return or for hedging purposes.
The Investment Manager also may use securities index futures contracts, interest
rate futures contracts, foreign currency futures contracts (collectively,
"futures contracts" or "futures"), options on futures contracts and forward
currency contracts for hedging purposes or in other circumstances permitted by
the Commodity Futures Trading Commission ("CFTC"). Certain special
characteristics of and risks associated with using these instruments are
discussed below. In addition to the non-fundamental investment restrictions
described above in sections (xi) and (xii), use of options, forward currency
contracts and futures by the Fund is subject to the applicable regulations of
the SEC, the several options and futures exchanges upon which such instruments
may be traded, the CFTC and the various state regulatory authorities.
In addition to the products, strategies and risks described below and
in the Prospectus, the Investment Manager may discover additional opportunities
in connection with options, futures and forward currency contracts. These new
opportunities may become available as the Investment Manager develops new
techniques, as regulatory authorities broaden the range of permitted
transactions and as new options, futures and forward currency contracts are
developed. The Investment Manager may utilize these opportunities to the extent
they are consistent with the Fund's investment objective, permitted by the
Fund's investment limitations and applicable regulatory authorities. The Fund's
registration statement will be supplemented to the extent that new products and
strategies involve materially different risks than those described below and in
the Prospectus.
Cover for Options, Futures and Forward Currency Contract Strategies.
The Fund will not use leverage in its options, futures and forward currency
contract strategies. Accordingly, the Fund will comply with guidelines
established by the SEC with respect to coverage of these strategies by either
(1) setting aside cash, U.S. Government or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed amount,
or (2) holding securities, currencies or other options or futures contracts
whose values are expected to offset ("cover") its obligations thereunder.
Securities, currencies or other options or futures contracts used for cover and
securities held in a segregated account cannot be sold or closed out while the
strategy is outstanding, unless they are replaced with similar assets. As a
result, there is a possibility that the use of cover or segregation involving a
large percentage of the Fund's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.
Option Income and Hedging Strategies. The Fund may purchase and write
(sell) both exchange-traded options and options traded on the over-the-counter
("OTC") market. Currently, options on debt securities are primarily traded on
the OTC market. Although many options on currencies are exchange-traded, the
majority of such options currently are traded on the OTC market. Exchange-traded
options in the U.S. are issued by a clearing organization affiliated with the
exchange on which the option is listed, which, in effect, guarantees completion
of every exchange-traded option transaction. In contrast, OTC options are
contracts between the Fund and its contra-party with no clearing organization
guarantee. Thus, when the Fund purchases an OTC option, it relies on the dealer
from which it has purchased the OTC option to make or take delivery of the
securities underlying the option. Failure by the dealer to do so would result in
the loss of any premium paid by the Fund as well as the loss of the expected
benefit of the transaction.
The Fund may purchase call options on securities (both equity and debt)
that the Investment Manager intends to include in the Fund's portfolio in order
to fix the cost of a future purchase. Call options also may be used as a means
of enhancing returns by, for example, participating in an anticipated price
increase of a security. In the event of a decline in the price of the underlying
security, use of this strategy would serve to limit the potential loss to the
Fund to the option premium paid; conversely, if the market price of the
underlying security increases above the exercise price and the Fund either sells
or exercises the option, any profit eventually realized would be reduced by the
premium paid.
The Fund may purchase put options on securities in order to hedge
against a decline in the market value of se curities held in its portfolio or to
attempt to enhance return. The put option enables the Fund to sell the
underlying se curity at the predetermined exercise price; thus, the potential
for loss to the Fund below the exercise price is limited to the option premium
paid. If the market price of the underlying security is higher than the exercise
price of the put option, any profit the Fund realizes on the sale of the
security would be reduced by the premium paid for the put option less any amount
for which the put option may be sold.
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The Fund may on certain occasions wish to hedge against a decline in
the market value of securities held in its portfolio at a time when put options
on those particular securities are not available for purchase. The Fund may
therefore purchase a put option on other carefully selected securities, the
values of which historically have a high degree of positive correlation to the
value of such portfolio securities. If the Investment Manager's judgment is
correct, changes in the value of the put options should generally offset changes
in the value of the portfolio securities being hedged. However, the correlation
between the two values may not be as close in these transactions as in
transactions in which the Fund purchases a put option on a security held in its
portfolio. If the Investment Manager's judgment is not correct, the value of the
securities underlying the put option may decrease less than the value of the
Fund's portfo lio securities and therefore the put option may not provide
complete protection against a decline in the value of the Fund's portfolio
securities below the level sought to be protected by the put option.
The Fund may write covered call options on securities in which it is
authorized to invest for hedging or to increase return in the form of premiums
received from the purchasers of the options. A call option gives the purchaser
of the option the right to buy, and the writer (seller) the obligation to sell,
the underlying security at the exercise price during the option period. The
strategy may be used to provide limited protection against a decrease in the
market price of the security, in an amount equal to the premium received for
writing the call option less any transaction costs. Thus, if the market price of
the underlying security held by the Fund declines, the amount of such decline
will be offset wholly or in part by the amount of the premium received by the
Fund. If, however, there is an increase in the market price of the underlying
security and the option is exercised, the Fund would be obligated to sell the
security at less than its market value. The Fund would give up the ability sell
any portfolio securities used to cover the call option while the call option was
outstanding. In addition, the Fund could lose the ability to participate in an
increase in the value of such securities above the exercise price of the call
option because such an increase would likely be offset by an increase in the
cost of closing out the call option (or could be negated if the buyer chose to
exercise the call option at an exercise price below the current market value).
Portfolio securities used to cover OTC options written also may be considered
illiquid, and therefore subject to the Fund's limitation on investing no more
than 15% of its net assets in illiquid securities, unless the OTC options are
sold to qualified dealers who agree that the Fund may repurchase any OTC options
it writes for a maximum price to be calculated by a formula set forth in the
option agreement. The cover for an OTC option written subject to this procedure
would be considered illiquid only to the extent that the maximum repurchase
price under the formula exceeds the intrinsic value of the option.
The Fund also may write covered put options on securities in which it
is authorized to invest. A put option gives the purchaser of the option the
right to sell, and the writer (seller) the obligation to buy, the underlying
security at the exercise price during the option period. So long as the
obligation of the writer continues, the writer may be assigned an exercise
notice by the broker/dealer through whom such option was sold, requiring it to
make payment of the exercise price against delivery of the underlying security.
The operation of put options in other respects, including their related risks
and rewards, is substantially identical to that of call options. If the put
option is not exercised, the Fund will realize income in the amount of the
premium received. This technique could be used to enhance current return during
periods of market uncertainty. The risk in such a transaction would be that the
market price of the underlying security would decline below the exercise price
less the premiums received, in which case the Fund would expect to suffer a
loss.
The Fund may purchase put and call options and write covered put and
call options on securities indexes in much the same manner as the more
traditional securities options discussed above, except that index options may
serve as a hedge against overall fluctuations in the securities markets (or a
market sector) rather than anticipated increases or decreases in the value of a
particular security. A securities index assigns values to the securities
included in the index and fluctuates with changes in such values. Settlements of
securities index options are effected with cash pay ments and do not involve
delivery of securities. Thus, upon settlement of a securities index option, the
purchaser will realize, and the writer will pay, an amount based on the
difference between the exercise price and the closing price of the index. The
effectiveness of hedging techniques using securities index options will depend
on the extent to which price movements in the securities index selected
correlate with price movements of the securities in which the Fund invests.
The Fund may purchase and write covered straddles on securities
indexes. A long straddle is a combination of a call and a put purchased on the
same security where the exercise price of the put is less than or equal to the
exer cise price on the call. The Fund would enter into a long straddle when the
Investment Manager believes that it is likely that securities prices will be
more volatile during the term of the options than is implied by the option
pricing. A short straddle is a combination of a call and a put written on the
same security where the exercise price on the put is less
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than or equal to the exercise price of the call where the same issue of the
security is considered "cover" for both the put and the call. The Fund would
enter into a short straddle when the Investment Manager believes that it is
unlikely that securities prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Fund will set
aside cash and/or liquid, high-grade debt securities in a segregated account
with its custodian equivalent in value to the amount, if any, by which the put
is "in-the-money," that is, that amount by which the exercise price of the put
exceeds the current market value of the underlying security.
Foreign Currency Options and Related Risks. The Fund may take positions
in options on foreign currencies to hedge against the risk of foreign exchange
rate fluctuations on foreign securities that the Fund holds in its portfolio or
that it intends to purchase. For example, if the Fund enters into a contract to
purchase securities denominated in a foreign currency, it could effectively fix
the maximum U.S. dollar cost of the securities by purchasing call options on
that foreign currency. Similarly, if the Fund held securities denominated in a
foreign currency and anticipated a decline in the value of that currency against
the U.S. dollar, the Fund could hedge against such a decline by purchasing a put
option on the currency involved. The Fund's ability to establish and close out
positions in such options is subject to the maintenance of a liquid secondary
market. Although many options on foreign currencies are exchange-traded, the
majority are traded on the OTC market. The Fund will not purchase or write such
options unless, in the Investment Manager's opinion, the market for them is
sufficiently liquid to ensure that the risks in connection with such options are
not greater than the risks in connection with the underlying currency. In
addition, options on foreign currencies are affected by all of those factors
that influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and may have no relationship to the investment merits of a foreign security.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers and other market resources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
transactions in the interbank market and thus may not reflect relatively smaller
transactions (that is, less than $1 million) where rates may be less favorable.
The interbank market in foreign currencies is a global, around-the-clock market.
To the extent that the U.S. options markets are closed while the markets for the
underlying currencies remain open, significant price and rate movements may take
place in the underlying markets that cannot be reflected in the options markets
until they reopen.
Special Characteristics and Risks of Options Trading. The Fund may
effectively terminate its right or obligation under an option by entering into a
closing transaction. If the Fund wishes to terminate its obligation to purchase
or sell securities or currencies under a put or a call option it has written,
the Fund may purchase a put or a call option of the same series (that is, an
option identical in its terms to the option previously written); this is known
as a closing purchase transaction. Conversely, in order to terminate its right
to purchase or sell specified securities or currencies under a call or put
option it has purchased, the Fund may sell an option of the same series as the
option held; this is known as a closing sale transaction. Closing transactions
essentially permit the Fund to realize profits or limit losses on its options
positions prior to the exercise or expiration of the option.
In considering the use of options to enhance returns or to hedge the
Fund's portfolio, particular note should be taken of the following:
(1) The value of an option position will reflect, among other things,
the current market price of the underlying security, securities index or
currency, the time remaining until expiration, the relationship of the exercise
price to the market price, the historical price volatility of the underlying
security, securities index or currency and general market conditions. For this
reason, the successful use of options depends upon the Investment Manager's
ability to forecast the direction of price fluctuations in the underlying
securities or currency markets or, in the case of securities index options,
fluctuations in the market sector represented by the selected index.
(2) Options normally have expiration dates of up to three years. The
exercise price of the options may be below, equal to or above the current market
value of the underlying security, securities index or currency. Purchased
options that expire unexercised have no value. Unless an option purchased by the
Fund is exercised or unless a closing
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transaction is effected with respect to that position, the Fund will realize a
loss in the amount of the premium paid and any transaction costs.
(3) A position in an exchange-listed option may be closed out only on
an exchange that provides a secondary market for identical options. Most
exchange-listed options relate to stocks. Although the Fund intends to purchase
or write only those exchange-traded options for which there appears to be a
liquid secondary market, there is no assurance that a liquid secondary market
will exist for any particular option at any particular time. Closing
transactions may be effected with respect to options traded in the OTC markets
(currently the primary markets for options on debt securities and a significant
market for foreign currencies) only by negotiating directly with the other party
to the option contract or in a secondary market for the option if such market
exists. Although the Fund will enter into OTC options with dealers that agree to
enter into, and that are expected to be capable of entering into, closing
transactions with the Fund, there can be no assurance that the Fund would be
able to liquidate an OTC option at a favorable price at any time prior to
expiration. In the event of insolvency of the contra-party, the Fund may be
unable to liquidate an OTC option. Accordingly, it may not be possible to effect
closing transactions with respect to certain options, which would result in the
Fund having to exercise those options that it has purchased in order to realize
any profit. With respect to options written by the Fund, the inability to enter
into a closing transaction may result in material losses to the Fund. For
example, because the Fund must maintain a covered position with respect to any
call option it writes on a security, currency or securities index, the Fund may
not sell the underlying securities or currency (or invest any cash securities
used to cover the option) during the period it is obligated under such option.
This requirement may impair the Fund's ability to sell a portfolio security or
make an investment at a time when such a sale or investment might be advanta
geous.
(4) Securities index options are settled exclusively in cash. If the
Fund writes a call option on an index, the Fund will not know in advance the
difference, if any, between the closing value of the index on the exercise date
and the exercise price of the call option itself and thus will not know the
amount of cash payable upon settlement. In addition, a holder of a securities
index option who exercises it before the closing index value for that day is
available, runs the risk that the level of the underlying index may subsequently
change.
(5) The Fund's activities in the options markets may result in a higher
portfolio turnover rate and additional brokerage costs and taxes; however, the
Fund also may save on commissions by using options as a hedge rather than buying
or selling individual securities in anticipation or as a result of market
movements.
Futures and Related Options Strategies. The Fund may engage in futures
strategies for hedging purposes to attempt to reduce the overall investment risk
that would normally be expected to be associated with ownership of the
securities in which it invests. This may involve, among other things, using
futures strategies to manage the effective duration of the Fund. If the
Investment Manager wishes to shorten the effective duration of the Fund, the
Fund may sell a futures contract or a call option thereon, or purchase a put
option on that futures contract. If the Investment Manager wishes to lengthen
the effective duration of the Fund, the Fund may buy a futures contract or a
call option thereon, or sell a put option.
The Fund may use interest rate futures contracts and options thereon to
hedge its portfolio against changes in the general level of interest rates and
in other circumstances permitted by the CFTC. The Fund may purchase an interest
rate futures contract when it intends to purchase debt securities but has not
yet done so. This strategy may minimize the effect of all or part of an increase
in the market price of the debt security that the Fund intends to purchase in
the future. A rise in the price of the debt security prior to its purchase may
either be offset by an increase in the value of the futures contract purchased
by the Fund or avoided by taking delivery of the debt securities under the
futures contract. Conversely, a fall in the market price of the underlying debt
security may result in a corresponding decrease in the value of the futures
position. The Fund may sell an interest rate futures contract in order to
continue to receive the income from a debt security, while endeavoring to avoid
part or all of the decline in market value of that security that would accompany
an increase in interest rates.
The Fund may purchase a call option on an interest rate futures
contract to hedge against a market advance in debt securities that the Fund
plans to acquire at a future date. The purchase of a call option on an interest
rate futures contract is analogous to the purchase of a call option on an
individual debt security, which can be used as a temporary substitute for a
position in the security itself. The Fund also may write covered put options on
interest rate futures contracts as a partial anticipatory hedge and may write
covered call options on interest rate futures contracts as a partial hedge
against a decline in the price of debt securities held in the Fund's portfolio.
The Fund may also
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purchase put options on interest rate futures contracts in order to hedge
against a decline in the value of debt securi ties held in the Fund's portfolio.
The Fund may sell securities index futures contracts in anticipation of
a general market or market sector decline that could adversely affect the market
value of the Fund's portfolio. To the extent that a portion of the Fund's
portfolio correlates with a given index, the sale of futures contracts on that
index could reduce the risks associated with a market decline and thus provide
an alternative to the liquidation of securities positions. For example, if the
Fund correctly anticipates a general market decline and sells securities index
futures to hedge against this risk, the gain in the futures position should
offset some or all of the decline in the value of the portfolio. The Fund may
purchase securi ties index futures contracts if a market or market sector
advance is anticipated. Such a purchase of a futures contract would serve as a
temporary substitute for the purchase of individual securities, which securities
may then be purchased in an orderly fashion. This strategy may minimize the
effect of all or part of an increase in the market price of securities that the
Fund intends to purchase. A rise in the price of the securities should be in
part or wholly offset by gains in the futures position.
As in the case of a purchase of a securities index futures contract,
the Fund may purchase a call option on a securities index futures contract to
hedge against a market advance in securities that the Fund plans to acquire at a
future date. The Fund may write covered put options on securities index futures
as a partial anticipatory hedge and may write covered call options on securities
index futures as a partial hedge against a decline in the price of securities
held in the Fund's portfolio. This is analogous to writing covered call options
on securities. The Fund also may purchase put options on securities index
futures contracts. The purchase of put options on securities index futures
contracts is analogous to the purchase of protective put options on individual
securities where a level of protection is sought below which no additional
economic loss would be incurred by the Fund.
The Fund may sell foreign currency futures contracts to hedge against
possible variations in the exchange rate of foreign currency in relation to the
U.S. dollar. In addition, the Fund may sell foreign currency futures contracts
when the Investment Manager anticipates a general weakening of the foreign
currency exchange rate that could adversely affect the market value of the
Fund's foreign securities holdings or interest payments to be received in that
foreign currency. In this case, the sale of futures contracts on the underlying
currency may reduce the risk to the Fund of a reduction in market value caused
by foreign currency exchange rate variations and, by so doing, provide an
alternative to the liquidation of securities positions and resulting transaction
costs. When the Investment Manager anticipates a significant foreign exchange
rate increase while intending to invest in a security denominated in that
currency, the Fund may purchase a foreign currency futures contract to hedge
against the increased rates pending completion of the anticipated transaction.
Such a purchase would serve as a temporary measure to protect the Fund against
any rise in the foreign currency exchange rate that may add additional costs to
acquiring the foreign security position. The Fund may also purchase call or put
options on foreign currency futures contracts to obtain a fixed foreign currency
exchange rate at limited risk. The Fund may purchase a call option on a foreign
currency futures contract to hedge against a rise in the foreign currency
exchange rate while intending to invest in a security denominated in that
currency. The Fund may purchase put options on foreign currency futures
contracts as a hedge against a decline in the foreign currency exchange rates or
the value of its foreign portfolio securities. The Fund may write a covered put
option on a foreign currency futures contract as a partial anticipatory hedge
and may write a covered call option on a foreign currency futures contract as a
partial hedge against the effects of declining foreign currency exchange rates
on the value of foreign securities.
The Fund may also write put options on interest rate, securities index
or foreign currency futures contracts while, at the same time, purchasing call
options on the same interest rate, securities index or foreign currency futures
contract in order to synthetically create an interest rate, securities index or
foreign currency futures contract. The options will have the same strike prices
and expiration dates. The Fund will only engage in this strategy when it is more
advantageous to the Fund to do so as compared to purchasing the futures
contract.
The Fund may also purchase and write covered straddles on interest rate
or securities index futures contracts. A long straddle is a combination of a
call and a put purchased on the same security at the same exercise price. The
Fund would enter into a long straddle when it believes that it is likely that
securities prices will be more volatile during the term of the options than is
implied by the option pricing. A short straddle is a combination of a call and
put written on the same futures contract at the same exercise price where the
same security or futures contract is considered "cover" for both the put and the
call. The Fund would enter into a short straddle when it believes that it is
unlikely that securities prices will be as volatile during the term of the
options as is implied by the option pricing. In such case, the Fund will set
aside cash and/or liquid, high grade debt securities in a segregated account
with its custodian equal in
11
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Gold SAI 8/24/95, 9am
value to the amount, if any, by which the put is "in-the-money," that is the
amount by which the exercise price of the put exceeds the current market value
of the underlying security.
Special Characteristics and Risks of Futures and Related Options
Trading. No price is paid upon entering into a futures contract. Instead, upon
entering into a futures contract, the Fund is required to deposit with its
custodian in a segregated account in the name of the futures broker through whom
the transaction is effected an amount of cash, U.S. Government securities or
other liquid, high-grade debt instruments generally equal to 10% or less of the
contract value. This amount is known as "initial margin." When writing a call or
a put option on a futures contract, margin also must be deposited in accordance
with applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not involve borrowing to finance the
futures transactions. Rather, initial margin on futures contracts is in the
nature of a performance bond or good-faith deposit on the contract that is
returned to the Fund upon termination of the transaction, assuming all
obligations have been satisfied. Under certain circum stances, such as periods
of high volatility, the Fund may be required by an exchange to increase the
level of its initial margin payment. Additionally, initial margin requirements
may be increased generally in the future by regulatory action. Subsequent
payments, called "variation margin," to and from the broker, are made on a daily
basis as the value of the futures or options position varies, a process known as
"marking to the market." For example, when the Fund purchases a contract and the
value of the contract rises, the Fund receives from the broker a variation
margin payment equal to that increase in value. Conversely, if the value of the
futures position declines, the Fund is required to make a variation margin
payment to the broker equal to the decline in value. Variation margin does not
involve borrowing to finance the futures transaction but rather represents a
daily settlement of the Fund's obligations to or from a clearing organization.
Buyers and sellers of futures positions and options thereon can enter
into offsetting closing transactions, similar to closing transactions on options
on securities, by selling or purchasing an offsetting contract or option.
Futures contracts or options thereon may be closed only on an exchange or board
of trade providing a secondary market for such futures contracts or options.
Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a futures contract or related option may
vary either up or down from the previous day's settlement price. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit. The daily limit governs only price movements
during a particular trading day and therefore does not limit potential losses,
because prices could move to the daily limit for several consecutive trading
days with little or no trading and thereby prevent prompt liquidation of
unfavorable positions. In such event, it may not be possible for the Fund to
close a position and, in the event of adverse price movements, the Fund would
have to make daily cash payments of variation margin (except in the case of
purchased options). However, if futures contracts have been used to hedge
portfolio se curities, such securities will not be sold until the contracts can
be terminated. In such circumstances, an increase in the price of the
securities, if any, may partially or completely offset losses on the futures
contract. However, there is no guarantee that the price of the securities will,
in fact, correlate with the price movements in the contracts and thus provide an
offset to losses on the contracts.
In considering the Fund's use of futures contracts and related options,
particular note should be taken of the following:
(1) Successful use by the Fund of futures contracts and related options
will depend upon the Investment Manager's ability to predict movements in the
direction of the overall securities, currencies and interest rate markets, which
requires different skills and techniques than predicting changes in the prices
of individual securities. Moreover, futures contracts relate not only to the
current price level of the underlying instrument or currency but also to the
anticipated price levels at some point in the future. There is, in addition, the
risk that the movements in the price of the futures contract will not correlate
with the movements in the prices of the securities or currencies being hedged.
For example, if the price of the securities index futures contract moves less
than the price of the securities that are the subject of the hedge, the hedge
will not be fully effective, but if the price of the securities being hedged has
moved in an unfavorable direction, the Fund would be in a better position than
if it had not hedged at all. If the price of the securities being hedged has
moved in a favorable direction, the advantage may be partially offset by losses
in the futures position. In addition, if the Fund has insufficient cash, it may
have to sell assets from its portfolio to meet daily variation margin
requirements. Any such sale of assets may or may not be made at prices that
reflect a rising market. Consequently, the Fund may need to sell assets at a
time when such sales are disadvantageous to the Fund. If the price of the
futures contract moves more than the price of the underlying securities, the
Fund will experience either a loss or a gain on the futures contract that may or
may not be completely offset by movements in the price of the securities that
are the subject of the hedge.
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Gold SAI 8/24/95, 9am
(2) In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between price movements in the futures
position and the securities or currencies being hedged, movements in the prices
of futures contracts may not correlate perfectly with movements in the prices of
the hedged securities or currencies due to price distortions in the futures
market. There may be several reasons unrelated to the value of the underlying
securi ties or currencies that cause this situation to occur. First, as noted
above, all participants in the futures market are subject to initial and
variation margin requirements. If, to avoid meeting additional margin deposit
requirements or for other reasons, investors choose to close a significant
number of futures contracts through offsetting transactions, distortions in the
normal price relationship between the securities or currencies and the futures
markets may occur. Second, because the margin deposit requirements in the
futures market are less onerous than margin requirements in the securities
market, there may be increased participation by speculators in the futures
market; such speculative activity in the futures market also may cause temporary
price distortions. As a result, a correct forecast of general market trends may
not result in successful hedging through the use of futures contracts over the
short term. In addi tion, activities of large traders in both the futures and
securities markets involving arbitrage and other investment strategies may
result in temporary price distortions.
(3) Positions in futures contracts may be closed out only on an
exchange or board of trade that provides a secondary market for such futures
contracts. Although the Fund intends to purchase and sell futures only on
exchanges or boards of trade where there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange or
board of trade will exist for any particular contract at any particular time. In
such event, it may not be possible to close a futures positions, and in the
event of adverse price movements, the Fund would continue to be required to make
variation margin payments.
(4) Like options on securities and currencies, options on futures
contracts have limited life. The ability to establish and close out options on
futures will be subject to the development and maintenance of liquid secondary
markets on the relevant exchanges or boards of trade. There can be no certainty
that such markets for all options on futures contracts will develop.
(5) Purchasers of options on futures contracts pay a premium at the
time of purchase. This amount and the transaction costs are all that is at risk.
Sellers of options on futures contracts, however, must post initial margin and
are subject to additional margin calls that could be substantial in the event of
adverse price movements. In addition, although the maximum amount at risk when
the Fund purchases an option is the premium paid for the option and the
transaction costs, there may be circumstances when the purchase of an option on
a futures contract would result in a loss to the Fund when the use of a futures
contract would not, such as when there is no movement in the level of the
underlying securities index value or the securities or currencies being hedged.
(6) As is the case with options, the Fund's activities in the futures
markets may result in a higher portfolio turnover rate and additional
transaction costs in the form of added brokerage commissions and taxes; however,
the Fund also may save on commissions by using futures contracts or options
thereon as a hedge rather than buying or selling individual securities or
currencies in anticipation or as a result of market movements.
Special Risks Related to Foreign Currency Futures Contracts and Related
Options. Buyers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the use of futures generally. In addition, there
are risks associated with foreign currency futures contracts and their use as a
hedging device similar to those associated with options on foreign currencies
described above.
Options on foreign currency futures contracts may involve certain
additional risks. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. Compared to
the purchase or sale of foreign currency futures contracts, the purchase of call
or put options thereon involves less potential risk to the Fund because the
maximum amount at risk is the premium paid for the option (plus transaction
costs). However, there may be circumstances when the purchase of a call or put
option on a foreign currency futures contract would result in a loss, such as
when there is no movement in the price of the underlying currency or futures
contract, when the purchase of the underlying futures contract would not result
in such a loss.
Forward Currency Contracts. The Fund may use forward currency
contracts to protect against uncertainty in the level of future foreign currency
exchange rates.
The Fund may enter into forward currency contracts with respect to
specific transactions. For example, when the Fund enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or the Fund
anticipates the receipt in a foreign currency of dividend or interest payments
on a security that it holds or anticipates
13
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purchasing the Fund may desire to "lock in" the U.S. dollar price of the
security or the U.S. dollar equivalent of such payment, as the case may be, by
entering into a forward contract for the purchase or sale, for a fixed amount of
U.S. dollars or foreign currency, of the amount of foreign currency involved in
the underlying transaction. The Fund will thereby be able to protect itself
against a possible loss resulting from an adverse change in the relationship
between the currency exchange rates during the period between the date on which
the security is purchased or sold, or on which the payment is declared, and the
date on which such payments are made or received.
The Fund also may hedge by using forward currency contracts in
connection with portfolio positions to lock in the U.S. dollar value of those
positions, to increase the Fund's exposure to foreign currencies that the
Investment Manager believes may rise in value relative to the U.S. dollar or to
shift the Fund's exposure to foreign currency fluctuations from one country to
another. For example, when the Investment Manager believes that the currency of
a particular foreign country may suffer a substantial decline relative to the
U.S. dollar or another currency, it may enter into a forward contract to sell
the amount of the former foreign currency approximating the value of some or all
of the Fund's portfolio securities denominated in such foreign currency. This
investment practice generally is referred to as "cross-hedging" when another
foreign currency is used. Certain of these strategies may result in income
subject to the "Short-Short Limitation". See "Distributions and Taxes" on page
27.
The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for
the Fund to purchase additional foreign currency on the spot (that is, cash)
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio security if
the market value of the security exceeds the amount of foreign currency the Fund
is obligated to deliver. The projection of short term currency market movements
is extremely difficult and the successful execution of a short term hedging
strategy is highly uncertain. Forward contracts involve the risk that antici
pated currency movements will not be accurately predicted, causing the Fund to
sustain losses on these contracts and transaction costs. Under normal
circumstances, consideration of the prospects for currency parities will be
incorporated into the longer term decisions made with regard to overall
investment strategies. However, the Investment Manager believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of the Fund will be served.
At or before the maturity date of a forward contract requiring the Fund
to sell a currency, the Fund may either sell a portfolio security and use the
sale proceeds to make delivery of the currency or retain the security and offset
its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
same amount of the currency that it is obligated to deliver. Similarly, the Fund
may close out a forward contract requiring it to purchase a specified currency
by entering into a second contract entitling it to sell the same amount of the
same currency on the maturity date of the first contract. The Fund would realize
a gain or loss as a result of entering into such an offsetting forward currency
contract under either circumstance to the extent the exchange rate or rates
between the currencies involved moved between the execution dates of the first
contract and the offsetting contract.
The cost to the Fund of engaging in forward currency contracts varies
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved. The use of forward currency contracts does not eliminate fluctuations
in the prices of the underlying securities the Fund owns or intends to acquire,
but it does fix a rate of exchange in advance. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund may convert foreign currency from time to time, and
investors should be aware of the costs of currency conversion. Although foreign
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to the
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
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Gold SAI 8/24/95, 9am
THE BULL & BEAR FUNDS
The Bull & Bear Funds are:
Bull & Bear Dollar Reserves
Bull & Bear U.S. Government Securities Fund
Bull & Bear Municipal Income Fund
Bull & Bear Global Income Fund
Bull & Bear Quality Growth Fund
Bull & Bear U.S. and Overseas Fund
Bull & Bear Special Equities Fund
Bull & Bear Gold Investors
OFFICERS AND DIRECTORS
The officers and Directors of the Fund, their respective offices and
principal occupations during the last five years are set forth below. Unless
otherwise noted, the address of each is 11 Hanover Square, New York, NY 10005.
BASSETT S. WINMILL* -- Chairman of the Board. He is Chairman of the Board of the
other four investment companies in the Bull & Bear Funds Complex (the "Bull &
Bear Funds Complex") and of the parent of the Investment Manager, Bull & Bear
Group, Inc. ("Group"). He was born February 10, 1930. He is a member of the New
York Society of Security Analysts, the Association for Investment Management and
Research and the International Society of Financial Analysts. He is the father
of Mark C. Winmill and Thomas B. Winmill.
ROBERT D. ANDERSON* -- Vice Chairman and Director. He is Vice Chairman and a
Director of the Bull & Bear Funds Complex and of the Investment Manager and its
affiliates. He was born December 7, 1929. He is a member of the Board of
Governors of the Mutual Fund Education Alliance, and of its predecessor, the
No-Load Mutual Fund Association. He has also been a member of the District #12,
District Business Conduct and Investment Companies Committees of the NASD.
RUSSELL E. BURKE III -- Director. 36 East 72nd Street, New York, NY 10021. He
was born August 23, 1946. He is President of Russell E. Burke III, Inc. Fine
Art, New York, New York. From 1988 to 1991, he was President of Altman Burke
Fine Arts, Inc. From 1983 to 1988, he was Senior Vice President of Kennedy
Galleries. He is also a Director of certain of the other Bull & Bear Funds.
BRUCE B. HUBER, CLU -- Director. 298 Broad Street, Red Bank, NJ 07701. He is
President of Huber o Hogan o Knotts Consulting, Inc. financial consultants
specializing in executive benefits, estate preservation, and asset management.
From 1990 to 1994, he was President of Huber Hogan Associates. He was born
February 7, 1930. He is also a Director of the Bull & Bear Funds Complex.
JAMES E. HUNT -- Director. One Dag Hammarskjold Plaza, New York, NY 10017. He is
a principal of Kenny, Kindler, Hunt & Howe, Inc., executive recruiting
consultants. He was born December 14, 1930. From 1976 until 1983 he was Vice
President of Russell Reynolds Associates, Inc., also executive recruiting
consultants. He is also a Director of the Bull & Bear Funds Complex.
FREDERICK A. PARKER, JR. -- Director. 219 East 69th Street, New York, NY 10021.
He is President and Chief Executive Officer of American Pure Water Corporation,
a manufacturer of water purifying equipment. He was born November 14, 1926. He
is also a Director of the Bull & Bear Funds Complex.
JOHN B. RUSSELL -- Director. 334 Carolina Meadows Villa, Chapel Hill, NC 27514.
He was Executive Vice President and a Director of Dan River, Inc., a diversified
textile company, from 1969 until he retired in 1981. He was born February 9,
1923. He is a Director of Wheelock, Inc., a manufacturer of signal products, and
a consultant for the National Executive Service Corps in the health care
industry. He is also a Director of the Bull & Bear Funds Complex.
MARK C. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
Chief Financial Officer. He is Co- President, Co-Chief Executive Officer, and
Chief Financial Officer of the Bull & Bear Funds Complex and of Group and
certain of its affiliates, Chairman of the Investment Manager and Investor
Service Center, Inc. (the "Distributor"), and President of Bull & Bear
Securities, Inc. ("BBSI"). He was born November 26, 1957. He received his M.B.A.
from the Fuqua School of Business at Duke University in 1987. From 1983 to 1985
he was Assistant Vice President and Director of Marketing of E.P. Wilbur & Co.,
Inc., a real estate development and syndication firm and Vice President of
E.P.W. Securities, its broker/dealer subsidiary. He is a son of Bassett S.
Winmill and brother of Thomas B. Winmill. He is also a Director of two of the
other investment companies in the Bull & Bear Funds Complex.
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Gold SAI 8/24/95, 9am
THOMAS B. WINMILL* -- Director, Co-President, Co-Chief Executive Officer, and
General Counsel. He is Co-President, Co-Chief Executive Officer, and General
Counsel of the Bull & Bear Funds Complex and of Group and certain of its
affiliates, President of the Investment Manager and the Distributor, and
Chairman of BBSI. He was born June 25, 1959. He was associated with the law firm
of Harris, Mericle & Orr from 1984 to 1987. He is a member of the New York State
Bar. He is a son of Bassett S. Winmill and brother of Mark C. Winmill. He is
also a Director of certain of the other Bull & Bear Funds.
STEVEN A. LANDIS -- Senior Vice President. He is Senior Vice President of the
Bull & Bear Funds Complex, the Investment Manager and certain of its affiliates.
He was born March 1, 1955. From 1993 to 1995, he was Associate Director --
Proprietary Trading at Barclays De Zoete Wedd Securities Inc., from 1992 to 1993
he was Director, Bond Arbitrage at WG Trading Company, and from 1989 to 1992 he
was Vice President of Wilkinson Boyd Capital Markets.
BRETT B. SNEED, CFA -- Senior Vice President. He is Senior Vice President of the
Bull & Bear Funds Complex, the Investment Manager and certain of its affiliates.
He was born June 11, 1941. He is a Chartered Financial Analyst, a member of the
Association for Investment Management and Research, and a member of the New York
Society of Security Analysts. From 1986 to 1988, he managed private accounts,
from 1981 to 1986, he was Vice President of Morgan Stanley Asset Management,
Inc. and prior thereto was a portfolio manager and member of the Finance and
Investment Committees of American International Group, Inc., an insurance
holding company.
WILLIAM K. DEAN, CPA -- Treasurer and Chief Accounting Officer. He is Treasurer
and Chief Accounting Officer of the Bull & Bear Funds Complex, the Investment
Manager and its affiliates. He was born September 5, 1955. From 1984 to 1995 he
held various positions with The Dreyfus Corporation, a mutual fund company. He
is a member of the American Institute of Certified Public Accountants and the
New York State Society of Certified Public Accountants.
WILLIAM J. MAYNARD -- Vice President and Secretary. He is Vice President and
Secretary of the Bull & Bear Funds Complex, the Investment Manager and its
affiliates. He was born September 13, 1964. From 1991 to 1994 he was associated
with the law firm of Skadden, Arps, Slate, Meagher & Flom. He is a member of the
New York State Bar.
* Bassett S. Winmill, Robert D. Anderson, Mark C. Winmill and Thomas B. Winmill
are "interested persons" of the Fund as defined by the 1940 Act, because of
their positions with the Investment Manager.
Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total Compensation
Pension or Retirement Estimated Annual From Registrant and
Aggregate Compensa- Benefits Accrued as Part Benefits Upon Fund Complex Paid to
Name of Person, Position tion From Registrant of Fund Expenses Retirement Directors
Bassett S. Winmill None None None None
Chairman
Robert D. Anderson None None None None
Vice Chairman
Russell E. Burke III $3,000 None None $5,500 from
Director 3 Funds
Bruce B. Huber $3,000 None None $10,000 from
Director 5 Funds
James E. Hunt $3,000 None None $10,000 from
Director 5 Funds
Frederick A. Parker $3,000 None None $10,500 from
Director 6 Funds
John B. Russell $3,000 None None $10,000 from
Director 5 Funds
Mark C. Winmill None None None None
Director
</TABLE>
16
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Gold SAI 8/24/95, 9am
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Thomas B. Winmill None None None None
Director, Co-President
Steven A. Landis None None None None
Senior Vice President
Brett B. Sneed None None None None
Senior Vice President
</TABLE>
Information in the above table is based on fees paid during the year
ended June 30, 1995. Directors who are not "interested persons" of the Fund may
elect to defer receipt of fees for serving as a Director of the Fund. During the
year ended June 30, 1995, Messrs. Huber and Hunt deferred such fees pursuant to
this arrangement.
No officer, Director or employee of the Fund's Investment Manager
receives any compensation from the Fund for acting as an officer, Director or
employee of the Fund. As of July 31, 1995, officers and Directors of the Fund
owned less than 1% of the outstanding shares of the Fund. As of July 31, 1995,
the following owners of record owned more than 5% of the outstanding shares of
the Fund: Charles Schwab & Co. Inc., 101 Montgomery St., San Francisco, CA
94104, 5.39%.
THE INVESTMENT MANAGER
Bull & Bear Advisers, Inc. (the "Investment Manager") acts as general
manager of the Fund, being responsible for the various functions assumed by it,
including the regular furnishing of advice with respect to portfolio
transactions. The other principal subsidiaries of Group include Investor Service
Center, Inc., the Fund's Distributor and a registered broker/dealer, and BBSI, a
registered broker/dealer providing discount brokerage services.
Group is a publicly owned company whose securities are listed on the
National Association of Securities Dealers Automated Quotations system
("Nasdaq") and traded in the OTC market. Bassett S. Winmill may be deemed a
controlling person of Group on the basis of his ownership of 100% of Group's
voting stock and, therefore, of the Investment Manager. The Bull & Bear Funds,
each of which is managed by the Investment Manager, had net assets in excess of
$240,000,000 as of August 2, 1995.
INVESTMENT MANAGEMENT AGREEMENT
Under the Investment Management Agreement, the Fund assumes and pays
all expenses required for the conduct of its business including, but not limited
to, custodian and transfer agency fees, accounting and legal fees, investment
management fees, fees of disinterested Directors, association fees, printing,
salaries of certain administrative and clerical personnel, necessary office
space, all expenses relating to the registration or qualification of the shares
of the Fund under Blue Sky laws and reasonable fees and expenses of counsel in
connection with such registration and qualification, miscellaneous expenses and
such non-recurring expenses as may arise, including actions, suits or
proceedings affecting the Fund and the legal obligation which the Fund may have
to indemnify its officers and Directors with respect thereto.
The Investment Manager has agreed in the Investment Management
Agreement that it will waive all or part of its fee or reimburse the Fund
monthly if and to the extent that the Fund's aggregate operating expenses exceed
the most restrictive limit imposed by any state in which shares of the Fund are
qualified for sale. Currently, the most restrictive such limit applicable to the
Fund is 2.5% of the first $30 million of the Fund's average daily net assets,
2.0% of the next $70 million of its average daily net assets and 1.5% of its
average daily net assets in excess of $100 million. Certain expenses, such as
brokerage commissions, taxes, interest, distribution fees, certain expenses
attributable to investing outside the United States and extraordinary items, are
excluded from this limitation. For the fiscal years ended June 30, 1993, 1994,
17
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Gold SAI 8/24/95, 9am
and 1995 the Fund paid to the Investment Manager aggregate investment management
fees of $244,629, $405,964 and $328,140, respectively. No reimbursement was made
to the Fund by the Investment Manager for the fiscal years ended June 30, 1993,
1994 and 1995 pursuant to the expense guaranty described above.
If requested by the Fund's Board of Directors, the Investment Manager
may provide other services to the Fund such as, without limitation, the
functions of billing, accounting, certain shareholder communications and
services, administering state and Federal registrations, filings and controls
and other administrative services. Any services so requested and performed will
be for the account of the Fund and the costs of the Investment Manager in
rendering such services shall be reimbursed by the Fund, subject to examination
by those directors of the Fund who are not interested persons of the Investment
Manager or any affiliate thereof. The cost of such services billed to the Fund
by the Investment Manager for the fiscal years ended June 30, 1993, 1994 and
1995 was $10,090, $19,383 and $12,514, respectively.
The Investment Management Agreement provides that the Investment
Manager will not be liable to the Fund or any shareholder of the Fund for any
error of judgment or mistake of law or for any loss suffered by the Fund in
connection with the matters to which the agreement relates. Nothing contained in
the Investment Management Agreement, however, shall be construed to protect the
Investment Manager against any liability to the Fund by reason of willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
by reason of its reckless disregard of obligations and duties under the
Investment Management Agreement.
The Investment Management Agreement will continue in effect, unless
sooner terminated as described below, for successive periods of twelve months,
provided such continuance is specifically approved at least annually by (a) the
Board of Directors of the Fund or by the holders of a majority of the
outstanding voting securities of the Fund as defined in the 1940 Act and (b) a
vote of a majority of the Directors of the Fund who are not parties to the
Investment Management Agreement, or interested persons of any such party. The
Investment Management Agreement may be terminated without penalty at any time
either by a vote of the Board of Directors of the Fund or the holders of a
majority of the outstanding voting securities of the Fund, as defined in the
1940 Act, on 60 days' written notice to the Investment Manager, or by the
Investment Manager on 60 days' written notice to the Fund, and shall immediately
terminate in the event of its assignment.
Group has granted the Fund a non-exclusive license to use the service
marks "Bull & Bear," "Bull & Bear Performance Driven," and "Performance Driven"
under certain terms and conditions on a royalty free basis. Such license will be
withdrawn in the event the investment manager of the Fund shall not be the
Investment Manager or another subsidiary of Group. If the license is terminated,
the Fund will eliminate all reference to "Bull & Bear" in its corporate name and
cease to use any of such service marks or any similar service marks in its
business.
THE SUBADVISER AND THE SUBADVISORY AGREEMENT
The Investment Manager has entered into a subadvisory agreement with
Lion Resource Management Limited (the "Subadviser") for certain subadvisory
services. The Subadviser advises and consults with the Investment Manager
regarding the selection, clearing and safekeeping of the Fund's portfolio
investments and assists in pricing and generally monitoring such investments.
The Subadviser also provides the Investment Manager with advice as to allocating
the Fund's portfolio assets among various countries, including the United
States, and among equities, bullion, and other types of investments, including
recommendations of specific investments. The Investment Manager, not the Fund,
pays the Subadviser monthly a fee based upon the Fund's performance and its
total net assets. The Subadviser, whose principal business address is 7 - 8
Kendrick Mews, London, U.K. SW7 3HG, is a wholly-owned subsidiary of The Lion
Mining Group, a mining finance and natural resource investment manager.
In consideration of the Subadviser's services, the Investment Manager,
and not the Fund, pays to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are defined as the actual amounts received by the
Investment Manager as compensation less reimbursements, if any, pursuant to the
guaranty of the Investment Management Agreement and waivers of such compensation
by the Investment Manager. The amount of the percentage is determined by the
grid and accompanying definitions set forth as follows:
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<TABLE>
<CAPTION>
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 basis points Within 50 basis points More than 50 basis
better than BTR of BTR points below BTR
<S> <C> <C> <C>
=$50,000,000 30% 17.5% 5%
$50,000,000 and 40% 30% 20%
=$150,000,000 45% 35% 25%
$250,000,000 50% 40% 30%
</TABLE>
The Subadvisory Agreement is not assignable and automatically
terminates in the event of its assignment, or in the event of the termination of
the Investment Management Agreement. The Subadvisory Agreement may also be
terminated without penalty on 60 days' written notice at the option of either
party thereto or by the Fund, by the Board of Directors or by a vote of Fund
shareholders. The Subadvisory Agreement provides that the Subadviser shall not
be liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund in connection with any investment policy or the
purchase, sale or retention of any security on the recommendation of the
Subadviser. Nothing contained in the Subadvisory Agreement, however, shall be
construed to protect the Subadviser against liability to the Fund by reason of
willful misfeasance, bad faith, or gross negligence in the performance of its
duties or by reason of its reckless disregard of obligations and duties under
the Subadvisory Agreement.
PERFORMANCE INFORMATION
The Fund's performance data quoted in advertising and other promotional
materials represents past performance and is not intended to indicate future
performance. The investment return and principal value of an investment in the
Fund will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than original cost. Performance is a function of the type and
quality of portfolio securities and will reflect general market conditions and
operating expenses. See "The Fund's Investment Program" in the Prospectus. This
Statement of Additional Information may be in use for a full year and
performance results for periods subsequent to June 30, 1995 may vary
substantially from those shown below.
The Fund computes its average annual total return by determining the
average annual compounded rate of return during specified periods that compares
the initial amount invested to the ending redeemable value of such investment.
This is done by dividing the ending redeemable value of a hypothetical $1,000
initial payment by $1,000 and raising the quotient to a power equal to one
divided by the number of years (or fractional portion thereof) covered by the
computation and subtracting one from the result. This calculation can be
expressed as follows:
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Gold SAI 8/24/95, 9am
T~~=~~ (~ERV OVER P~) SUP {1 OVER n}~~-~~1
Where: T = average annual total return.
ERV = ending redeemable value at the end of the
period covered by the computation of a
hypothetical $1,000 payment made at the beginning
of the period which assumes
all dividends and other distributions by the
Fund are reinvested on the reinvestment
date during the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms
of years.
The Fund's average annual total return for the one, five, and ten year
periods ended June 30, 1995 was (8.01%), 1.85% and 4.76%, respectively.
The Fund's "total return" or "cumulative total return" or "cumulative
growth" is based on the increase or (decrease) in a hypothetical $1,000 invested
in the Fund at the beginning of each of the specified periods, assuming the
reinvestment of any dividends and distributions paid by the Fund during such
periods. The return is calculated by subtracting the amount of the Fund's net
asset value per share at the beginning of a stated period from the net asset
value per share at the end of the period (after giving effect to the
reinvestment of all distributions during the period), and dividing the result by
the net asset value per share at the beginning of the period. Such total return
information (together with average annual total return information) is expressed
below as a percentage rate and as the value of a hypothetical $1,000 and $10,000
initial investment (made on July 1 of the years shown) at the end of the periods
through June 30, 1995.
Ending Value of a Ending Value
Start of Periods Average Total $1,000 of a $10,000
Ending 6/30/95 Annual Return Investment Investment
Total Return
July 1, 1994 -8.01% -8.01% $919.87 $9,198.75
July 1, 1993 -7.47% -14.38% $856.22 $8,562.2
July 1, 1992 7.76% 25.12% $1,251.18 $12,511.84
July 1, 1991 3.98% 16.90% $1,168.99 $11,689.90
July 1, 1990 1.85% 9.62% $1,096.17 $10,961.71
July 1, 1989 1.80% 11.27% $1,112.71 $11,127.15
July 1, 1988 0.55% 3.95% $1,039.49 $10,394.89
July 1, 1987 -1.85% -13.90% $860.96 $8,609.60
July 1, 1986 5.53% 62.28% $1,622.80 $16,228.02
July 1, 1985 4.76% 59.24% $1,592.35 $15,923.54
The Fund may provide the above described standardized total return for
a period which ends as of not earlier than the most recent calendar quarter end
and which begins either twelve months before or at the time of commencement of
the Fund's operations. In addition, the Fund may provide nonstandardized total
return results for differing periods, such as for the most recent three months
or the year to date. For example, the Fund's nonstandardized total return for
the three year period ended September 30, 1994 was 16.45%. Such nonstandardized
total return is computed as otherwise described above except that no
annualization is made.
The Investment Manager and certain of its affiliates serve as
investment managers to the Fund and the other Bull & Bear Funds, which Funds
have individual and institutional investors throughout the United States and in
37 foreign countries.
The Fund may also provide performance information based on an initial
investment in the Fund and/or cumulative investments of varying amounts over
periods of time. Some or all of this information may be provided either
graphically or in tabular form.
Source Material
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Gold SAI 8/24/95, 9am
From time to time, in marketing pieces and other Fund literature, the
Fund's performance may be compared to the performance of broad groups of
comparable mutual funds or unmanaged indexes of comparable securities.
Evaluations of Fund performance made by independent sources may also be used in
advertisements concerning the Fund. Sources for Fund performance information may
include, but are not limited to, the following:
Bank Rate Monitor, a weekly publication which reports yields on various bank
money market accounts and certificates of deposit.
Barron's, a Dow Jones and Company, Inc. business and financial weekly that
periodically reviews mutual fund performance data.
Bloomberg, a computerized market data source and portfolio analysis system.
Bond Buyer Municipal Index (20 year) Bond. An index of municipal bonds provided
by a national periodical reporting on municipal securities.
Business Week, a national business weekly that periodically reports the
performance rankings and ratings of a variety of mutual funds.
CDA/Wiesenberger Investment Companies Services, an annual compendium of
information about mutual funds and other investment companies, including
comparative data on funds' backgrounds, management policies, salient features,
management results, income and dividend records, and price ranges.
Composite Index -- 70% Standard & Poor's 500 Composite Stock Price Index ("S&P
500") and 30% Nasdaq Industrial Index.
Composite Index -- 35% S&P 500 Index and 65% Salomon Brothers High Grade Bond
Index.
Composite Index -- 65% S&P 500 Index and 35% Salomon Brothers High Grade Bond
Index.
Consumer's Digest, a bimonthly magazine that periodically features the
performance of a variety of investments, including mutual funds.
Financial Times, Europe's business newspaper, which from time to time reports
the performance of specific investment companies in the mutual fund industry.
Forbes, a national business publication that from time to time reports the
performance of specific investment companies in the mutual fund industry.
Fortune, a national business publication that periodically rates the performance
of a variety of mutual funds.
Goldman Sachs Convertible Bond Index -- currently includes 67 bonds and 33
preferred shares. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The index
is priced monthly.
Global Investor, a European publication that periodically reviews the
performance of U.S. mutual funds.
Growth Fund Guide, a newsletter providing a mutual fund rating service published
for over 25 years.
Individual Investor, a newspaper that periodically reviews mutual fund
performance and other data.
Investment Advisor, a monthly publication reviewing performance of mutual funds.
Investor's Daily, a nationally distributed newspaper which regularly covers
financial news.
Kiplinger's Personal Finance Magazine, a monthly publication periodically
reviewing mutual fund performance.
Lehman Brothers, Inc. "The Bond Market Report" reports on various Lehman
Brothers bond indices.
Lehman Government/Corporate Bond Index -- is a widely used index composed of
government, corporate, and mortgage backed securities.
Lehman Long Term Treasury Bond -- is composed of all bonds covered by the Lehman
Treasury Bond Index with maturities of 10 years or greater.
Lipper Analytical Services, Inc., a publication periodically reviewing mutual
funds industry-wide by means of various methods of analysis.
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Gold SAI 8/24/95, 9am
Merrill Lynch Pierce Fenner & Smith Taxable Bond Indices reports on a variety of
bond indices.
Money, a monthly magazine that from time to time features both specific funds
and the mutual fund industry as a whole.
Morgan Stanley Capital International EAFE Index, is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.
Morningstar, Mutual Fund Values, publications of Morningstar, Inc., periodically
reviewing mutual funds industry-wide by means of various methods of analysis and
textual commentary.
Mutual Fund Forecaster, a newsletter providing a mutual fund rating service.
Nasdaq Industrial Index -- is composed of more than 3000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.
New York Times, a nationally distributed newspaper which regularly covers
financial news.
The No-Load Fund Investor, a monthly newsletter that reports on mutual fund
performance, rates funds, and discusses investment strategies for mutual fund
investors.
Personal Investing News, a monthly news publication that often reports on
investment opportunities and market conditions.
Personal Investor, a monthly investment advisory publication that includes a
special section reporting on mutual fund performance, yields, indexes, and
portfolio holdings.
Russell 3000 Index -- consists of the 3,000 largest stocks of U.S. domiciled
companies commonly traded on the New York and American Stock Exchanges or the
Nasdaq over-the-counter market, accounting for over 90% of the market value of
publicly traded Stocks in the U.S.
Russell 2000 Small Company Stock Index -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely used benchmark for small capitalization common
stocks.
Salomon Brothers GNMA Index -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.
Salomon Brothers High-Grade Corporate Bond Index -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.
Salomon Brothers Broad Investment-Grade Bond -- is a market-weighted index that
contains approximately 4700 individually priced investment-grade corporate bonds
rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.
Salomon Brothers Market Performance tracks the Salomon Brothers bond index.
S&P 500 -- is a well diversified list of 500 companies representing the U.S.
Stock Market.
Standard & Poor's 100 Composite Stock Price Index -- is a well diversified list
of 100 companies representing the U.S. Stock Market.
Standard & Poor's Preferred Index is an index of preferred securities.
Success, a monthly magazine targeted to the world of entrepreneurs and growing
businesses, often featuring mutual fund performance data.
USA Today, a national newspaper that periodically reports mutual fund
performance data.
U.S. News and World Report, a national weekly that periodically reports mutual
fund performance data.
Wall Street Journal, a nationally distributed newspaper which regularly covers
financial news.
Wilshire 5000 Equity Indexes -- consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.
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Gold SAI 8/24/95, 9am
Wilshire 4500 Equity Index -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the S&P 500.
DISTRIBUTION OF SHARES
Pursuant to a Distribution Agreement Investor Service Center, Inc.
acts as the Distributor of the Fund's shares. Under the Distribution Agreement,
the Distributor shall use its best efforts, consistent with its other
businesses, to sell shares of the Fund. Fund shares are offered continuously.
Pursuant to a Plan of Distribution ("Plan") adopted pursuant to Rule 12b-1 under
the 1940 Act. The Fund pays the Distributor monthly a fee in the amount of
three-quarters of one percent per annum of the Fund's average daily net assets
as compensation for service activities and a fee in the amount of one-quarter of
one percent per annum of the Fund's average daily net assets as compensation for
distribution activities.
In performing distribution and service activities pursuant to the Plan,
the Distributor may spend such amounts as it deems appropriate on any activities
or expenses primarily intended to result in the sale of the Fund's shares or the
servicing and maintenance of shareholder accounts, including, but not limited
to: advertising, direct mail, and promotional expenses; compensation to the
Distributor and its employees; compensation to and expenses, including overhead
and telephone and other communication expenses, of the Distributor, the
Investment Manager, the Fund, and selected dealers and their affiliates who
engage in or support the distribution of shares or who service shareholder
accounts; fulfillment expenses, including the costs of printing and distributing
prospectuses, statements of additional information, and reports for other than
existing shareholders; the costs of preparing, printing and distributing sales
literature and advertising materials; and internal costs incurred by the
Distributor and allocated by the Distributor to its efforts to distribute shares
of the Fund such as office rent and equipment, employee salaries, employee
bonuses and other overhead expenses.
Among other things, the Plan provides that (1) the Distributor will
submit to the Fund's Board of Directors at least quarterly, and the Directors
will review, reports regarding all amounts expended under the Plan and the
purposes for which such expenditures were made, (2) the Plan will continue in
effect only so long as it is approved at least annually, and any material
amendment or agreement related thereto is approved, by the Fund's Board of
Directors, including those Directors who are not "interested persons" of the
Fund and who have no direct or indirect financial interest in the operation of
the Plan or any agreement related to the Plan ("Plan Directors"), acting in
person at a meeting called for that purpose, unless terminated by vote of a
majority of the Plan Directors, or by vote of a majority of the outstanding
voting securities of the Fund, (3) payments by the Fund under the Plan shall not
be materially increased without the affirmative vote of the holders of a
majority of the outstanding voting securities of the Fund and (4) while the Plan
remains in effect, the selection and nomination of Directors who are not
"interested persons" of the Fund shall be committed to the discretion of the
Directors who are not interested persons of the Fund.
With the approval of the vote of a majority of the entire Board of
Directors and of the Plan Directors of the Fund, the Distributor has entered
into a related agreement with Hanover Direct Advertising Company, Inc. ("Hanover
Direct"), a wholly-owned subsidiary of Group, in an attempt to obtain cost
savings on the marketing of the Fund's shares. Hanover Direct will provide
services to the Distributor on behalf of the Fund and the other Bull & Bear
Funds at standard industry rates, which includes commissions. The amount of
Hanover Direct's commissions over its cost of providing Fund marketing will be
credited to the Fund's distribution expenses and represent a saving on
marketing, to the benefit of the Fund. To the extent Hanover Direct's costs
exceed such commissions, Hanover Direct will absorb any of such costs.
It is the opinion of the Board of Directors that the Plan is necessary
to maintain a flow of subscriptions to offset redemptions. Redemptions of mutual
fund shares are inevitable. If redemptions are not offset by subscriptions, a
fund shrinks in size and its ability to maintain quality shareholder services
declines. Eventually, redemptions could cause a fund to become uneconomic.
Furthermore, an extended period of significant net redemptions may be
detrimental to orderly management of the portfolio. Offsetting redemptions
through sales efforts benefits shareholders by maintaining the viability of a
fund. In periods where net sales are achieved, additional benefits may accrue
relative to portfolio management and increased shareholder servicing capability.
In addition, increased assets enable the establishment and maintenance of a
better shareholder servicing staff which can respond more effectively and
promptly to shareholder inquiries and needs. While net increases in total assets
are desirable, the primary goal of the Plan is to prevent a decline in assets
serious enough to cause disruption of portfolio management and to impair the
Fund's ability to maintain a high level of quality shareholder services.
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Gold SAI 8/24/95, 9am
The Plan increases the overall expense ratio of the Fund; however, a
substantial decline in Fund assets is likely to increase the portion of the
Fund's expense ratio comprised of management fees and fixed costs (i.e., costs
other than the Plan) while a substantial increase in Fund assets would be
expected to reduce the portion of the expense ratio comprised of management fees
(reflecting a larger portion of the assets falling within fee scale-down
levels), as well as of fixed costs. Nevertheless, the net effect of the Plan is
to increase overall expenses. To the extent the Plan maintains a flow of
subscriptions to the Fund, there results an immediate and direct benefit to the
Investment Manager by maintaining or increasing its fee revenue base,
diminishing the obligation, if any, of the Investment Manager to make an expense
reimbursement to the Fund, and eliminating or reducing any contribution made by
the Investment Manager to marketing expenses. Other than as described herein, no
Director or interested person of the Fund had any direct or indirect financial
interest in the operation of the Plan or any related agreement.
Of the amounts reimbursed or compensated to the Distributor during the
Fund's fiscal year ended June 30, 1995, approximately $227,210 represented
reimbursement of expenses incurred for advertising, $145,034 for printing and
mailing prospectuses and other information to other than current shareholders, $
for salaries of marketing and sales personnel, $ for payments to third parties
who sold shares of the Fund and provided certain services in connection
therewith, and $ for overhead and miscellaneous expenses.
The Glass-Steagall Act prohibits certain banks from engaging in the
business of underwriting, selling, or distributing securities such as shares of
a mutual fund. Although the scope of this prohibition under the Glass- Steagall
Act has not been fully defined, in the Distributor's opinion it should not
prohibit banks from being paid for administrative and accounting services under
the Plan. If, because of changes in law or regulation, or because of new
interpretations of existing law, a bank or the Fund were prevented from
continuing these arrangements, it is expected that other arrangements for these
services will be made. In addition, state securities laws on this issue may
differ from the interpretations of Federal law expressed herein and banks and
financial institutions may be required to register as dealers pursuant to state
law.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value per share is determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") (currently 4:00 p.m.
eastern time) each business day of the Fund. The following are not business days
of the Fund: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Because a
substantial portion of the Fund's net assets may be invested in gold, platinum
and silver bullion, foreign securities and/or foreign currencies, trading in
each of which is also conducted in foreign markets which are not necessarily
closed on days when the NYSE is closed, the net asset value per share may be
significantly affected on days when shareholders have no access to the Fund or
its transfer agent.
Securities owned by the Fund are valued by various methods depending on
the market or exchange on which they trade. Securities traded on the NYSE, the
American Stock Exchange and the Nasdaq National Market System are valued at the
last sales price, or if no sale has occurred, at the mean between the current
bid and asked prices. Securities traded on other exchanges are valued as nearly
as possible in the same manner. Securities traded only OTC are valued at the
mean between the last available bid and ask quotations, if available, or at
their fair value as determined in good faith by or under the general supervision
of the Board of Directors. Short term securities are valued either at amortized
cost or at original cost plus accrued interest, both of which approximate
current value.
Foreign securities and bullion, if any, are valued at the price in a
principal market where they are traded, or, if last sale prices are unavailable,
at the mean between the last available bid and ask quotations. Foreign security
prices are expressed in their local currency and translated into U.S. dollars at
current exchange rates. Any changes in the value of forward contracts due to
exchange rate fluctuations are included in the determination of the net asset
value. Foreign currency exchange rates are generally determined prior to the
close of trading on the NYSE. Occasionally, events affecting the value of
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Gold SAI 8/24/95, 9am
foreign securities and such exchange rates occur between the time at which they
are determined and the close of trading on the NYSE, which events will not be
reflected in a computation of the Fund's net asset value on that day. If events
materially affecting the value of such securities or exchange rates occur during
such time period, the securities will be valued at their fair value as
determined in good faith under the direction of the Fund's Board of Directors.
Price quotations generally are furnished by pricing services, which may
also use a matrix system to determine valuations. This system considers such
factors as security prices, yields, maturities, call features, ratings, and
developments relating to specific securities in arriving at valuations.
PURCHASE OF SHARES
The Fund will not issue shares for consideration other than cash. The
Fund reserves the right to reject any order, to cancel any order due to
nonpayment, to accept initial orders by telephone or telegram, and to waive the
limit on subsequent orders by telephone, with respect to any person or class of
persons. Orders to purchase shares are not binding on the Fund until they are
confirmed by the Transfer Agent. In order to permit the Fund's shareholder base
to expand, to avoid certain shareholder hardships, to correct transactional
errors, and to address similar exceptional situations, the Fund may waive or
lower the investment minimums with respect to any person or class of persons.
ALLOCATION OF BROKERAGE
The Fund seeks to obtain prompt execution of orders at the most
favorable net prices. The Fund is not currently obligated to deal with any
particular broker, dealer or group thereof. Fund transactions in debt and OTC
securities generally are with dealers acting as principals at net prices with
little or no brokerage costs. In certain circumstances, however, the Fund may
engage a broker as agent for a commission to effect transactions for such
securities. Purchases of securities from underwriters include a commission or
concession paid to the underwriter, and purchases from dealers include a spread
between the bid and asked price. While the Investment Manager generally seeks
reasonably competitive spreads or commissions, payment of the lowest spread or
commission is not necessarily consistent with obtaining the bet net results.
Accordingly, the Fund will not necessarily be paying the lowest spread or
commission available.
The Investment Manager directs portfolio transactions to broker/dealers
for execution on terms and at rates which it believes, in good faith, to be
reasonable in view of the overall nature and quality of services provided by a
particular broker/dealer, including brokerage and research services, sales of
Fund shares and shares of the other Bull & Bear Funds, and allocation of
commissions to the Fund's Custodian. With respect to brokerage and research
services, consideration may be given in the selection of broker/dealers to
brokerage or research provided and payment may be made of a fee higher than that
charged by another broker/dealer which does not furnish brokerage or research
services or which furnishes brokerage or research services deemed to be of
lesser value, so long as the criteria of Section 28(e) of the Securities
Exchange Act of 1934, as amended (the "1934 Act") or other applicable law are
met. Section 28(e) of the 1934 Act specifies that a person with investment
discretion shall not be "deemed to have acted unlawfully or to have breached a
fiduciary duty" solely because such person has caused the account to pay a
higher commission than the lowest available under certain circumstances. To
obtain the benefit of Section 28(e), the person so exercising investment
discretion must make a good faith determination that the commissions paid are
"reasonable in relation to the value of the brokerage and research services
provided ... viewed in terms of either that particular transaction or his
overall responsibilities with respect to the accounts as to which he exercises
investment discretion." Thus, although the Investment Manager may direct
portfolio transactions without necessarily obtaining the lowest price at which
such broker/dealer, or another, may be willing to do business, the Investment
Manager seeks the best value to the Fund on each trade that circumstances in the
market place permit, including the value inherent in on-going relationships with
quality brokers.
Currently, it is not possible to determine the extent to which
commissions that reflect an element of value for brokerage or research services
might exceed commissions that would be payable for execution alone, nor
generally can the value of such services to the Fund be measured, except to the
extent such services have a readily ascertainable market value. There is no
certainty that services so purchased, or the sale of Fund shares, if any, will
be beneficial to the Fund, and it may be that the other Bull & Bear Funds will
derive benefit therefrom. Such services being largely intangible, no dollar
amount can be attributed to benefits realized by the Fund or to collateral
benefits, if any, conferred on affiliated entities. These services may include
(1) furnishing advice 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, (2) furnishing analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts, and (3) effecting
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securities transactions and performing functions incidental thereto (such as
clearance, settlement, and custody). Pursuant to arrangements with certain
broker/dealers, such broker/dealers provide and pay for various computer
hardware, software and services, market pricing information, investment
subscriptions and memberships, and other third party and internal research of
assistance to the Investment Manager in the performance of its investment
decision-making responsibilities for transactions effected by such
broker/dealers for the Fund. Commission "soft dollars" may be used only for
"brokerage and research services" provided directly or indirectly by the
broker/dealer and under no circumstances will cash payments be made by such
broker/dealers to the Investment Manager. To the extent that commission "soft
dollars" do not result in the provision of any "brokerage and research services"
by a broker/dealer to whom such commissions are paid, the commissions,
nevertheless, are the property of such broker/dealer. To the extent any such
services are utilized by the Investment Manager for other than the performance
of its investment decision-making responsibilities, the Investment Manager makes
an appropriate allocation of the cost of such services according to their use.
BBSI, a wholly owned subsidiary of Group and the Investment Manager's
affiliate, provides discount brokerage services to the public as an introducing
broker clearing through unaffiliated firms on a fully disclosed basis. The
Investment Manager is authorized to place Fund brokerage through BBSI at its
posted discount rates and indirectly through a BBSI clearing firm. The Fund will
not deal with BBSI in any transaction in which BBSI acts as principal. The
clearing firm will execute trades in accordance with the fully disclosed
clearing agreement between BBSI and the clearing firm. BBSI will be financially
responsible to the clearing firm for all trades of the Fund until complete
payment has been received by the Fund or the clearing firm. BBSI will provide
order entry services or order entry facilities to the Investment Manager,
arrange for execution and clearing of portfolio transactions through executing
and clearing brokers, monitor trades and settlements and perform limited
back-office functions including the maintenance of all records required of it by
the National Association of Securities Dealers, Inc.("NASD").
In order for BBSI to effect any portfolio transactions for the Fund,
the commissions, fees or other remuneration received by BBSI must be reasonable
and fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time. The Fund's Board of Directors has adopted procedures in conformity with
Rule 17e-1 under the 1940 Act to ensure that all brokerage commissions paid to
BBSI are reasonable and fair. Although BBSI's posted discount rates may be lower
than those charged by full cost brokers, such rates may be higher than some
other discount brokers and certain brokers may be willing to do business at a
lower commission rate on certain trades. The Fund's Board of Directors has
determined that portfolio transactions may be executed through BBSI if, in the
judgment of the Investment Manager, the use of BBSI is likely to result in price
and execution at least as favorable as those of other qualified broker/dealers
and if, in particular transactions, BBSI charges the Fund a rate consistent with
that charged to comparable unaffiliated customers in similar transactions.
Brokerage transactions with BBSI are also subject to such fiduciary standards as
may be imposed by applicable law. The Investment Manager's fees under its
agreement with the Fund are not reduced by reason of any brokerage commissions
paid to BBSI.
During the fiscal years ended June 30, 1993, 1994 and 1995 the Fund
paid total brokerage commissions of $194,519, $320,836, and $255,129
respectively. For the fiscal year ended June 30, 1995, $107,715 in brokerage
commissions (representing $65,471,943 in portfolio transactions) was allocated
to broker/dealers that provided research services. No transactions were directed
to broker/dealers during such periods for selling shares of the Fund or any of
the other Bull & Bear Funds. During the Fund's fiscal years ended June 30, 1993,
1994 and 1995 the Fund paid brokerage commissions of $20,808, $53,103, and
$121,586, respectively, to BBSI, representing approximately 10.7%, 16.55%, and
47.66%, respectively, of the total brokerage commissions paid by the Fund and
18.8%, 19.27%, and 42.14%, respectively, of the aggregate dollar amount of Fund
transactions involving the payment of commissions.
Investment decisions for the Fund and for the other Funds managed by
the Investment Manager are made independently of each other in the light of
differing conditions. The same investment decision, however, may occasionally be
made for two or more of such Funds. In such cases, simultaneous transactions may
occur. Combined purchase or sale orders are then averaged as to price and
allocated as to amount according to a formula deemed equitable to each Fund.
While in some cases this practice could have a detrimental effect upon the price
or value of the security as far as the Fund is concerned, in other cases it is
believed to be beneficial to the Fund.
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Gold SAI 8/24/95, 9am
The Fund is not obligated to deal with any particular broker, dealer or
group thereof. Certain broker/dealers that the Bull & Bear Funds do business
with may, from time to time, own more than 5% of the publicly traded Class A
non-voting Common Stock of Group, the parent of the Investment Manager, and may
provide clearing services to BBSI.
The Fund's portfolio turnover rate may vary from year to year and will
not be a limiting factor when the Investment Manager deems portfolio changes
appropriate. The portfolio turnover rate is calculated by dividing the lesser of
the Fund's annual sales or purchases of portfolio securities (exclusive of
purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of securities in the
portfolio during the year.
From time to time, certain brokers may be paid a fee for record
keeping, shareholder communications and other services provided by them to
investors purchasing shares of the Fund through the "no transaction fee"
programs offered by such brokers. This fee is based on the average daily value
of the investments in the Fund made by such brokers on behalf of investors
participating in their "no transaction fee" programs. The Fund's directors have
further authorized the Investment Manager to place a portion of the Fund's
brokerage transactions with any of such brokers, if the Investment Manager
reasonably believes that, in effecting the Fund's transactions in portfolio
securities, such broker or brokers are able to provide the best execution of
orders at the most favorable prices. Commissions earned by such brokers from
executing portfolio transactions on behalf of the Fund may be credited by them
against the fee they charge the Fund, on a basis which has resulted from
negotiations between the Investment Manager and such brokers.
DISTRIBUTIONS AND TAXES
If the U.S. Postal Service cannot deliver a shareholder's check, or if
a shareholder's check remains uncashed for six months, the Fund reserves the
right to credit the shareholder's account with additional shares of the Fund at
the then current net asset value in lieu of the cash payment and to thereafter
issue such shareholder's distributions in additional shares of the Fund.
The Fund intends to continue to qualify for treatment as a regulated
investment company ("RIC") under the Internal Revenue Code of 1986, as amended
("Code"). To qualify for this treatment, the Fund must distribute to its
shareholders for each taxable year at least 90% of its investment company
taxable income (consisting generally of net investment income, net short term
capital gain and net gains from certain foreign currency transactions) and must
meet several additional requirements. Among these requirements are the
following: (1) at least 90% of the Fund's gross income each taxable year must be
derived from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of securities or foreign currencies, or
other income (including gains from options, futures, or forward contracts)
derived with respect to its business of investing in securities or those
currencies ("Income Requirement"); (2) the Fund must derive less than 30% of its
gross income each taxable year from the sale or other disposition of securities,
or any of the following, that were held for less than three months - options,
futures, or forward contracts (other than those on foreign currencies), or
foreign currencies (or options, futures, or forward contracts thereon) that are
not directly related to the Fund's principal business of investing in securities
(or options and futures with respect thereto) ("Short-Short Limitation"); and
(3) the Fund's investments must satisfy certain diversification requirements. In
any year during which the applicable provisions of the Code are satisfied, the
Fund will not be liable for Federal income taxes on net income and gains that
are distributed to its shareholders. If for any taxable year the Fund does not
qualify for treatment as a RIC, all of its taxable income will be taxed at
corporate rates.
A portion of the dividends from the Fund's investment company taxable
income (whether paid in cash or in additional Fund shares) may be eligible for
the dividends-received deduction allowed to corporations. The eligible portion
may not exceed the aggregate dividends received by the Fund from U.S.
corporations. However, dividends received by a corporate shareholder and
deducted by it pursuant to the dividends-received deduction are subject
indirectly to the alternative minimum tax.
A loss on the sale of Fund shares that were held for six months or less
will be treated as a long term (rather than a short term) capital loss to the
extent the seller received any capital gain distributions attributable to those
shares.
Any dividend or other distribution will have the effect of reducing the
net asset value of the Fund's shares on the payment date by the amount thereof.
Furthermore, any such dividend or other distribution, although similar in effect
to a return of capital, will be subject to taxes. Dividends and other
distributions may also be subject to state and local taxes.
The Fund will be subject to a nondeductible 4% excise tax to the extent
it fails to distribute by the end of any calendar year an amount equal to the
sum of (1) 98% of its ordinary income, (2) 98% of its capital gain net income
(determined on an October 31 fiscal year basis), plus (3) generally, income and
gain not distributed or
27
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Gold SAI 8/24/95, 9am
subject to corporate tax in the prior calendar year. The Fund intends to avoid
imposition of this excise tax by making adequate distributions.
Dividends and interest received by the Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of
the Fund's total assets at the close of its taxable year consists of securities
of foreign corporations, the Fund will be eligible to, and may, file an election
with the Internal Revenue Service that would enable its shareholders, in effect,
to receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions' income taxes paid by it. Pursuant to the election, the Fund
would treat those taxes as dividends paid to its shareholders and each
shareholder would be required to (1) include in gross income, and treat as paid
by the shareholder, the shareholder's proportionate share of those taxes, (2)
treat the shareholder's share of those taxes and of any dividend paid by the
Fund that represents income from foreign or U.S. possessions sources as the
shareholder's own income from those sources, and (3) either deduct the taxes
deemed paid by the shareholder in computing the shareholder's taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against the shareholder's Federal income tax. The Fund will report to its
shareholders shortly after each taxable year their respective shares of the
Fund's income from sources within, and taxes paid to, foreign countries and U.S.
possessions if it makes this election.
The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, the Fund will be
subject to Federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain from disposition of the stock
(collectively "PFIC income"), plus interest thereon, even if the Fund
distributes the PFIC income as a taxable dividend to its shareholders. The
balance of the PFIC income will be included in the Fund's taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders. If the Fund invests in a PFIC and elects to treat the PFIC
as a "qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long term capital gain over net short term
capital loss), even if they are not distributed to the Fund; those amounts would
be subject to the distribution requirements described above. In most instances
it will be very difficult, if not impossible, to make this election because of
certain requirements thereof.
Pursuant to proposed regulations, open-end RICs, such as the Fund,
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each taxable
year the excess, as of the end of that year, of the fair market value of each
such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).
Options, Futures, and Forward Contracts. The Fund's use of hedging strategies,
such as selling (writing) and purchasing options and futures contracts and
entering into forward contracts, involves complex rules that will determine for
income tax purposes the timing of recognition and character of the gains and
28
<PAGE>
Gold SAI 8/24/95, 9am
losses the Fund realizes in connection therewith. Income from foreign currencies
(except certain gains therefrom that may be excluded by future regulations), and
income from transactions in options, futures, and forward contracts derived by
the Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options, futures, and forward contracts
(other than those on foreign currencies) will be subject to the Short-Short
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures, and forward contracts
on foreign currencies, also will be subject to the Short-Short Limitation if
they are held for less than three months and are not directly related to the
Fund's principal business of investing in securities (or options and futures
with respect thereto).
If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
Short-Short Limitation. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of the that limitation. The
Fund will consider whether it should seek to qualify for this treatment for its
hedging transactions. To the extent the Fund does not so qualify, it may be
forced to defer the closing out of certain options, futures, and forward
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.
The foregoing discussion of Federal tax consequences is based on the
tax law in effect on the date of this Statement of Additional Information, which
is subject to change by legislative, judicial, or administrative action. The
Fund may be subject to state or local tax in jurisdictions in which it may be
deemed to be doing business.
REPORTS TO SHAREHOLDERS
The Fund issues, at least semi-annually, reports to its shareholders
including a list of investments held and statements of assets and liabilities,
income and expense, and changes in net assets of the Fund. The Fund's fiscal
year ends on June 30.
CUSTODIAN, TRANSFER AND DIVIDEND DISBURSING AGENT
Investors Bank & Trust Company, P.O. Box 2197, Boston, MA 02111 has
been retained by the Corporation to act as Custodian of the Fund's investments
and may appoint one or more subcustodians. The Custodian also performs certain
accounting services for the Fund. As part of its agreement with the Corporation,
the Custodian may apply credits or charges for its services to the Fund for,
respectively, positive or deficit cash balances maintained by the Fund with the
Custodian. DST Systems, Inc., P.O. Box 419789, Kansas City, Missouri 64141-
6789, is the Fund's Transfer and Dividend Disbursing Agent. The Distributor
provides certain administrative and shareholder services to the Fund pursuant to
the Shareholder Services Agreement and is reimbursed by the Fund the actual
costs incurred with respect thereto. For shareholder services, the Fund paid the
Distributor for the fiscal years ended June 30, 1993, 1994, and 1995
approximately $39,273, $63,344, and $68,552, respectively.
AUDITORS
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia, PA
19101-1707, are the independent accountants for the Fund. Financial statements
of the Fund are audited annually.
FINANCIAL STATEMENTS
The Fund's Financial Statements for the fiscal year ended June 30,
1995, together with the Report of the Fund's independent accountants thereon,
appear in the Fund's Annual Report to Shareholders and are incorporated herein
by reference.
29
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Gold SAI 8/24/95, 9am
APPENDIX--DESCRIPTIONS OF BOND RATINGS
Moody's Investors Service, Inc.'s Corporate Bond Ratings
Aaa Bonds which are rated Aaa are judged to be of the best quality and carry the
smallest degree of investment risk. Interest payments are protected by a large
or 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.
Aa Bonds which are rated Aa are judged to be of high quality by all standards
and, together with the Aaa group, 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 of fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the longer term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
Standard & Poor's Corporate Bond Ratings
AAA This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.
AA Bonds rated AA also qualify as high quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A Bonds rated A have a strong capacity to pay principal interest, although they
are somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions.
BBB Bonds rated BBB are regarded as having adequate capacity to pay principal
and interest. Whereas they normally exhibit protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this capacity than
for bonds in the A category.
BB, B, CCC, CC Bonds rated BB, B, CCC and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions.
30
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Gold SAI 8/24/95, 9am
BULL & BEAR
--------------------------------------------------------------------------------
Performance Driven(R)
BULL & BEAR
GOLD INVESTORS LTD.
Supplement dated August 28, 1995 to
the Prospectus dated August 28, 1995
For Wisconsin residents, the following is intended to supplement the information
contained in the Prospectus.
Prospective Wisconsin investors should note that the Fund may invest up to 10%
of its total assets in restricted securities (other than Rule 144A securities
determined to be liquid by or under the direction of the Fund's Board of
Directors). Investment in restricted securities (other than Rule 144A
securities) in excess of 5% of the Fund's total assets may be considered a
speculative activity and may result in greater risk and increased Fund ex
penses.
For Wisconsin residents, the following is intended to supplement the information
contained in the Prospectus on page 4.
Sec. 3.09(1)(c), Wisconsin Administrative Code, permits an open-end investment
company to invest up to 10% of it's assets in precious metals. This Fund may
invest up to 25% of its assets in gold, platinum and silver bullion. Thus, the
Fund does not comply with the Fairness Standards set by the Office of the
Wisconsin Commissioner of Securities.
GL-S-8/5.WI
<PAGE>
Gold SAI 8/24/95, 9am
BULL & BEAR
--------------------------------------------------------------------------------
Performance Driven(R)
BULL & BEAR
GOLD INVESTORS LTD.
Supplement dated August 28, 1995 to the
Prospectus dated August 28, 1995
Prospective South Dakota investors should note that the Fund's annual operating
expenses for its fiscal year ended June 30, 1995 were higher than those of many
other investment companies (see the expense table on page 2).
GL-S-8/5.SD
<PAGE>
Gold SAI 8/24/95, 9am
BULL & BEAR
--------------------------------------------------------------------------------
Performance Driven(R)
BULL & BEAR
GOLD INVESTORS LTD.
Supplement dated August 28, 1995 to the
Prospectus dated August 28, 1995
1. Bull & Bear Advisers, Inc. is the Fund's Investment Manager. The Board of
Directors has approved, subject to shareholder approval, a subadvisory agreement
between the Investment Manager and Lion Resource Management Limited. Pursuant to
the Subadvisory Agreement, the Subadviser will advise and consult with the
Investment Manager regarding the selection, clearing and safekeeping of the
Fund's portfolio investments and assists in pricing and generally monitoring
such investments. The Subadviser also will provide the Investment Manager with
advice as to allocating the Fund's portfolio assets among various countries,
including the United States, and among equities, bullion, and other types of
investments, including recommendations of specific investments. The Investment
Manager, not the Fund, will pay the Subadviser monthly a fee based upon the
Fund's performance and its total net assets. Based in London (U.K.), the
Subadviser is a part of Lion Mining Group, which specializes in gold mining and
resource company investment management, corporate finance and consulting. For
shareholders of record in July 1995, proxy material describing the foregoing
more fully will be mailed in July 1995 and is available without charge by
calling Investor Service Center, 1-800-847- 4200. A meeting of shareholders to
consider the Subadvisory Agreement is scheduled for August 25, 1995.
2. The Distributor acting as the Fund's principal agent for the sale of Fund
shares has changed its name to Investor Service Center, Inc. The Fund's transfer
and dividend disbursing agent is DST Systems, Inc.
GL-S-6/5
<PAGE>
BULL & BEAR GOLD INVESTORS LTD.
Cross Reference Sheet
Part C. Other Information
Item 24. Financial Statements and Exhibits
(a) Financial Statements in Part A of this Registration Statement:
Financial Highlights
Financial Statements Included in Part B of this Registration State-
ment:
The Annual Report to Shareholders of the Fund for the fiscal period
ended June 30, 1995 containing financial statements as of and for
the fiscal period ended June 30, 1995 is incorporated into the
Statement of Additional Information by reference. The letter to
shareholders and other information contained on pages 1 through 2
of said Annual Report to Shareholders is not incorporated in Part B
by reference and is not a part of this Registration Statement.
(b) Exhibits
(1) Articles of Incorporation. Incorporated herein by reference
to corresponding Exhibit of Post-Effective Amendment No. 64
to the Registration Statement, SEC File No. 2- 14486, filed
September 2, 1993.
(2) By-Laws. Incorporated herein by reference to corresponding
Exhibit of Post-Effective Amendment No. 64 to the
Registration Statement, SEC File No. 2-14486, filed
September 2, 1993.
(3) Voting trust agreement -- none
(4) Specimen security. Filed herewith.
(5) (a) Investment Management Agreement. Incorporated herein by
reference to corresponding Exhibit of Post-Effective
Amendment No. 64 to the Registration Statement, SEC File No.
2-14486, filed September 2, 1993.
(b) Subadvisory Agreement. Filed herewith.
(c) Transfer agreement and consent. Incorporated herein by
reference to corresponding Exhibit of Post-Effective
Amendment No. 62 to the Registration Statement, SEC
File No. 2-14486, filed March 2, 1993.
(6) Underwriting agreement - none
(7) Bonus, profit sharing or pension plans -- none
(8) (a) Custodian Agreement. Incorporated herein by reference to
corresponding Exhibit of Post-Effective Amendment No. 61 to
the Registration Statement, SEC File No. 2-14486, filed
October 30, 1992.
(b) Depository Agreements. Incorporated herein by reference
to corresponding Exhibit of Post-Effective Amendment
No. 63 to the Registration Statement, SEC File No.
2-14486, filed April 30, 1993.
(c) Precious Metals Storage Agreement. Filed herewith.
Part C p. 1
<PAGE>
(9) (a) Administration Agreement. Incorporated herein by reference to
corresponding Exhibit of Post-Effective Amendment No. 61 to the
Registration Statement, SEC File No. 2-14486, filed October 30,
1992.
(b) Amendments to Administration Agreement. Incorporated herein
by reference to corresponding Exhibit of Post-Effective
Amendment No. 61 to the Registration Statement, SEC File No.
2-14486, filed October 30, 1992.
(c) Shareholder Services Agreements. Incorporated herein by
reference to corresponding Exhibit of Post-Effective
Amendment No. 61 to the Registration Statement, SEC File No.
2-14486, filed October 30, 1992.
(d) Transfer Agency Agreement. Incorporated herein by reference
to corresponding Exhibit of Post-Effective Amendment No. 65
to the Registration Statement, SEC File No. 2-14486, filed
October 31, 1994.
(10) (a) Opinion of counsel. Incorporated herein by reference to
corresponding Exhibit of Post-Effective Amendment No. 61 to the
Registration Statement, SEC File No. 2-14486, filed October 30,
1992.
(b) Opinion of counsel pursuant to Section 24 (e) (1). Filed
herewith.
(11) Other opinions, appraisals, rulings and consents -Accountants'
consent. Filed herewith.
(12) Financial statements omitted from Item 23 -- not applicable
(13) Agreement for providing initial capital -- not applicable
(14) (a) Standardized Profit Sharing Adoption Agreement. Filed
herewith.
(b) Defined Contribution Basic Plan Document. Filed herewith.
(c) Standardized Money Purchase Adoption Agreement. Filed
herewith.
(d) Simplified Profit Sharing Adoption Agreement. Filed
herewith.
(e) Simplified Money Purchase Adoption Agreement. Filed
herewith.
(15) (a) Plan pursuant to Rule 12b-1. Incorporated herein by reference
to corresponding Exhibit of Post-Effective Amendment No. 64 to
the Registration Statement, SEC File No. 2-14486, filed September
2, 1993.
(b) Related Agreement to Plan of Distribution between Bull &
Bear Service Center, Inc. and Hanover Direct Advertising
Company, Inc. Incorporated by reference to corresponding
Exhibit of Post-Effective Amendment No. 58 to the
Registration Statement, SEC File No. 2-14486, filed August
30, 1991.
(c) Broker Services Agreements. Incorporated herein by reference
to corresponding Exhibit of Post-Effective Amendment No. 63
to the Registration Statement, SEC File No. 2-14486, filed
April 30, 1993.
(16) Schedule for computation of performance quotations
(a) Basic information. Incorporated herein by reference to
corresponding Exhibit of Post-Effective Amendment No.
62 to the Registration Statement, SEC File No. 2-14486,
filed March 2, 1993.
(b) Supplemental information. Incorporated herein by
reference to corresponding Exhibit of Post-Effective
Amendment No. 65 to the Registration Statement, SEC
File No. 2-14486, filed October 31, 1994.
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class (as of August 17, 1995)
Shares of Common Stock, 4,151
$0.01 par value
<PAGE>
Item 27. Indemnification
The Registrant is incorporated under Maryland law. Section 2-418 of
the Maryland General Corporation Law requires the Registrant to indemnify its
directors, officers and employees against expenses, including legal fees, in a
successful defense of a civil or criminal proceeding. The law also permits
indemnification of directors, officers, employees and agents unless it is proved
that (a) the act or omission of the person was material and was committed in bad
faith or was the result of active or deliberate dishonesty, (b) the person
received an improper personal benefit in money, property or services or (c) in
the case of a criminal action, the person had reasonable cause to believe that
the act or omission was unlawful.
Registrant's amended and restated Articles of Incorporation: (1)
provide that, to the maximum extent permitted by applicable law, a director or
officer will not be liable to the Registrant or its stockholders for monetary
damages; (2) require the Registrant to indemnify and advance expense as provided
in the By-laws to its present and past directors, officers, employees and
agents, and persons who are serving or have served at the request of the
Registrant in similar capacities for other entities in advance of final
disposition of any action against that person to the extent permitted by
Maryland law and the 1940 Act; (3) allow the corporation to purchase insurance
for any present or past director, officer, employee, or agent; and (4) require
that any repeal or modification of the amended and restated Articles of
Incorporation by the shareholders, or adoption or modification of any provision
of the Articles of Incorporation inconsistent with the indemnification
provisions, be prospective only to the extent such repeal or modification would,
if applied retrospectively, adversely affect any limitation on the liability of
or indemnification available to any person covered by the indemnification
provisions of the amended and restated Articles of Incorporation.
Section 11.01 of Article XI of the By-Laws sets forth the
procedures by which the Registrant will indemnify its directors, officers,
employees and agents. Section 11.02 of Article XI of the By-Laws further
provides that the Registrant may purchase and maintain insurance or other
sources of reimbursement to the extent permitted by law on behalf of any person
who is or was a director or officer of the Registrant, or is or was serving at
the request of the Registrant as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her and incurred by him or her in or arising out of his
or her position.
Registrant's amended Investment Management Agreement between the
Registrant and Bull & Bear Advisers, Inc. (the "Investment Manager") provides
that the Investment Manager shall not be liable to the Registrant or its series
or any shareholder of the Registrant or its series for any error of judgment or
mistake of law or for any loss suffered by the Registrant in connection with the
matters to which the Investment Management Agreement relates. However, the
Investment Manager is not protected against any liability to the Registrant or
to the series by reason of willful misfeasance, bad faith, or gross negligence
in the performance of its duties or by reason of its reckless disregard of its
obligations and duties under the Investment Management Agreement.
Section 9 of the Distribution Agreement between the Registrant and
Bull & Bear Service Center, Inc. ("Service Center") provides that the Registrant
will indemnify Service Center and its officers, directors and controlling
persons against all liabilities arising from any alleged untrue statement of
material fact in the Registration Statement or from any alleged omission to
state in the Registration Statement a material fact required to be stated in it
or necessary to make the statements in it, in light of
Part C p. 3
<PAGE>
the circumstances under which they were made, not misleading, except insofar as
liability arises from untrue statements or omissions made in reliance upon and
in conformity with information furnished by Service Center to the Registrant for
use in the Registration Statement; and provided that this indemnity agreement
shall not protect any such persons against liabilities arising by reason of
their bad faith, gross negligence or willful misfeasance; and shall not inure to
the benefit of any such persons unless a court of competent jurisdiction or
controlling precedent determines that such result is not against public policy
as expressed in the Securities Act of 1933. Section 9 of the Distribution
Agreement also provides that Service Center agrees to indemnify, defend and hold
the Registrant, its officers and Directors free and harmless of any claims
arising out of any alleged untrue statement or any alleged omission of material
fact contained in information furnished by Service Center for use in the
Registration Statement or arising out of any agreement between Service Center
and any retail dealer, or arising out of supplementary literature or advertising
used by Service Center in connection with the Distribution Agreement.
The Registrant undertakes to carry out all indemnification
provisions of its Articles of Incorporation and By-Laws and the above-described
contract in accordance with Investment Company Act Release No. 11330 (September
4, 1980) and successor releases.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be provided 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 with the successful defense of any action, suit or
proceeding or payment pursuant to any insurance policy) is asserted against the
Registrant 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.
Item 28. Business and other Connections of Investment Adviser
The directors and officers of Bull & Bear Advisers, Inc., the
Investment Manager, are also directors and officers of the other Funds managed
by the Investment Manager, a wholly-owned subsidiary of Bull & Bear Group, Inc.
(the "Bull & Bear Funds"). In addition, such officers are officers and directors
of Bull & Bear Group, Inc. and its other subsidiaries; Bull & Bear Service
Center, Inc., the distributor of the Bull & Bear Funds and a registered
broker/dealer and Bull & Bear Securities, Inc., a discount brokerage firm. Bull
& Bear Group, Inc.'s predecessor was organized in 1976. In 1978, it acquired
control of and subsequently merged with Investors Counsel, Inc., a registered
investment adviser organized in 1959. The principal business of both companies
since their founding has been to serve as investment manager to registered
investment companies. The Investment Manager serves as investment manager of
Bull & Bear Dollar Reserves, Bull & Bear Global Income Fund, and Bull & Bear
U.S. Government Securities Fund, each a series of shares issued by Bull & Bear
Funds II, Inc.; Bull & Bear Municipal Income Fund, a series of shares issued by
Bull & Bear Municipal Securities, Inc.; Bull & Bear Gold Investors Ltd. and Bull
& Bear U.S. and Overseas Fund, and Bull & Bear Quality Growth Fund, each a
series of Bull & Bear Funds I, Inc.; and Bull & Bear Special Equities Fund, Inc.
Item 29. Principal Underwriters
Part C p. 4
<PAGE>
a) In addition to the Registrant, Bull & Bear Service Center, Inc.
serves as principal underwriter of Bull & Bear Funds II, Inc., Bull & Bear
Special Equities Fund, Inc., Bull & Bear Funds I, Inc., and Bull & Bear
Municipal Securities, Inc.
b) Service Center will serve as the Registrant's principal underwriter. The
directors and officers of Service Center, their principal business addresses,
their positions and offices with Service Center and their positions and offices
with the Registrant (if any) are set forth below.
<TABLE>
<CAPTION>
<S> <C> <C>
Name and Principal Position and Offices with Bull & Bear Position and Offices
Business Address Service Center, Inc. with Registrant
Bassett S. Winmill n/a Chairman of the Board
11 Hanover Square
New York, NY 10005
Robert D. Anderson Vice Chairman and Director Vice Chairman and Director
11 Hanover Square
New York, NY 10005
Steven A. Landis Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Brett B. Sneed Senior Vice President Senior Vice President
11 Hanover Square
New York, NY 10005
Mark C. Winmill Chairman, Director and Chief Financial Co-President, Director, and Chief Financial
11 Hanover Square Officer Officer
New York, NY 10005
Thomas B. Winmill President, Director, General Counsel Co-President, Director, and General
11 Hanover Square Counsel
New York, NY 10005
Kathleen B. Fliegauf Vice President and Assistant Treasurer None
11 Hanover Square
New York, NY 10005
William J. Maynard Vice President, Secretary, Chief Vice President, Secretary, Chief
11 Hanover Square Compliance Officer Compliance Officer
New York, NY 10005
Irene K. Kawczynski Vice President None
11 Hanover Square
New York, NY 10005
William K. Dean Treasurer, Chief Accounting Officer Treasurer, Chief Accounting Officer
11 Hanover Square
New York, NY 10005
Michael J. McManus Vice President None
11 Hanover Square
New York, NY 10005
H. Matthew Kelly Vice President None
11 Hanover Square
New York, NY 10005
</TABLE>
Part C p. 5
<PAGE>
Item 30. Location of Accounts and Records
The minute books of Registrant and copies of its filings with the
Commission are located at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and its Investment Manager). All other records required by Section
31(a) of the Investment Company Act of 1940 are located at Investors Bank &
Trust Company, 89 South Street, Boston, MA 02111 (the offices of Registrant's
custodian) and DST Systems, Inc., 1055 Broadway, Kansas City, MO 64105-1594 (the
offices of the Registrant's Transfer and Dividend Disbursing Agent). Copies of
certain of the records located at Investors Bank & Trust Company & DST Systems,
Inc. are kept at 11 Hanover Square, New York, NY 10005 (the offices of
Registrant and the Investment Manager).
Item 31. Management Services -- none
Item 32. Undertakings -- none
Part C p. 6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City, County and State of New York on this 24th day of
August, 1995.
BULL & BEAR GOLD INVESTORS LTD.
/S/Thomas B. Winmill
By: Thomas B. Winmill
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:
Mark C. Winmill Director, Co-President August 24, 1995
Mark C. Winmill and Co-Chief Executive Officer
Thomas B. Winmill Director, Co-President and August 24, 1995
Thomas B. Winmill Co-Chief Executive Officer
Bassett S. Winmill Director, Chairman of the August 24, 1995
Bassett S. Winmill Board of Directors
William K. Dean Treasurer, Principal August 24, 1995
William K. Dean Accounting Officer
Robert D. Anderson Director, Vice Chairman August 24, 1995
Robert D. Anderson
Bruce B. Huber Director August 24, 1995
Bruce B. Huber
James E. Hunt Director August 24, 1995
James E. Hunt
Frederick A. Parker, Jr. Director August 24, 1995
Frederick A. Parker, Jr.
John B. Russell Director August 24, 1995
John B. Russell
Russell E. Burke III Director August 24, 1995
Russell E. Burke III
Part C p. 7
<PAGE>
EXHIBIT INDEX
PAGE
EXHIBIT NUMBER
Part C p. 8
<PAGE>
NUMBER SHARES
BULL & BEAR GOLD INVESTORS LTD.
INCORPORATED UNDER THE LAWS OF MARYLAND
THIS CERTIFIES THAT ACCOUNT NUMBER
CUSIP NUMBER
119908101
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE CAPITAL STOCK, PAR VALUE $0.01
PER SHARE OF BULL & BEAR GOLD INVESTORS LTD.
Herein called the "Corporation", transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
the surrender of this certificate properly endorsed. The Corporation will
furnish to any shareholder upon request and without charge a full statement of
the designations, relative rights, preferences and limitations of the shares of
each series and class authorized to be issued. This certificate is not valid
unless countersigned by the Transfer Agent. Witness the facsimile seal of the
Corporation and the facsimile signatures of its duly authorized officers.
Dated:
COUNTERSIGNED:
CO-PRESIDENT TREASURER
COUNTERSIGNED:
DST SYSTEMS, INC.
(KANSAS CITY, MISSOURI) TRANSFER AGENT
BY:
AUTHORIZED SIGNATURE
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. SIGNATURE(S) MUST BY
DULY GUARANTEED BY A COMMERCIAL BANK, TRUST COMPANY, SAVINGS AND LOAN
ASSOCIATION, FEDERAL SAVINGS BANK, MEMBER FIRM OF A NATIONAL SECURITIES EXCHANGE
OR OTHER ELIGIBLE FINANCIAL INSTITUTION.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations: TEN COM - as tenants in common UNIF
GIFT MIN ACT - Custodian TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship under Uniform Gifts to
Minors Act and not as tenants in common (State) Additional abbreviations may
also be used though not in the above list. For value received, do hereby sell,
assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP
CODE, OF ASSIGNEE) Shares of capital stock represented by the within
Certificate, and do hereby irrevocably constitute and appoint Attorney to
transfer the said shares on the books of the within-named Corporation with full
power of substitution in the premises.
Dated,
Owner
Signature of Co-Owner, if any
IMPORTANT BEFORE SIGNING, READ AND COMPLY CAREFULLY
WITH NOTICE PRINTED ABOVE
Signature(s) guaranteed by:
SUBADVISORY AGREEMENT
AGREEMENT made this 15th day of May, 1995, by and between BULL & BEAR
ADVISERS, INC., a Delaware corporation (the "Investment Manager") and LION
RESOURCE MANAGEMENT LIMITED, an English corporation (the "Subadviser").
WHEREAS the Investment Manager has entered into a management agreement (the
"Management Agreement") with BULL & BEAR GOLD INVESTORS LTD. (the "Fund")
pursuant to which the Investment Manager furnishes the Fund with investment
management and other services; and
WHEREAS the Management Agreement provides that the Investment Manager may,
at its own expense, contract for research and other services as it deems
necessary or desirable to fulfill such obligations; and
WHEREAS, the Subadviser is registered under the Investment Advisers Act of
1940; and
WHEREAS, the Investment Manager desires to retain the Subadviser to provide
subadvisory and research services in connection with the Fund and the Subadviser
is willing to provide such services;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. The Investment Manager will manage the investment and reinvestment of
the assets of Fund including the regular furnishing of advice with respect to
the Fund's portfolio transactions subject at all times to the control and final
direction of the Board of Directors of the Fund, for the period and on the terms
set forth in its Management Agreement with the Fund. The Investment Manager
retains responsibility for selecting brokers, monitoring trade executions,
communicating instructions to the Fund's custodian and other Fund agents, and
all other functions pertaining to the management of the Fund.
2. The Subadviser will make itself available to advise and consult with the
Investment Manager regarding the selection, clearing, and safekeeping of the
Fund's portfolio investments and assist in pricing and generally monitoring such
investments. The Subadviser will provide the Investment Manager with advice as
to allocation of the Fund's portfolio assets among (1) various countries,
including the United States and (2) equities, bullion, and/or other types of
investments, and within each such allocation of country and/or type of
investment, recommendations of specific investments. The Subadviser agrees to
permit the use of its name and the names of its personnel and other information
about the Subadviser in the marketing and other literature in connection with
the Fund.
3. In consideration of the Subadviser's services, the Investment Manager,
and not the Fund, shall pay to the Subadviser a percentage of the Investment
Manager's Net Fees. "Net Fees" are hereby defined as the actual amounts received
by the Investment Manager as compensation pursuant to paragraph 7 of the
Management Agreement less reimbursements, if any, pursuant to the guaranty set
forth in paragraph 9 of the Management Agreement and waivers of such
compensation by the Investment Manager. The amount of the percentage and the
timing of the payment shall be determined by the schedule and accompanying
definitions set forth in Appendix A hereto.
4. The Subadviser will pay all expenses incurred by it in connection with
this Subadvisory Agreement.
5. The services of the Subadviser hereunder are not to be deemed exclusive,
and the Subadviser shall be free to render similar services to others in
addition to the Investment Manager and the Fund so long as its services
hereunder are not impaired thereby. The Subadviser shall not render, however,
similar services to any U.S. registered investment company either directly or
indirectly as an adviser, subadviser, or otherwise, other than to the Fund and
other investment companies for which the Investment Manager or its affiliates
provide investment management services. The Subadviser may render similar
services to certain private specialist portfolios, as determined by the
Investment Manager and the Subadviser from time to time.
6. This Subadvisory Agreement shall become effective upon approval by the
directors and shareholders of the Fund as required by the Investment Company Act
of 1940 (the "1940 Act"). Thereafter, if not terminated, this Subadvisory
Agreement shall continue from year to year if approved annually by (a) the Board
of Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund as defined in the 1940 Act and (b) by a vote of a
majority of the Directors of the Fund who are not parties to the Subadvisory
Agreement, or interested persons of any such party. This Subadvisory Agreement
may be terminated without penalty at any time either by vote of the Board of
Directors of the Fund or by vote of the holders of a majority of the outstanding
voting securities of the Fund on 60 days' written notice to the Investment
Manager and the Subadviser, or by the Investment Manager or the Subadviser on 60
days' written notice to the Fund. In the event of termination upon notice as
herein described, the Investment Manager and the Subadviser agree that, subject
to the provisions of the 1940 Act, no party hereto will be entitled to or seek
indemnification or compensation from the other party for expenses incurred in
connection with marketing efforts performed during the term of this Agreement.
This Subadvisory Agreement shall immediately terminate in the event of its
assignment or upon the termination of the Management Agreement.
7. The Subadviser shall not be liable to the Fund or any shareholder of the
Fund for any error of judgment or mistake of law or for any loss suffered by the
Fund in connection with the matters to which this Subadvisory Agreement relates,
but nothing herein contained shall be construed to protect the Subadviser
against any liability to the Fund by reason of willful misfeasance, bad faith,
or gross negligence in the performance of its duties or by reason of its
reckless disregard of obligations and duties under this Subadvisory Agreement.
8. Subject to and in accordance with the Articles of Incorporation and
Bylaws of the Fund, the Investment Manager, and the Subadviser, it is understood
that directors, officers, agents and shareholders of the Fund, the Investment
Manager, or Subadviser are or may be interested in the Fund, the Investment
Manager, or the Subadviser as directors, officers, shareholders or otherwise,
that the Investment Manager or the Subadviser is or may be interested in the
Fund or the Investment Manager or the Subadviser as a shareholder or otherwise
and that the effect and nature of any such interests shall be governed by law
and by the provisions, if any, of said Articles of Incorporation or Bylaws.
9. All notices hereunder shall be in writing and shall be delivered in
person or sent by facsimile transmission that is confirmed by regular,
registered, or certified mail to the following address for the respective
parties:
BULL & BEAR ADVISERS, INC.
11 Hanover Square
New York, NY 10005
Fax: (212) 785-0400
LION RESOURCE MANAGEMENT LIMITED
7 - 8 Kendrick Mews
London, U.K. SW7 3HG
Fax 01-144-71-591-0535
Notice shall be deemed given, five days after depositing in a post office,
postage prepaid and if sent by facsimile transmission five days after
confirmation has been mailed.
10. As used in this Subadvisory Agreement, the terms "interested person,"
"assignment," and "vote of a majority of the outstanding voting securities"
shall have the meaning provided therefor in the 1940 Act, as from time to time
amended.
IN WITNESS WHEREOF, the parties hereto have executed this Subadvisory
Agreement on the day and year first above written.
BULL & BEAR ADVISERS, INC.
By:
LION RESOURCE MANAGEMENT LIMITED
By:
APPENDIX A
BULL & BEAR GOLD INVESTORS LTD.
Subadvisory Fee
As a percent of Net Fees
The Investment Manager shall pay to the Subadviser within 30 days of each
Performance Determination Date, as defined in paragraph A below, a percentage of
the Net Fees, as defined in paragraph 3 of this Subadvisory Agreement, earned
since the later of the effective date of this Subadvisory Agreement or the prior
Performance Determination Date, as defined in paragraph A below. The amount of
the percentage shall be determined by reference to the grid set forth below.
RELATIVE PERFORMANCEA
TOTAL NET ASSETSB More than 50 Within 50 More than 50
basis points basis points basis points
better than BTR of BTR below BTR
=$50,000,000 30% 17.5% 5%
$50,000,000 and 40% 30% 20%
=$150,000,000
$150,000,000 and 45% 35% 25%
=$250,000,000
$250,000,000 50% 40% 30%
MEMORANDUM OF UNDERSTANDING
This MEMORANDUM OF UNDERSTANDING between BULL & BEAR ADVISERS, INC., a
Delaware corporation (the "Investment Manager") and LION RESOURCE MANAGEMENT
LIMITED, an English corporation (the "Subadviser") is dated this 15th day of
May, 1995.
WHEREAS, the Investment Manager has retained the Subadviser to provide
subadvisory and research services in connection with Bull & Bear Gold Investors
Ltd. (the "Fund") pursuant to the terms of a Subadvisory Agreement dated May 15,
1995 (the "Agreement");
WHEREAS, pursuant to paragraph 5 of the Agreement, the Subadviser may
render similar services to certain private specialist portfolios, as determined
by the Investment Manager and the Subadviser from time to time;
NOW THEREFORE, in consideration of the mutual promises and agreements
herein contained and other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed between the parties hereto as
follows:
1. Subject to its applicable fiduciary duties, the Subadviser shall
encourage investors seeking the Subadviser's subadvisory and research services
to invest in the Fund and its affiliates.
2. The Investment Manager and the Subadviser have determined at this time
that permitted private specialist portfolios are those having net assets in
excess of the greater of $5,000,000 or 10% of the Fund's total net assets.
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Understanding on the day and year first above written.
BULL & BEAR ADVISERS, INC.
By:
LION RESOURCE MANAGEMENT LIMITED
By:
PRECIOUS METALS STORAGE AGREEMENT
This Agreement dated as of the 20th day of June, 1995, between Wilmington
Trust Company, a Delaware Corporation, having its principal office at Rodney
Square North, Wilmington, Delaware 19890 ("Wilmington Trust"), and Bull & Bear
Gold Investors Ltd. a Maryland corporation, having its principal office at 11
Hanover Square, New York, NY 10005 ("Fund"), with respect to Wilmington Trust's
accepting, holding as custodian, storing, transferring, and delivering precious
metals owned by the Fund.
WHEREAS, the Fund is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management company: and
WHEREAS, Wilmington Trust desires to serve as custodian for the Fund; and
WHEREAS, Wilmington Trust has aggregate capital, surplus, and undivided
profits in excess of Two Million Dollars ($2,000,000) and has its functions and
physical facilities supervised by the Federal Deposit Insurance Corporation and
the Delaware State Bank Commissioner and is ready and willing to serve pursuant
to the terms of this Agreement; and
WHEREAS, the Fund is authorized to invest in precious metals and,
therefore, wishes to enter into this Agreement in order that it may provide
storage for said precious metals at Wilmington Trust.
NOW, THEREFORE, in consideration of the mutual agreements herein made, Fund
and Wilmington Trust agree as follows:
1. Definitions. The term "proper instructions" shall mean a request or
direction by a tested telex, or written (including, without limitation,
facsimile transmission) request, direction, instruction or
certification signed or initialed by or on behalf of the Fund by at
least two Authorized Persons (as hereinafter defined).
2. Names, Titles and Signatures of Authorized Signers. An officer of Fund
will certify to Wilmington Trust the names, titles and signatures of those
persons authorized to sign in accordance with Sec. 1 hereof ("Authorized
Persons"), and on a timely basis, of any changes which thereafter may occur.
3. Delivery to Bank. Wilmington Trust will receive shipments said to
contain precious metals for the Fund's account and will store such shipments in
safekeeping for the Fund in the State of Delaware.
4. Accounts. All such shipments said to contain precious metals delivered
to Wilmington Trust will be held and stored by Wilmington Trust and shall be
credited (in accordance with instructions of Fund), to the Fund's account and
maintained in reasonably detailed books of account. Wilmington Trust shall open
and maintain a separate bank account(s) in the name of the Fund, subject only to
draft or order by Wilmington Trust acting pursuant to the terms of this
Agreement, and shall hold in such account(s), subject to the provisions hereof,
all cash received by it for the account of the Fund.
5. Holding of Precious Metals. Wilmington Trust shall hold all precious
metals received by it for the account of the Fund, pursuant to the provisions of
Section 17(f) of the Investment Company Act of 1940 and the regulations hereof.
All such precious metals are to be held or disposed of by Wilmington Trust for,
and subject at all times to the proper instructions of, Fund, pursuant to the
terms of this Agreement. Wilmington Trust shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any such precious metals,
except pursuant to the proper instructions of Fund.
6. Instructions-Purchase. Upon receipt of proper instructions from Fund,
Wilmington Trust is hereby authorized to pay for bullion purchased for the
account of the Fund only upon receipt of bullion by Wilmington Trust for the
account of the Fund.
7. Instructions-Sales. Upon receipt of proper instructions from Fund,
Wilmington Trust is authorized to make delivery of bullion which has been sold
for the account of the Fund, but only against receipt of cash proceeds by
Wilmington Trust for the account of the Fund.
8. Reports by Custodian Wilmington Trust shall each business day furnish
the Fund and Company with a statement summarizing all transactions and entries
for the account of the Fund for the preceding business day provided activity
occurred within the Fund's account such day. At the end of every month
Wilmington Trust shall furnish the Fund with an account statement which
summarizes account activity during the month and provides details of account
inventory as of the close of the last business day of the month, which shall
include bar size, quantity, brand name, serial number, fineness, gross weight in
troy ounces, fine weight and fine troy weight contained in the Fund's bullion
inventory. Wilmington Trust shall furnish such other reports as may be mutually
agreed upon from time-to time.
9. Disclaimer. Wilmington Trust will not ascertain nor be responsible nor
liable for the authenticity or correctness of the markings on, or the weight,
contents or fineness of precious metals held in safekeeping for the Fund.
10. Insurance. Wilmington Trust agrees to maintain adequate insurance
coverage on the precious metals stored. This insurance consists of a Bankers
Blanket Bond Form 24 followed by all-risk property policies which shall provide
that the loss thereunder shall be payable to the Fund. Wilmington Trust will
provide certificates of insurance to the Fund evidencing such insurance after
receipt of a written request to provide such certificates.
11. Force Majeure. Wilmington Trust shall not be liable for any failure to
transfer or re-deliver or physically deliver precious metals as provided in
instructions to it pursuant to this Agreement during any period in which
Wilmington Trust is prevented from doing so as the direct and proximate result
of war (whether an actual declaration thereof is made or not), sabotage,
insurrection, riot, act of civil disobedience, act of public enemy, act of any
government or any agency or subdivision thereof, judicial action, labor dispute,
explosion, storm, technical failure, fire or flood, provided, however, that
nothing contained herein shall impair the obligation which Wilmington Trust
shall have to substitute insurance proceeds therefor unless such proceeds are
not payable by the appropriate insurance carriers by reason of an exclusion
contained in applicable policies.
12. Fees. Exhibit A hereto sets forth Wilmington Trust's current fees and
charges for its services hereunder. Fees may be changed upon not less than
ninety (90) day's notice to Fund.
13. Liability.
(a) The physical safekeeping and the settlement of purchase and sale
transactions are the responsibility of Wilmington Trust, and Fund shall have the
right to bring directly against Wilmington Trust any claim for failure of
Wilmington Trust to perform its obligations hereunder.
(b) Wilmington Trust shall not be liable for any action taken in good faith
upon either any proper instructions herein described or a certified copy of any
resolution of the Board of Directors of Fund, and may rely on the genuineness of
any such document which it may in good faith believe to have been validly
executed.
(c) So long as and to the extent that it is in the exercise of reasonable
care, Wilmington Trust shall not be responsible for the title, validity or
genuineness of any property or evidence or title thereto received by it or
delivered by it pursuant to this Agreement and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument from Fund
reasonably believed by it to be genuine and to be signed by the proper party or
parties.
Wilmington Trust shall be entitled to rely on and may act upon advice of
non-in-house counsel (who may be counsel for Wilmington Trust Company or counsel
for Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Wilmington Trust shall be liable only for its own negligent or bad faith
performance of this Agreement, its own negligent or bad faith acts or failures
to act. Fund shall indemnify Wilmington Trust and hold it harmless from and
against all claims, liabilities, and expenses (including reasonable attorney's
fees) which Wilmington Trust may suffer or incur on account of being Custodian
hereunder except such claims, liabilities and expenses arising from Wilmington
Trust's own negligence or bad faith.
If Fund requires Wilmington Trust to take any action, which action involves
the payment of money or which action may, in the opinion of Wilmington Trust,
result in Wilmington Trust being liable for the payment of money or incurring
liability of some other form, Fund, as a prerequisite to requiring Wilmington
Trust to take such action, shall provide indemnity to Wilmington Trust in an
amount and form satisfactory to it.
14. Records. Wilmington Trust hereby acknowledges that all of the records,
except the records retained on magnetic tape, it shall prepare and maintain
pursuant to this Agreement, shall be the property of the Fund and that upon
proper instructions of Fund, it shall:
(a) Deliver said records to Fund or a successor custodian, as appropriate;
(b) Provide the auditors or other representative, agent or employee of the
Fund with a copy of such records without charge; and provide the Fund or
successor custodian with a reasonable number of reports and copies of such
records at a mutually agreed upon charge appropriate to the circumstances;
(c) Permit the auditors or any representative, agent or employee of the
Fund to inspect or copy during Wilmington Trust's normal business hours any such
records, and;
(d) Provide the Fund and its auditors with copies of the Third Party audit
report by Wilmington Trust's auditors regarding internal control matters
relevant to Wilmington Trust's duties hereunder.
(e) As may be requested from time to time by the Fund, Wilmington Trust
shall create and maintain all records relating to its activities and obligations
under this Agreement in such manner as will reasonably assist the Fund in
meeting the Fund's obligations under the Investment Company Act of 1940, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder,
applicable federal and state tax laws and any other law or administrative rules
or procedures which may be applicable to the Fund. Wilmington Trust shall take
all reasonable action to allow the Fund to obtain from year to year favorable
opinions from the Fund's independent accountants with respect to its activities
hereunder in connection with the preparation of the Fund's Form N-1A, as the
Fund may from time to time request, and the Fund's Form N- SAR or other annual
or semi-annual reports to the Securities and Exchange commission and with
respect to any other requirements of the Commission.
15. Appointment of Agents.
(a) Wilmington Trust shall have the authority, in its discretion, to
appoint an agent or agents to do and perform any acts or things for and on
behalf of Wilmington Trust, pursuant at all times to its instructions, as
Wilmington Trust is permitted to do under this Agreement.
(b) Any agent or agents appointed to have physical custody of precious
metals held under this Agreement or any part thereof must be a bank or banks, as
that term is defined in Section 2(a) (5) of the 1940 Act, having an aggregate,
surplus and undivided profits of not less than Two Million Dollars ($2,000,000)
(or such greater sum as may then be required by applicable laws.)
(c) The delegation of any responsibilities or activities by Wilmington
Trust to any agent or agents shall not relieve Wilmington Trust from any
liability which would exist if there were no such delegation.
16. Assignment and Termination.
(a) This Agreement may not be assigned by Fund or Wilmington Trust without
written consent of the other party.
(b) Either Wilmington Trust or Fund may terminate this Agreement without
payment of any penalty, at any time upon ninety (90) days written notice thereof
delivered by the one to the other, and upon the expiration of said ninety (90)
days, this Agreement shall terminate; provided, however, that this Agreement
shall continue thereafter for such period as may be necessary for the complete
divestiture of all assets held hereunder. In the event of such termination,
Wilmington Trust will immediately upon the receipt or transmittal of such
notice, as the case may be, commence and prosecute diligently to completion the
transfer of all precious metals to its successor when appointed by Fund. Fund
shall select such successor custodian within sixty (60) days after the giving of
such notice of termination, and the obligation of Wilmington Trust to deliver
and transfer over said assets directly to such successor custodian shall
commence as soon as such successor is appointed, and all fees due Wilmington
Trust are paid by Fund and shall continue until completed, as aforesaid. At any
time after termination hereof Fund may have access to the records of the
administration of this custodianship whenever the same may be necessary.
(c) If, after termination of the services of Wilmington Trust, no successor
custodian has been appointed within the period above provided, Wilmington Trust
may deliver the precious metals owned by the Fund to a bank or trust company of
its own selection having an aggregate capital, surplus and undivided profits of
not less than Two Million Dollars ($2,000,000) (or such greater sum as may then
be required by the laws and regulations governing the conduct by the Fund of its
business as an investment company) and having its functions and physical
facilities supervised by federal or state authority, to be held as the property
of the Fund under the terms similar to those on which they were held by
Wilmington Trust, whereupon such bank or trust company so selected by Wilmington
Trust shall become the successor custodian with the same effect as though
selected by Fund.
17. This Agreement shall be governed by the laws of the State of Delaware.
Fund agrees that jurisdiction and venue for any action arising under this
Agreement shall be exclusively with the State and Federal courts located in
Delaware. This Agreement shall not be amended, except pursuant to a writing
signed by both parties hereto.
19. Notice.
(a) Account statements and bills sent from Wilmington Trust to Fund shall
be sent as follows:
Bull & Bear Gold Investors Ltd.
Attn: Treasurer
11 Hanover Street
New York, NY 10005
(b) All notices sent by Fund to Wilmington Trust shall be sent as follows:
Wilmington Trust Company
Precious Metals Services Division
c/o Michael B. Clark, Vice President
Rodney Square North
1100 North Market Street
Wilmington, DE 1989
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set forth at the beginning of this Agreement.
WILMINGTON TRUST COMPANY BULL & BEAR GOLD INVESTORS LTD.
By:.............................. By:.........................................
(signature) (signature)
Name:............................ Name:.......................................
Title:........................... Title:......................................
Date:............................ Date:.......................................
ARTHUR J. BROWN
(202) 778-9046
[email protected]
August 22, 1995
Bull & Bear Gold Investors Ltd.
11 Hanover Square
New York, New York 10005
Dear Sir or Madam:
Bull & Bear Gold Investors Ltd. ("Company") is a corporation organized
under the laws of the State of Maryland. We understand that the Company is about
to file Post-Effective Amendment No. 67 to its registration statement on Form
N-1A for the purpose of registering additional shares of capital stock of the
Company under the Securities Act of 1933, as amended ("1933 Act"), pursuant to
Section 24(e)(1) of the Investment Company Act of 1940, as amended ("1940 Act").
We have, as counsel, participated in various corporate and other
proceedings relating to the Company. We have examined copies, either certified
or otherwise proved to be genuine, of the Company's Articles of Incorporation
and By-Laws, as now in effect, and other documents relating to its organization
and operation. Based upon the foregoing, it is our opinion that the shares of
capital stock of the Company currently being registered pursuant to Section
24(e)(1) as reflected in Post-Effective Amendment No. 67, when sold in
accordance with the Company's Articles of Incorporation and By-Laws, will be
legally issued, fully paid and non-assessable, subject to compliance with the
1933 Act, the 1940 Act and applicable state laws regulating the offer and sale
of securities.
We hereby consent to this opinion accompanying Post-Effective Amendment
No. 67 which you are about to file with the Securities and Exchange Commission.
Sincerely,
KIRKPATRICK & LOCKHART LLP
By:
DC-218075.1
<PAGE>
Anybody
August 22, 1995
Page 2
Arthur J. Brown
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our report dated July 14, 1995 on the financial
statements and highlights of Bull & Bear Gold Investors Ltd. Such financial
statements and financial highlights appear in the 1995 Annual Report to
Shareholders which is incorporated by reference in the Statement of Additional
Information filed in Post-Effective Amendment No. 67 under the Securities Act of
1933 and Amendment No. 30 under the Investment Company Act of 1940 to the
Registration Statement on Form N-1A of Bull & Bear Gold Investors Ltd. We also
consent to the reference to our Firm in the Registration Statement and
Prospectus.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
August 18, 1995
Standardized Profit Sharing Plan
ADOPTION AGREEMENT
_____________________________________________________________________________
SECTION 1. EMPLOYER INFORMATION
Name of Employer:______________________________________________________
Address_______________________________________________________________
City: _______________________State:______________________ Zip: _____________
Telephone: _________________ Federal Tax Identification Number______________
Income Tax Year End __________________________
Type of Business (Check only one) [ ] Sole Proprietorship
[ ] Partnership [ ] Corporation [ ] Other (Specify)_______________
Nature of Business
(Describe)_______________________________________________
Plan Sequence No. __________ (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________ Date Business Established ____________
Date of Birth________________________ Marital Status_______________________
Home Address _______________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this Plan is ________, 19 .
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was initially
effective on _____________. The Effective Date of this amendment
and restatement is ________________. NOTE: The effective date
is usually the first day of the Plan Year in which this Adoption
Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing _______ (enter 0, 1 or 2) Years of Eligibility Service.
NOTE: If more than 1 year is selected, the immediate 100% vesting
schedule of Section 5, Option C will automatically apply. If left
blank, the Years of Eligibility Service required will be deemed to be 0.
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age ____________ (no more than 21). NOTE: If left blank, it
will be deemed there is no age requirement for eligibility.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan, and except those
Employees who are non-resident aliens pursuant to Section 410(b)
(3)(C) of the Code and who received no earned income from the
Employer which constitutes income from sources within the United
States.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
Part A. Contribution Formula
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
Part B. Allocation Formula: (Check Option 1 or 2)
Option 1: [ ] Pro Rata Formula. Employer Contributions and Forfeitures
shall be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula: Employer Contributions and Forfeitures
shall be allocated as follows (Start with Step 3 if this Plan
is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that each qualifying Participant's Compensation for the
Plan Year in excess of the integration level bears to all
qualifying Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that the sum of each qualifying Participant's total
Compensation and Compensation in excess of the
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of the
profit sharing maximum disparity rate as described in
Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro
rata to qualifying Participants in the manner described
in Section 4, Part B, Option 1.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $______(a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
_____________________________________________________________________
YEARS OF VESTING SERVICE
Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if Chosen)
___________________________________________________________________________
VESTED PERCENTAGE
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
_____________________________________________________________________
_________
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____(not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ________ Hours of Service (no more than 1,000) shall be required
to constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B. ________ Hours of Service (no more than 500) must be exceeded to
avoid a Break in Vesting Service or a Break in Eligibility
Service.
NOTE: The number of hours in Part A must be greater than the
number of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not
checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to
Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be permitted to make
withdrawals during service pursuant to Section 6.01(A)(3) of the
Plan? [ ] Yes [ ] No
NOTE: If the Plan is being adopted to amend and replace a Prior Plan
which permitted in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be permitted only on account of
hardship. [ ]
SECTION 9. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
Option 1: [ ] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to _____ (at least 50% but no more
than 100%) of the amount paid to the Participant prior to his or
her death.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of
the Code, which provides post-retirement medical benefits allocated
to separate accounts for key employees as defined in Section 419A(d)
(3) of the Code or an individual medical account, as defined in
Section 415(1)(2) of the Code) in addition to this Plan (other than a
paired standardized profit sharing plan using Basic Plan Document No.
03) may not rely on the opinion letter issued by the National Office
of the Internal Revenue Service as evidence that this Plan is
qualified under Section 401 of the Code. If the Employer who adopts
or maintains multiple plans wishes to obtain reliance that the
Employer's plan(s) are qualified, application for a determination
letter should be made to the appropriate Key District Director of
Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer_____________________________Date
Signed_______________
Type
Name________________________________________________________________
____
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers,
or [ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization
__________________________________________________
Signature_____________________________________________________________
____
Type
Name________________________________________________________________
Option B. [ ] Individual Trustee(s)
Signature _____________________________
Signature_________________________
Type Name _____________________________ Type
Name_________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor
Address_______________________________________________________________
___
Telephone
Number_________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan
If you maintain or ever maintained another qualified plan (other than a
paired standardized money purchase pension plan using Basic Plan Document
No. 03) in which any Participant in this Plan is (or was) a Participant
or could become a Participant, you must complete this section. You must
also complete this section if you maintain a welfare benefit fund, as
defined in Section 419(e) of the Code, or an individual medical account,
as defined in Section 415(l)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in this Plan.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master
or prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.) ________________
____________________________________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude Employer
discretion. (Complete)____________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
_______________________________________
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
QUALIFIED RETIREMENT PLAN AND TRUST
Defined Contribution Basic Plan Document 03
_______________________________________________________________________________
SECTION ONE DEFINITIONS
The following words and phrases when used in the Plan with initial capital
letters shall, for the purpose of this Plan, have the meanings set forth
below unless the context indicates that other meanings are intended:
1.01 ADOPTION AGREEMENT
Means the document executed by the Employer through which it adopts
the Plan and Trust and thereby agrees to be bound by all terms and
conditions of the Plan and Trust.
1.02 BASIC PLAN DOCUMENT
Means this prototype Plan and Trust document.
1.03 BREAK IN ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation Period during which an Employee fails to
complete more than 500 Hours of Service (or such lesser number of
Hours of Service specified in the Adoption Agreement for this
purpose).
1.04 BREAK IN VESTING SERVICE
Means a Plan Year during which an Employee fails to complete more than
500 Hours of Service (or such lesser number of Hours of Service
specified in the Adoption Agreement for this purpose).
1.05 CODE
Means the Internal Revenue Code of 1986 as amended from time-to-time.
1.06 COMPENSATION
For Plan Years beginning on or after January 1, 1989, the following
definition of Compensation shall apply:
Compensation will mean Compensation as that term is defined in Section
3.05(E)(2) of the Plan. For any Self-Employed Individual covered under the
Plan, Compensation will mean Earned Income. Compensation shall include only
that Compensation which is actually paid to the Participant during the
applicable period. Except as provided elsewhere in this Plan, the applicable
period shall be the Plan Year unless the Employer has selected another
period in the Adoption Agreement.
Unless otherwise indicated in the Adoption Agreement, Compensation shall
<PAGE>
include any amount which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includible in the gross income of the
Employee under Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
For years beginning after December 31, 1988, the annual Compensation of each
Participant taken into account under the Plan for any year shall not exceed
$200,000. This limitation shall be adjusted by the Secretary at the same
time and in the same manner as under Section 415(d) of the Code, except that
the dollar increase in effect on January 1 of any calendar year is effective
for years beginning in such calendar year and the first adjustment to the
$200,000 limitation is effected on January 1, 1990. If a Plan determines
Compensation on a period of time that contains fewer than 12 calendar
months, then the annual Compensation limit is an amount equal to the annual
Compensation limit for the calendar year in which the compensation period
begins multiplied by the ratio obtained by dividing the number of full
months in the period by 12.
<PAGE>
In determining the Compensation of a Participant for purposes of this
limitation, the rules of Section 414(q)(6) of the Code shall apply, except
in applying such rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participant who have not
attained age 19 before the close of the year.
If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining the portion
of Compensation up to the integration level if this Plan provides for
permitted disparity), the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation as
determined under this Section prior to the application of this limitation.
If Compensation for any prior Plan Year is taken into account in determining
an Employee's contributions or benefits for the current year, the
Compensation for such prior year is subject to the applicable annual
Compensation limit in effect for that prior year. For this purpose, for
years beginning before January 1, 1990, the applicable annual Compensation
limit is $200,000.
Unless otherwise indicated in the Adoption Agreement, where an Employee
enters the Plan (and thus becomes a Participant) on an Entry Date other than
the Entry Date in a Plan Year, his Compensation will include any such
earnings paid to him during the whole of such Plan Year.
Where this Plan is being adopted as an amendment and restatement to bring a
Prior Plan into compliance with the Tax Reform Act of 1986, such Prior
Plan's definition of Compensation shall apply for Plan Years beginning
before January 1, 1989.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan
Years beginning on or after January 1, 1994, the annual Compensation of each
Employee taken into account under the Plan shall not exceed the OBRA '93
annual Compensation limit. The OBRA '93 annual Compensation limit is
$150,000, as adjusted by the Commissioner for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Internal Revenue
Code. The cost-of-living adjustment in effect for a calendar year applies to
any period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual Compensation
limit will be multiplied by a fraction, the numerator of which is the number
of months in the determination period, and the denominator of which is 12.
<PAGE>
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual Compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual Compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of
the first Plan Year beginning on or after January 1, 1994 the OBRA '93
annual Compensation limit is $150,000.
<PAGE>
1.07 CUSTODIAN
Means an entity specified in the Adoption Agreement as Custodian or
any duly appointed successor as provided in Section 5.09.
1.08 DISABILITY
Means the inability to engage in any substantial, gainful activity by
reason of any medically determinable physical or mental impairment
that can be expected to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12 months.
The permanence and degree of such impairment shall be supported by
medical evidence.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to
the extent deductible under Section 404 of the Code.
1.09 EARNED INCOME
Means the net earnings from self-employment in the trade or business
with respect to which the Plan is established, for which personal
services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in
gross income and the deductions allocable to such items. Net earnings
are reduced by contributions by the Employer to a qualified plan to
the extent deductible under Section 404 of the Code.
Net earnings shall be determined with regard to the deduction allowed
to the Employer by Section 164(f) of the Code for taxable years
beginning after December 31, 1989.
<PAGE>
1.10 EFFECTIVE DATE
Means the date the Plan becomes effective as indicated in the Adoption
Agreement. However, where a separate date is stated in the Plan as of
which a particular Plan provision becomes effective, such date will
control with respect to that provision.
1.11 ELIGIBILITY COMPUTATION PERIOD
An Employee's initial Eligibility Computation Period shall be the 12
consecutive month period commencing with the date such Employee first
performs an Hour of Service (employment commencement date). His
subsequent Eligibility Computation Periods shall be the 12 consecutive
month periods commencing on the anniversaries of his employment
commencement date; provided, however, if pursuant to the Adoption
Agreement, an Employee is required to complete one or less Years of
Eligibility Service to become a Participant, then his subsequent
Eligibility Computation Periods shall be the Plan Years commencing
with the Plan Year beginning during his initial Eligibility
Computation Period.
1.12 EMPLOYEE
Means any person employed by an Employer maintaining the Plan or of
any other employer required to be aggregated with such Employer under
Sections 414(b), (c), (m) or (o) or the Code.
The term Employee shall also include any Leased Employee deemed to be
an Employee of any Employer described in the previous paragraph as
provided in Section 414(n) or (o) of the Code.
1.13 EMPLOYER
Means any corporation, partnership, sole-proprietorship or other
entity named in the Adoption Agreement and any successor who by
merger, consolidation, purchase or otherwise assumes the obligations
of the Plan. A partnership is considered to be the Employer of each of
the partners and a sole-proprietorship is considered to be the
Employer of a sole proprietor.
1.14 EMPLOYER CONTRIBUTION
Means the amount contributed by the Employer each year as determined
under this Plan.
1.15 ENTRY DATES
Means the first day of the Plan Year and the first day of the seventh
month of the Plan Year, unless the Employer has specified more
frequent dates in the Adoption Agreement.
<PAGE>
1.16 ERISA
Means the Employee Retirement Income Security Act of 1974 as amended
from time-to-time.
1.17 FORFEITURE
Means that portion of a Participant's Individual Account as derived
from Employer Contributions which he or she is not entitled to receive
(i.e., the nonvested portion).
1.18 FUND
Means the Plan assets held by the Trustee for the Participants'
exclusive benefit.
1.19 HIGHLY COMPENSATED EMPLOYEE
The term Highly Compensated Employee includes highly compensated
active employees and highly compensated former employees.
A highly compensated active employee includes any Employee who
performs service for the Employer during the determination year and
who, during the look-back year: (a) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (b) received Compensation from the Employer in excess of
$50,000 (as adjusted pursuant to Section 415(d) of the Code) and was a
member of the top-paid group for such year; or (c) was an officer of
the Employer and received Compensation during such year that is
greater than 50% of the dollar limitation in effect under Section
415(b)(1)(A) of the Code. The term Highly Compensated Employee also
includes: (a) Employees who are both described in the preceding
sentence if the term "determination year" is substituted for the term
"look-back year" and the Employee is one of the 100 Employees who
received the most Compensation from the Employer during the
determination year; and (b) Employees who are 5% owners at any time
during the look-back year or determination year.
If no officer has satisfied the Compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the 12 month period immediately preceding the
determination year.
A highly compensated former employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
<PAGE>
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5% owner who is an active or former Employee
or a Highly Compensated Employee who is one of the 10 most
<PAGE>
Highly Compensated Employees ranked on the basis of Compensation paid
by the Employer during such year, then the family member and the 5%
owner or top 10 Highly Compensated Employee shall be aggregated. In
such case, the family member and 5% owner or top 10 Highly Compensated
Employee shall be treated as a single Employee receiving Compensation
and Plan contributions or benefits equal to the sum of such
Compensation and contributions or benefits of the family member and 5%
owner or top 10 Highly Compensated Employee. For purposes of this
Section, family member includes the spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of such
lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee, including
the determinations of the number and identity of Employees in the
top-paid group, the top 100 Employees, the number of Employees treated
as officers and the Compensation that is considered, will be made in
accordance with Section 414(q) of the Code and the regulations
there-under.
1.20 HOURS OF SERVICE - Means
A. Each hour for which an Employee is paid, or entitled to payment,
for the performance of duties for the Employer. These hours will
be credited to the Employee for the computation period in which
the duties are performed; and
B. Each hour for which an Employee is paid, or entitled to payment, by
the Employer on account of a period of time during which no duties
are performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity
(including disability), layoff, jury duty, military duty or leave
of absence. No more than 501 Hours of Service will be credited
under this paragraph for any single continuous period (whether or
not such period occurs in a single computation period). Hours under
this paragraph shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which is
incorporated herein by this reference;
<PAGE>
and
C. Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same
Hours of Service will not be credited both under paragraph (A) or
paragraph (B), as the case may be, and under this paragraph (C).
These hours will be credited to the Employee for the computation
period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement, or
payment is made.
D. Solely for purposes of determining whether a Break in Eligibility
Service or a Break in Vesting Service has occurred in a computation
period (the computation period for purposes of determining whether
a Break in Vesting Service has occurred is the Plan Year), an
individual who is absent from work for maternity or paternity
reasons shall receive credit for the Hours of Service which would
otherwise have been credited to such individual but for such
absence, or in any case in which such hours cannot be determined, 8
Hours of Service per day of such absence. For purposes of this
paragraph, an absence from work for maternity or paternity reasons
means an absence (1) by reason of the pregnancy of the individual,
(2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or
(4) for purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of Service
credited under this paragraph shall be credited (1) in the
Eligibility Computation Period or Plan Year in which the absence
begins if the crediting is necessary to prevent a Break in
Eligibility Service or a Break in Vesting Service in the applicable
period, or (2) in all other cases, in the following Eligibility
Computation Period or Plan Year.
E. Hours of Service will be credited for employment with other members
of an affiliated service group (under Section 414(m) of the Code),
a controlled group of corporations (under Section 414(b) of the
Code), or a group of trades or businesses under common control
(under Section 414(c) of the Code) of which the adopting Employer
is a member, and any other entity required to be aggregated with
the Employer pursuant to Section 414(o) of the Code and the
regulations thereunder.
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Code
<PAGE>
Sections 414(n) or 414(o) and the regulations thereunder.
F. Where the Employer maintains the plan of a predecessor employer,
service for such predecessor employer shall be treated as service
for the Employer.
G. The above method for determining Hours of Service may be altered
as specified in the Adoption Agreement.
1.21 INDIVIDUAL ACCOUNT
Means the account established and maintained under this Plan for each
Participant in accordance with Section 4.01.
1.22 INVESTMENT FUND
Means a subdivision of the Fund established pursuant to Section 5.05.
1.23 KEY EMPLOYEE
Means any person who is determined to be a Key Employee under Section
10.08.
1.24 LEASED EMPLOYEE
Means any person (other than an Employee of the recipient) who
pursuant to an agreement between the recipient and any other person
("leasing organization") has performed services for the recipient (or
for the recipient and related persons determined in accordance with
Section 414(n)(6) of the Code) on a substantially full time basis for
a period of at least one year, and such services are of a type
historically performed by Employees in the business field of the
recipient Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to
services performed for the recipient Employer shall be treated as
provided by the recipient Employer.
A Leased Employee shall not be considered an Employee of the recipient
if: (1) such employee is covered by a money purchase pension plan
providing: (a) a nonintegrated employer contribution rate of at least
10% of compensation, as defined in Section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction agreement
which are excludable from the employee's gross income under Section
125, Section 402(a)(8), Section 402(h) or Section 403(b) of the Code,
(b) immediate participation, and (c) full and immediate vesting; and
(2) Leased Employees do not constitute more than 20% of the
recipient's nonhighly compensated work force.
1.25 NORMAL RETIREMENT AGE
<PAGE>
Means the age specified in the Adoption Agreement. However, if the
Employer enforces a mandatory retirement age which is less than the
Normal Retirement Age, such mandatory age is deemed to be the Normal
Retirement Age. If no age is specified in the Adoption Agreement, the
Normal Retirement Age shall be age 59 1/2.
1.26 OWNER - EMPLOYEE
Means an individual who is a sole proprietor, or who is a partner
owning more than 10% of either the capital or profits interest of the
partnership.
<PAGE>
1.27 PARTICIPANT
Means any Employee or former Employee of the Employer who has met the
Plan's eligibility requirements, has entered the Plan and who is or
may become eligible to receive a benefit of any type from this Plan or
whose Beneficiary may be eligible to receive any such benefit.
1.28 PLAN
Means the prototype defined contribution plan adopted by the Employer.
The Plan consists of this Basic Plan Document plus the corresponding
Adoption Agreement as completed and signed by the Employer.
1.29 PLAN ADMINISTRATOR
Means the person or persons determined to be the Plan Administrator in
accordance with Section 8.01.
1.30 PLAN YEAR
Means the 12 consecutive month period which coincides with the
Employer's tax year or such other 12 consecutive month period as is
designated in the Adoption Agreement.
1.31 PRIOR PLAN
Means a plan which was amended or replaced by adoption of this Plan
document as indicated in the Adoption Agreement.
1.32 PROTOTYPE SPONSOR
Means the entity specified in the Adoption Agreement. Such entity must
meet the definition of a sponsoring organization set forth in Section
3.07 of Revenue Procedure 89-13.
1.33 SELF-EMPLOYED INDIVIDUAL
Means an individual who has Earned Income for the taxable year from
the trade or business for which the Plan is established; also, an
individual who would have had Earned Income but for the fact that the
<PAGE>
trade or business had no net profits for the taxable year.
1.34 SEPARATE FUND
Means a subdivision of the Fund held in the name of a particular
Participant representing certain assets held for that Participant. The
assets which comprise a Participant's Separate Fund are those assets
earmarked for him and those assets subject to the Participant's
individual direction pursuant to Section 5.14.
1.35 TAXABLE WAGE BASE
Means, with respect to any taxable year, the maximum amount of
earnings which may be considered wages for such year under Section
3121(a)(1) of the Code.
1.36 TERMINATION OF EMPLOYMENT
A Termination of Employment of an Employee of an Employer shall occur
whenever his status as an Employee of such Employer ceases for any
reason other than his death. An Employee who does not return to work
for the Employer on or before the expiration of an authorized leave of
absence from such Employer shall be deemed to have incurred a
Termination of Employment when such leave ends.
1.37 TOP-HEAVY PLAN
This Plan is a Top-Heavy Plan for any Plan Year if it is determined to
be such pursuant to Section 10.08.
1.38 TRUSTEE
Means an individual, individuals or corporation specified in the
Adoption Agreement as Trustee or any duly appointed successor as
provided in Section 5.09. Trustee shall mean Custodian in the event
the financial organization named as Trustee does not have full trust
powers.
1.39 VALUATION DATE
Means the last day of the Plan Year and each other date designated by
the Plan Administrator which is selected in a uniform and
non-discriminatory manner when the assets of the Fund are valued at
their then fair market value.
1.40 VESTED
Means nonforfeitable, that is, a claim which is unconditional and
legally enforceable against the Plan obtained by a Participant or his
Beneficiary to that part of an immediate or deferred benefit under the
Plan which arises from a Participant's Years of Vesting Service.
<PAGE>
1.41 YEAR OF ELIGIBILITY SERVICE
Means a 12 consecutive month period which coincides with an
Eligibility Computation period during which an Employee completes at
least 1,000 Hours of Service (or such lesser number of Hours of
Service specified in the Adoption Agreement for this purpose).
1.42 YEAR OF VESTING SERVICE
Means a Plan Year during which an Employee completes at least 1,000
Hours of Service (or such lesser number of Hours of Service specified
in the Adoption Agreement for this purpose).
In the case of a Participant who has 5 or more consecutive Breaks in
Vesting Service, all Years of Vesting Service after such Breaks in
Vesting Service will be disregarded for the purpose of determining the
Vested portion of his Individual Account derived from Employer
Contributions that accrued before such breaks. Such Participant's
prebreak service will count in vesting the postbreak Individual
Account derived from Employer Contributions only if either:
(A) such Participant had any Vested right to any portion of his
Individual Account derived from Employer Contributions at the
time of his Termination of Employment; or
(B) upon returning to service, the number of consecutive Breaks in
Vesting Service is less than his number of Years of Vesting
Service before such breaks.
Separate subaccounts will be maintained for the Participant's
<PAGE>
prebreak and postbreak portions of his Individual Account derived from
Employer Contributions. Both subaccounts will share in the gains and
losses of the Fund.
Years of Vesting Service shall not include any period of time excluded
from Years of Vesting Service in the Adoption Agreement.
In the event the Plan Year is changed to a new 12-month period,
Employees shall receive credit for Years of Vesting Service, in
accordance with the preceding provisions of this definition, for each
of the Plan Years (the old and new Plan Years) which overlap as a
result of such change.
SECTION TWO ELIGIBILITY AND PARTICIPATION
<PAGE>
2.01 ELIGIBILITY TO PARTICIPATE
Each Employee of the Employer, except those Employees who belong to a
class of Employees which is excluded from participation as indicated
in the Adoption Agreement, shall be eligible to participate in this
Plan upon the satisfaction of the age and Years of Eligibility Service
requirements specified in the Adoption Agreementment.
2.02 PLAN ENTRY
A. If this Plan is a replacement of a Prior Plan by amendment or
restatement, each Employee of the Employer who was a Participant in
said Prior Plan before the Effective Date shall continue to be a
Participant in this Plan.
B. An Employee will become a Participant in the Plan as of the
Effective Date if he has met the eligibility requirements of
Section 2.01 as of such date. After the Effective Date, each
Employee shall become a Participant on the first Entry Date
following the date the Employee satisfies the eligibility
requirements of Section 2.01.
C. The Plan Administrator shall notify each Employee who becomes
eligible to be a Participant under this Plan and shall furnish him
with the application form, enrollment forms or other documents
which are required of Participants. The eligible Employee shall
execute such forms or documents and make available such information
as may be required in the administration of the Plan.
2.03 TRANSFER TO OR FROM INELIGIBLE CLASS
If an Employee who had been a Participant becomes ineligible to
participate because he is no longer a member of an eligible class of
Employees, but has not incurred a Break in Eligibility Service, such
Employee shall participate immediately upon his return to an eligible
class of Employees. If such Employee incurs a Break in Eligibility
Service, his eligibility to participate shall be determined by Section
2.04.
An Employee who is not a member of the eligible class of Employees
will become a Participant immediately upon becoming a member of the
eligible class provided such Employee has satisfied the age and Years
of Eligibility Service requirements. If such Employee has not
satisfied the age and Years of Eligibility Service requirements as of
the date he becomes a member of the eligible class, he shall become a
Participant on the first Entry Date following the date he satisfies
said requirements.
<PAGE>
2.04 RETURN AS A PARTICIPANT AFTER BREAK IN ELIGIBILITY SERVICE
A. Employee Not Participant Before Break - If an Employee incurs a
Break in Eligibility Service before satisfying the Plan's
eligibility requirements, such Employee's Years of Eligibility
Service before such Break in Eligibility Service will not be taken
into account.
B. Nonvested Participants - In the case of a Participant who does not
have a Vested interest in his Individual Account derived from
Employer Contributions, Years of Eligibility Service before a
period of consecutive Breaks in Eligibility Service will not be
taken into account for eligibility purposes if the number of
consecutive Breaks in Eligibility Service in such period equals or
exceeds the greater of 5 or the aggregate number of Years of
Eligibility Service before such break. Such aggregate number of
Years of Eligibility Service will not include any Years of
Eligibility Service disregarded under the preceding sentence by
reason of prior breaks.
If a Participant's Years of Eligibility Service are disregarded
pursuant to the preceding paragraph, such Participant will be
treated as a new Employee for eligibility purposes. If a
Par-ticipant's Years of Eligibility Service may not be disregarded
pursuant to the preceding paragraph, such Participant shall
continue to participate in the Plan, or, if terminated, shall
participate immediately upon reemployment.
C. Vested Participants - A Participant who has sustained a Break in
Eligibility Service and who had a Vested interest in all or a
portion of his Individual Account derived from Employer
Contributions shall continue to participate in the Plan, or, if
terminated, shall participate immediately upon reemployment.
2.05 DETERMINATIONS UNDER THIS SECTION
The Plan Administrator shall determine the eligibility of each
Employee to be a Participant. This determination shall be conclusive
and binding upon all persons except as otherwise provided herein or by
law.
2.06 TERMS OF EMPLOYMENT
Neither the fact of the establishment of the Plan nor the fact that a
common law Employee has become a Participant shall give to that common
law Employee any right to continued employment; nor shall
<PAGE>
either fact limit the right of the Employer to discharge or to deal
otherwise with a common law Employee without regard to the effect such
treatment may have upon the Employee's rights under the Plan.
SECTION THREE CONTRIBUTIONS
3.01 EMPLOYER CONTRIBUTIONS
A. Obligation to Contribute - The Employer shall make contributions to
the Plan in accordance with the contribution formula specified in
the Adoption Agreement. If this Plan is a profit sharing plan, the
Employer shall, in its sole discretion, make contributions without
regard to current or accumulated earnings or profits.
B. Allocation Formula and the Right to Share in the Employer Profit
Sharing Contribution -
1. General - The Employer Contribution for any Plan Year will be
allocated or contributed to the Individual Accounts of
qualifying Participants in accordance with the allocation or
contribution formula specified in the Adoption Agreement. The
Employer Contribution for any Plan Year will be allocated to
each Participant's Individual Account as of the last day of that
Plan Year.
<PAGE>
Any Employer Contribution for a Plan Year must satisfy Section
401(a)(4) and the regulations thereunder for such Plan Year.
2. Qualifying Participants - A Participant is a qualifying
Participant and is entitled to share in the Employer
Contribution for any Plan Year if (1) he was a Participant on at
least one day during the Plan Year, (2) if this Plan is a
nonstandardized plan, he completes a Year of Vesting Service
during the Plan Year and (3) where the Employer has selected the
"last day requirement" in the Adoption Agreement, he is an
Employee of the Employer on the last day of Plan Year (except
that this last requirement (3) shall not apply if the
Participant has died during the Plan Year or incurred a
Termination of Employment during the Plan Year after having
reached his Normal Retirement Age or having incurred a
Disability). Notwithstanding anything in this paragraph to the
contrary, a Participant will not be a qualifying Participant for
a Plan Year if he incurs a Termination of Employment during such
Plan Year with not more than 500 Hours of Service if he is not
an Employee on the last day of the Plan Year. The determination
of whether a Participant
<PAGE>
is entitled to share in the Employer Contribution shall be made
as of the last day of each Plan Year.
3. Special Rules for Integrated Plans - If the Employer has
selected the integrated contribution or allocation formula in
the Adoption Agreement, then the maximum disparity rate shall be
determined in accordance with the following table.
MAXIMUM DISPARITY RATE
Top-Heavy Nontop-Heavy
Integration Level Money Purchase Profit Sharing Profit Sharing
---------------------------------------------------------------------
----------
Taxable Wage Base (TWB) 5.7% 2.7% 5.7%
More than $0 but not more
than X* 5.7% 2.7% 5.7%
More than X* of TWB but
not more than 80% of TWB 4.3% 1.3% 4.3%
More than 80% of TWB but
not more than TWB 5.4% 2.4% 5.4%
* X means the greater of $10, 000 or 20% of TWB.
C. Allocation of Forfeitures - Forfeitures for a Plan Year which arise
as a result of the application of Section 6.01(D) shall be allo-
cated as follows:
1. Profit Sharing Plan - If this is a profit sharing plan,
Forfeitures shall be allocated in the manner provided in Section
3.01 (B) (for Employer Contributions) to the Individual Accounts
of Participants who are entitled to share in the Employer
Contribution for such Plan Year.
2. Money Purchase Pension and Target Benefit Plan - If this Plan is
a money purchase plan or a target benefit plan, Forfeitures shall
be applied towards the reduction of Employer Contributions to the
Plan. However, if the Employer has indicated in the Adoption
Agreement that Forfeitures shall be allocated to the Individual
Accounts of Participants, then Forfeitures shall be allocated in
the manner provided in Section 3.01(B) (for
<PAGE>
Employer Contributions) to the Individual Accounts of
Participants who are entitled to share in the Employer
Contributions for such Plan Year.
D. Timing of Employer Profit Sharing Contribution - The Employer
Contribution for each Plan Year shall be delivered to the Trustee
(or Custodian, if applicable) not later than the due date for filing
the Employer's income tax return for its fiscal year in which the
Plan Year ends, including extensions thereof.
E. Minimum Allocation for Top-Heavy Plans - The contribution and
allocation provisions of this Section 3.01(E) shall apply for any
Plan Year with respect to which this Plan is a Top-Heavy Plan.
1. Except as otherwise provided in (3) and (4) below, the Employer
Contributions and Forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of 3% of such Participant's Compensation or (in the case
where the Employer has no defined benefit plan which designates
this Plan to satisfy Section 401 of the Code) the largest
percentage of Employer Contributions and Forfeitures, as a
percentage of the first $200,000 (increased by any cost of living
adjustment made by the Secretary of Treasury or his delegate) of
the Key Employee's Compensation, allocated on behalf of any Key
Employee for that year. The minimum allocation is determined
without regard to any Social Security contribution. This minimum
allocation shall be made even though under other Plan provisions,
the Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation for the
year because of (a) the Participant's failure to complete 1,000
Hours of Service (or any equivalent provided in the Plan), or (b)
the Participant's failure to make mandatory Employee
Contributions to the Plan, or (c) Compensation less than a stated
amount.
2. For purposes of computing the minimum allocation, Compensation
shall mean Compensation as defined in Section 1.06 of the Plan.
3. The provision in (1) above shall not apply to any Participant
who was not employed by the Employer on the last day of the Plan
Year.
4. The provision in (1) above shall not apply to any Participant to
the extent the Participant is covered under any other plan or
plans of the Employer and the Employer has provided in the adop-
<PAGE>
tion agreement that the minimum allocation or benefit requirement
applicable to Top-Heavy Plans will be met in the other plan or
plans.
5. The minimum allocation required under this Section 3.01(E) and
Section 3.01(F)(1) (to the extent required to be nonforfeitable
under Code Section 416(b)) may not be forfeited under Code
Section 411(a)(3)(B) or 411(a)(3)(D).
F. Special Requirements for Paired Plans - The Employer maintains
paired plans if the Employer has adopted both a standardized profit
sharing plan and a standardized money purchase pension plan using
this Basic Plan Document.
<PAGE>
1. Minimum Allocation - The mandatory minimum allocation provision
of Section 3.01(E) shall not apply to any Participant if the
Employer maintains paired plans. Rather, for each Plan Year, the
Employer will provide a minimum contribution equal to 3% of
Compensation for each non-Key Employee who is entitled to a
minimum contribution. Such minimum contribution will only be made
to one of the Plans. If an Employee is a Participant in only one
of the Plans, the minimum contribution shall be made to that
Plan. If the Employee is a Participant in both Plans, the minimum
contribution shall be made to the money purchase plan.
2. Only One Plan Can Be Integrated - If the Employer maintains
paired plans, only one of the Plans may provide for the disparity
in contributions which is permitted under Section 401(l) of the
Code. In the event that both Adoption Agreements provide for such
integration, only the money purchase pension plan shall be deemed
to be integrated.
G. Return of the Employer Contribution to the Employer Under Special
Circumstances - Any contribution made by the Employer because of a
mistake of fact must be returned to the Employer within one year of
the contribution.
In the event that the Commissioner of Internal Revenue determines
that the Plan is not initially qualified under the Code, any
contributions made incident to that initial qualification by the
Employer must be returned to the Employer within one year after the
date the initial qualification is denied., but only if the
application for qualification is made by the time prescribed by law
for filing the Employer's return for the taxable year in which the
Plan is adopted, or such later date as the Secretary of the Treasury
may
<PAGE>
prescribe.
In the event that a contribution made by the Employer under this
Plan is conditioned on deductibility and is not deductible under
Code Section 404, the contribution, to the extent of the amount
disallowed, must be returned to the Employer within one year after
the deduction is disallowed.
H. Omission of Participant
1. If the Plan is a money purchase plan or a target benefit plan
and, if in any Plan Year, any Employee who should be included as
a Participant is erroneously omitted and discovery of such
omission is not made until after a contribution by the Employer
for the year has been made and allocated, the Employer shall make
a subsequent contribution with respect to the omitted Employee in
the amount which the Employer would have contributed with respect
to that Employee had he not been omitted.
2. If the Plan is a profit sharing plan, and if in any Plan Year,
any Employee who should be included as a Participant is
erroneously omitted and discovery of such omission is not made
until after the Employer Contribution has been made and
allocated, then the Plan Administrator must re-do the allocation
(if a correction can be made) and inform the Employee.
Alternatively, the Employer may choose to contribute for the
omitted Employee the amount which the Employer would have
contributed for him.
3.02 EMPLOYEE CONTRIBUTIONS
This Plan will not accept nondeductible employee contributions and
matching contributions for Plan Years beginning after the Plan Year in
which this Plan is adopted by the Employer. Employee contributions for
Plan Years, beginning after December 31, 1986, together with any
matching contributions as defined in Section 401(m) of the Code, will
be limited so as to meet the nondiscrimination test of Section 401(m)
of the Code.
A separate account will be maintained by the Plan Administrator for the
nondeductible employee contributions of each Participant.
A Participant may, upon a written request submitted to the Plan
Administrator withdraw the lesser of the portion of his Individual
Account attributable to his nondeductible employee contributions or the
amount he contributed as nondeductible employee contributions.
<PAGE>
Employee contributions and earnings thereon will be nonforfeitable at
all times. No Forfeiture will occur solely as a result of an Employee's
withdrawal of employee contributions.
The Plan Administrator will not accept deductible employee
contributions which are made for a taxable year beginning after
December 31, 1986. Contributions made prior to that date will be
maintained in a separate account which will be nonforfeitable at all
times. The account will share in the gains and losses of the Fund in
the same manner as described in Section 4.03 of the Plan. No part of
the deductible employee contribution account will be used to purchase
life insurance. Subject to Section 6.05, joint and survivor annuity
requirements (if applicable), the Participant may withdraw any part of
the deductible employee contribution account by making a written
application to the Plan Administrator.
3.03 ROLLOVER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, an Employee may contribute a rollover contribution to the Plan;
provided that such Employee submits a written certification,
satisfactory to the Trustee (or Custodian), that the contribution
qualifies as a rollover contribution.
A separate account shall be maintained by the Plan Administrator for
each Employee's rollover contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
subject to the Plan's provisions governing distributions.
For purposes of this Section 3.03, "rollover contribution" means a
contribution described in Sections 402(a)(5), 403(a)(4) or 408(d)(3) of
the Code or in any other provision which may be added to the Code which
may authorize rollovers to the Plan.
3.04 TRANSFER CONTRIBUTIONS
If the Plan Administrator so permits in a uniform and nondiscriminatory
manner, the Trustee (or Custodian, if applicable) may receive any
amounts transferred to it from the trustee or custodian of another plan
qualified under Code Section 401(a).
A separate account shall be maintained by the Plan Administrator for
each Employee's transfer contributions which will be nonforfeitable at
all times. Such account will share in the income and gains and losses
of the Fund in the manner described in Section 4.03 and shall be
<PAGE>
subject to the Plan's provisions governing distributions.
3.05 LIMITATION ON ALLOCATIONS
A. If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer
or a welfare benefit fund, as defined in Section 419(e) of the Code
maintained by the Employer, or an individual medical account, as
defined in Section 415(l)(2) of the Code, maintained by the
Employer, which provides an annual addition as defined in Section
3.08(E)(1), the following rules shall apply:
<PAGE>
1. The amount of annual additions which may be credited to the
Par-ticipant's Individual Account for any limitation year will
not exceed the lesser of the maximum permissible amount or any
other limitation contained in this Plan. If the Employer
Contribution that would otherwise be contributed or allocated to
the Partici-pant's Individual Account would cause the annual
additions for the limitation year to exceed the maximum
permissible amount, the amount contributed or allocated will be
reduced so that the annual additions for the limitation year
will equal the maximum permissible amount.
2. Prior to determining the Participant's actual compensation for
the limitation year, the Employer may determine the maximum
permissible amount for a Participant on the basis of a
reasonable estimation of the Participant's Compensation for the
limitation year, uniformly determined for all participants
similarly situated.
3. As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the
limitation year will be determined on the basis of the
Participant's actual compensation for the limitation year.
4. If pursuant to Section 3.08(A)(3) or as a result of the
allocation of Forfeitures there is an excess amount, the excess
will be disposed of as follows:
a. Any nondeductible voluntary employee contributions, to the
extent they would reduce the excess amount, will be returned
to the Participant;
b. If after the application of paragraph (a) an excess amount
still exists, and the Participant is covered by the Plan at
the end of the limitation year, the excess amount in the
<PAGE>
Participant's Individual Account will be used to reduce
Employer Contributions (including any allocation of
Forfeitures) for such Participant in the next limitation
year, and each succeeding limitation year if necessary.
c. If after the application of paragraph (b) an excess amount
still exists, and the Participant is not covered by the Plan
at the end of a limitation year, the excess amount will be
held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer Contri-
butions (including allocation of any Forfeitures) for all
remaining Participants in the next limitation year, and each
succeeding limitation year if necessary;
d. If a suspense account is in existence at any time during a
limitation year pursuant to this Section, it will not par-
ticipate in the allocation of the Fund's investment gains
and losses. If a suspense account is in existence at any
time during a particular limitation year, all amounts in the
suspense account must be allocated and reallocated to Par-
ticipants' Individual Accounts before any Employer Contribu-
tions or any Employee contributions may be made to the Plan
for that limitation year. Excess amounts may not be distri-
buted to Participants or former Participants.
B. If, in addition to this Plan, the Participant is covered under
another qualified master or prototype defined contribution plan
maintained by the Employer, a welfare benefit fund, as defined in
Section 419(e) of the Code maintained by the Employer, or an
individual medical account, as defined in Section 415(l)(2) of the
Code, maintained by the Employer, which provides an annual addition
as defined in Section 3.05(E)(1), during any limitation year, the
following rules apply:
1. The annual additions which may be credited to a Participant's
Individual Account under this Plan for any such limitation year
will not exceed the maximum permissible amount reduced by the
annual additions credited to a Participant's Individual Account
under the other plans and welfare benefit funds for the same
limitation year. If the annual additions with respect to the
Participant under other defined contribution plans and welfare
benefit funds maintained by the employer are less than the maximum
permissible amount and the Employer Contribution that would
otherwise be contributed or allocated to the Participant's
Individual Account under this Plan would cause the annual
additions for the limitation year to exceed this limitation, the
amount contributed
<PAGE>
or allocated will be reduced so that the annual additions under
all such plans and funds for the limitation year will equal the
maximum permissible amount. If the annual additions with respect
to the Participant under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater
than the maximum permissible amount, no amount will be contributed
or allocated to the Participant's Individual Account under this
Plan for the limitation year.
2. Prior to determining the Participant's actual compensation for the
limitation year, the Employer may determine the maximum
permissible amount for a Participant in the manner described in
Section 3.05(A)(2).
3. As soon as is administratively feasible after the end of the
limitation year, the maximum permissible amount for the limitation
year will be determined on the basis of the Participant's actual
compensation for the limitation year.
4. If, pursuant to Section 3.05(B)(3) or as a result of the
allocation of Forfeitures a Participant's annual additions under
this Plan and such other plans would result in an excess amount
for a limitation year, the excess amount will be deemed to consist
of the annual additions last allocated, except that annual
additions attributable to a welfare benefit fund or individual
medical account will be deemed to have been allocated first
regardless of the actual allocation date.
5. If an excess amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the excess amount attributed to this Plan
will be the product of,
a. the total excess amount allocated as of such date, times
b. the ration of (i) the annual additions allocated to the Parti-
cipant for the limitation year as of such date under this Plan
to (ii) the total annual additions allocated to the
Participant for the limitation year as of such date under this
and all the other qualified prototype defined contribution
plans.
6. Any excess amount attributed to this Plan will be disposed in the
manner described in Section 3.05(A)(4).
C. If the Participant is covered under another qualified defined contri-
bution plan maintained by the Employer which is not a master or pro-
<PAGE>
totype plan, annual additions which may be credited to the
Partici-pant's Individual Account under this Plan for any limitation
year will be limited in accordance with Sections 3.05(B)(1) through
3.08(B)(6) as though the other plan were a master or prototype plan
unless the Employer provides other limitations in the Section of the
Adoption Agreement titled "Limitation on Allocation - More Than One
Plan."
<PAGE>
D. If the Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the sum
of the Participant's defined benefit plan fraction and defined
contribution plan fraction will not exceed 1.0 in any limitation
year. The annual additions which may be credited to the Participant's
Individual Account under this Plan for any limitation year will be
limited in accordance with the Section of the Adoption Agreement
titled "Limitation on Allocation - More Than One Plan."
E. The following terms shall have the following meanings when used in
this Section 3.05:
1. Annual additions: The sum of the following amounts credited to a
Participant's Individual Account for the limitation year:
a. Employer Contributions,
b. Employee contributions,
c. Forfeitures, and
d. amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415(l)(2) of the Code,
which is part of a pension or annuity plan maintained by the
Employer are treated as annual additions to a defined contri-
bution plan. Also amounts derived from contributions paid or
accrued after December 31, 1985, in taxable years ending after
such date, which are attributable to post-retirement medical
benefits, allocated to the separate account of a key employee,
as defined in Section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e) of the Code, main-
tained by the Employer are treated as annual additions to a
defined contribution plan.
For this purpose, any excess amount applied under Section
3.05(A)(4) or 3.05(B)(6) in the limitation year to reduce
Employer Contributions will be considered annual additions for
<PAGE>
such limitation year.
2. Compensation: As elected by the Employer in the Adoption Agreem-
ent (and if no election is made, Section 3401(a) wages will be
deemed to have been selected), Compensation shall mean all of a
Participant's:
a. Section 3121 wages. Wages as defined in Section 3121(a) of
the Code, for purposes of calculating Social Security taxes,
but determined without regard to the wage base limitation in
Section 3121(a)(1), the special rules in Section 3121(v), any
rules that limit covered employment based on the type or loca-
tion of an Employee's Employer, and any rules that limit the
remuneration included in wages based on familial relationship
or based on the nature or location of the employment or the
services performed (such as the exceptions to the definition
of employment in Section 3121(b)(1) through (2)).
b. Section 3401(a) wages. Wages as defined in Section 3401(a) of
the Code, for the purposes of income tax withholding at the
source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed (such as
the exception for agricultural labor in Section 3401(a)(2)).
c. 415 safe-harbor compensation. Wages, salaries, and fees for
professional services and other amounts received (without
regard to whether or not an amount is paid in cash) for per-
sonal services actually rendered in the course of employment
with the Employer maintaining the Plan to the extent that the
amounts are includable in gross income (including, but not
limited to, commissions paid salesmen, compensation for ser-
vices on the basis of a percentage of profits, commissions on
insurance premiums, tips, bonuses, fringe benefits, reimburse-
ments, and expense allowances), and excluding the following:
1. Employer contributions to a plan of deferred compensation
which are not includible in the Employee's gross income for
the taxable year in which contributed, or employer
contributions under a simplified employee pension plan to
the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
2. Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the
<PAGE>
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture;
3. Amounts realized from the sale, exchange or other disposit-
ion of stock acquired under a qualified stock option; and
4. Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an
annuity described in Section 403(b) of the Code (whether or
not the amounts are actually excludable from the gross
income of the Employee).
For any Self-Employed Individual, Compensation will mean
Earned Income. For limitation years beginning after
Decem-ber 31, 1991, for purposes of applying the
limitations of this Section 3.05, compensation for a
limitation year is the compensation actually paid or
includible in gross income during such limitation year.
Notwithstanding the preceding sentence, compensation for a
Participant in a defined contribution plan who is
permanently and totally disabled (as defined in Section
22(e)(3) of the Code) is the compensation such Participant
would have received for the limitation year if the
Participant had been paid at the rate of compensation paid
immediately before becoming permanently and totally
disabled; such imputed compensation for the disabled
participant may be taken into account only if the
Participant is not a Highly Compensated Employee (as
defined in Section 414(q) of the Code) and contributions
made on behalf of such Participant are nonforfeitable when
made.
3. Defined benefit fraction: A fraction, the numerator of which is
the sum of the Participant's projected annual benefits under all
the defined benefit plans (whether or not terminated) maintained
by the Employer, and the denominator of which is the lesser of
125% of the dollar limitation determined for the limitation year
under Section 415(b) and (d) of the Code or 140% of the highest
average compensation, including any adjustments under Section
415(b) of the Code.
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first limitation year beginning after
<PAGE>
<PAGE>
December 31, 1986, in one or more defined benefit plans maintained
by the employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125% of the sum
of the annual benefits under such plans which the participant had
accrued as of the close of the last limitation year beginning
before January 1, 1987, disregarding any changes in the terms and
conditions of the plan after May 5, 1986. The preceding sentence
applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of Section 415 of the Code
for all limitation years beginning before January 1, 1987.
4. Defined contribution dollar limitation: $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in
Section 415(b)(1) of the Code as in effect for the limitation
year.
5. Defined contribution fraction: A fraction, the numerator of which
is the sum of the annual additions to the Participant's account
under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior limitation years (including the annual additions
attributable to the Participant's nondeductible employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual additions
attributable to all welfare benefit funds, as defined in Section
419(e) of the Code, and individual medical accounts, as defined in
Section 415(l)(2) of the Code, maintained by the Employer), and
the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior limitation years of service
with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount
in any limitation year is the lesser of 125% of the dollar
limitation determined under Section 415(b) and (d) of the Code in
effect under Section 415(c)(1)(A) of the Code or 35% of the
Participant's compensation for such year.
If the Employee was a participant as of the end of the first day
of the first limitation year beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986, the numerator of this
fraction will be adjusted if the sum of this fraction and the
defined benefit fraction would otherwise exceed 1.0 under the
terms of this Plan. Under the adjustment, an amount equal to the
product of (1) the excess of the sum of the fractions over 1.0
times (2) the denominator of this fraction, will be permanently
subtracted from the numerator of this fraction. The adjustment is
<PAGE>
calculated using the fractions as they would be computed as of the
end of the last limitation year beginning before January 1, 1987,
and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Section 415 limitation
applicable to the first limitation year beginning on or after
January 1, 1987.
The annual addition for any limitation year beginning before
Jan-uary 1, 1987, shall not be recomputed to treat all employee
contributions as annual additions.
6. Employer: For purposes of this Section 3.05, Employer shall mean
the Employer that adopts this Plan, and all members of a
controlled group of corporations (as defined in Section 414(b) of
the Code as modified by Section 415(h)), all commonly controlled
trades or businesses (as defined in Section 414(c) as modified by
Section 415(h)) or affiliated service groups (as defined in
Section 414(m)) of which the adopting Employer is a part, and any
other entity required to be aggregated with the Employer pursuant
to regulations under Section 414(o) of the Code.
7. Excess amount: The excess of the Participant's annual additions
for the limitation year over the maximum permissible amount.
8. Highest average compensation: The average compensation for the
three consecutive years of service with the Employer that produces
the highest average.
9. Limitation year: A calendar year, or the 12-consecutive month
period elected by the Employer in the Section of the Adoption
Agreement titled "Limitation on Allocation - More Than One Plan."
All qualified plans maintained by the Employer must use the same
limitation year. If the limitation year is amended to a different
12-consecutive month period, the new limitation year must begin on
a date within the limitation year in which the amendment is made.
10. Master or prototype plan: A plan the form of which is the subject
of a favorable notification letter from the Internal Revenue
Service.
11. Maximum permissible amount: The maximum annual addition that may
be contributed or allocated to a Participant's Individual Account
under the Plan for any limitation year shall not exceed the lesser
of:
<PAGE>
a. the defined contribution dollar limitation, or
b. 25% of the Participant's compensation for the limitation year.
The compensation limitation referred to in (b) shall not apply to
any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is
otherwise treated as an annual addition under Section 415(l)(1) or
419A(d)(2) of the Code.
If a short limitation year is created because of an amendment
changing the limitation year to a different 12-consecutive month
period, the maximum permissible amount will not exceed the defined
contribution dollar limitation multiplied by the following
fraction:
Number of months in the short limitation year / 12
12. Projected annual benefit: The annual retirement benefit (adjusted
to an actuarially equivalent straight life annuity if such benefit
is expressed in a form other than a straight life annuity or
qualified joint and survivor annuity) to which the Participant
would be entitled under the terms of the Plan assuming:
a. the Participant will continue employment until normal retire-
ment age under the Plan (or current age, if later), and
b. the Participant's compensation for the current limitation year
and all other relevant factors used to determine benefits
under the Plan will remain constant for all future limitation
years.
<PAGE>
SECTION FOUR INDIVIDUAL ACCOUNTS OF PARTICIPANTS AND VALUATION
4.01 INDIVIDUAL ACCOUNTS
A. The Plan Administrator shall establish and maintain an Individual
Account in the name of each Participant to reflect the total
value of his interest in the Fund. Each Individual Account
established hereunder shall consist of such subaccounts as may be
needed for each Participant including:
1. a subaccount to reflect Employer Contributions and Forfeitures
allocated on behalf of a Participant;
2. a subaccount to reflect a Participant's rollover contributions;
<PAGE>
3. a subaccount to reflect a Participant's transfer contributions;
4. a subaccount to reflect a Participant's nondeductible employee
contributions; and
5. a subaccount to reflect a Participant's deductible employee
contributions.
B. The Plan Administrator may establish additional accounts as it may
deem necessary for the proper administration of the Plan, including,
but not limited to, a suspense account for Forfeitures as required
pursuant to Section 6.01(D).
4.02 VALUATION OF FUND
The Fund will be valued each Valuation Date at fair market value.
4.03 VALUATION OF INDIVIDUAL ACCOUNTS
A. Where all or a portion of the assets of a Participant's Individual
Account are invested in a Separate Fund for the Participant, then
the value of that portion of such Participant's Individual Account
at any relevant time equals the sum of the fair market values of
the assets in such Separate Fund, less any applicable charges or
penalties.
B. The fair market value of the remainder of each Individual Account
is determined in the following manner:
1. First, the portion of the Individual Account invested in each
Investment Fund as of the previous Valuation Date is
determined. Each such portion is reduced by any withdrawal made
from the applicable Investment Fund to or for the benefit of a
Participant or his Beneficiary, further reduced by any amounts
forfeited by the Participant pursuant to Section 6.01(D) and
further reduced by any transfer to another Investment Fund
since the previous Valuation Date and is increased by any
amount transferred from another Investment Fund since the
previous Valuation Date. The resulting amounts are the net
Individual Account portions invested in the Investment Funds.
2. Secondly, the net Individual Account portions invested in each
Investment Fund are adjusted upwards or downwards, pro rata
(i.e., ratio of each net Individual Account portion to the sum
of all net Individual Account portions) so that the sum of all
the net Individual Account portions invested in an Investment
Fund will equal the then fair market value of the Investment
<PAGE>
Fund. Notwithstanding the previous sentence, for the first Plan
Year only, the net Individual Account portions shall be the sum
of all contributions made to each Participant's Individual
Account during the first Plan Year.
3. Thirdly, any contributions to the Plan and Forfeitures are
allocated in accordance with the appropriate allocation
provisions of Section 3. For purposes of Section 4,
contributions made by the Employer for any Plan Year but after
that Plan Year will be considered to have been made on the last
day of that Plan Year regardless of when paid to the Trustee
(or Custodian, if applicable).
Amounts contributed between Valuation Dates will not be
credited with investment gains or losses until the next
following Valuation Date.
4. Finally, the portions of the Individual Account invested in
each Investment Fund (determined in accordance with (1), (2)
and (3) above) are added together.
4.04 SEGREGATION OF ASSETS
If a Participant elects a mode of distribution other than a lump sum,
the Plan Administrator may place that Participant's account balance
into a segregated Investment Fund for the purpose of maintaining the
necessary liquidity to provide benefit installments on a periodic
basis.
4.05 STATEMENT OF INDIVIDUAL ACCOUNTS
No later than 270 days after the close of each Plan Year, the Plan
Administrator shall furnish a statement to each Participant
indicating the Individual Account balances of such Participant as of
the last Valuation Date in such Plan Year.
4.06 MODIFICATION OF METHOD FOR VALUING INDIVIDUAL ACCOUNTS If necessary
or appropriate, the Plan Administrator may establish different or
additional procedures (which shall be uniform and non-discriminatory)
for determining the fair market value of the Individual Accounts.
SECTION FIVE TRUSTEE OR CUSTODIAN
<PAGE>
5.01 CREATION OF FUND
By adopting this Plan, the Employer establishes the Fund which shall
consist of the assets of the Plan held by the Trustee (or Custodian,
if applicable) pursuant to this Section 5. Assets within the Fund may
be pooled on behalf of all Participants, earmarked on behalf of each
Participant or be a combination of pooled and earmarked. To the
extent that assets are earmarked for a particular Participant, they
will be held in a Separate Fund for that Participant.
No part of the corpus or income of the Fund may be used for, or
diverted to, purposes other than for the exclusive benefit of
Participants or their Beneficiaries.
5.02 INVESTMENT AUTHORITY
Except as provided in Section 5.14 (relating to individual direction
of investments by Participants), the Employer, not the Trustee (or
<PAGE>
Custodian, if applicable), shall have exclusive management and
control over the investment of the Fund into any permitted
investment. Notwithstanding the preceding sentence, a Trustee with
full trust powers (under applicable law) may make an agreement with
the Employer whereby the Trustee will manage the investment of all or
a portion of the Fund. Any such agreement shall be in writing and set
forth such matters as the Trustee deems necessary or desirable.
5.03 FINANCIAL ORGANIZATION CUSTODIAN OR TRUSTEE WITHOUT FULL
TRUST POWERS
This Section 5.03 applies where a financial organization has
indicated in the Adoption Agreement that it will serve, with respect
to this Plan, as Custodian or as Trustee without full trust powers
(under applicable law). Hereinafter, a financial organization Trustee
without full trust powers (under applicable law) shall be referred to
as a Custodian.
A. Permissible Investments - The assets of the Plan shall be invested
only in those investments which are available through the
Custodian in the ordinary course of business which the Custodian
may legally hold in a qualified plan and which the Custodian
chooses to make available to Employers for qualified plan
investments.
B. Responsibilities of the Custodian - The responsibilities of the
Custodian shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest
the Fund without distinction between principal and interest;
<PAGE>
provided, however, that nothing in this Plan shall require the
Custodian to maintain physical custody of stock certificates
(or other indicia of ownership of any type of asset)
representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, with-
drawals and other information the Custodian deems relevant with
respect to the Plan;
3. To make disbursements from the Fund to Participants or Benefic-
iaries upon the proper authorization of the Plan Administrator;
and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Custodian as
of the end of each Plan Year.
C. Powers of the Custodian - Except as otherwise provided in this Plan,
the Custodian shall have the power to take any action with respect to
the Fund which it deems necessary or advisable to discharge its
responsibilities under this Plan including, but not limited to, the
following powers:
1. To invest all or a portion of the Fund (including idle cash
balances) in time deposits, savings accounts, money market
accounts or similar investments bearing a reasonable rate of
interest in the Custodian's own savings department or the savings
department of another financial organization;
2. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to pay any assessment or charges in connection
therewith; and generally to exercise any of the powers of an owner
with respect to stocks, bonds, securities or other property;
3. To hold securities or other property of the Fund in its own name,
in the name of its nominee or in bearer form; and
4. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers herein
<PAGE>
granted.
5.04 FINANCIAL ORGANIZATION TRUSTEE WITH FULL TRUST POWERS AND
INDIVIDUAL
TRUSTEE
This Section 5.04 applies where a financial organization has
indicated in the Adoption Agreement that it will serve as Trustee
with full trust powers. This Section also applies where one or more
individuals are named in the Adoption Agreement to serve as
Trustee(s).
A. Permissible Investments - The Trustee may invest the assets of the
Plan in property of any character, real or personal, including,
but not limited to the following: stocks, including shares of
open-end investment companies (mutual funds); bonds; notes;
debentures; options; limited partnership interests; mortgages;
real estate or any interests therein; unit investment trusts;
Treasury Bills, and other U.S. Government obligations; common
trust funds, combined investment trusts, collective trust funds or
commingled funds maintained by a bank or similar financial
organization (whether or not the Trustee hereunder); savings
accounts, time deposits or money market accounts of a bank or
similar financial organization (whether or not the Trustee
hereunder); annuity contracts; life insurance policies; or in such
other investments as is deemed proper without regard to
investments authorized by statute or rule of law governing the
investment of trust funds but with regard to ERISA and this Plan.
Notwithstanding the preceding sentence, the Prototype Sponsor may,
as a condition of making the Plan available to the Employer for
adoption, limit the types of property in which the Trustee (other
than a financial organization Trustee with full trust powers), is
permitted to invest.
B. Responsibilities of the Trustee - The responsibilities of the Trustee
shall be limited to the following:
1. To receive Plan contributions and to hold, invest and reinvest the
Fund without distinction between physical and interest; provided,
however, that nothing in this Plan shall require the Trustee to
maintain physical custody of stock certificates (or other indicia
of ownership) representing assets within the Fund;
2. To maintain accurate records of contributions, earnings, with-
drawals and other information the Trustee deems relevant with re-
<PAGE>
spect to the Plan;
3. To make disbursements from the Fund to Participants or Beneficiar-
ies upon the proper authorization of the Plan Administrator; and
4. To furnish to the Plan Administrator a statement which reflects
the value of the investments in the hands of the Trustee as of the
end of each Plan Year.
C. Powers of the Trustee - Except as otherwise provided in this Plan,
the Trustee shall have the power to take any action with respect to
the Fund which it deems necessary or advisable to discharge its
responsibilities under this Plan including, but not limited to, the
following powers:
<PAGE>
1. To hold any securities or other property of the Fund in its own
name, in the name of its nominee or in bearer form;
2. To purchase or subscribe for securities issued, or real property
owned, by the Employer or any trade or business under common
control with the Employer but only if the prudent investment and
diversification requirements of ERISA are satisfied;
3. To sell, exchange, convey, transfer or otherwise dispose of any
securities or other property held by the Trustee, by private
contract or at public auction. No person dealing with the Trustee
shall be bound to see to the application of the purchase money or
to inquire into the validity, expediency, or propriety of any such
sale or other disposition, with or without advertisement;
4. To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges or
subscription rights and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in,
corporate reorganizations or other changes affecting corporate
securities, and to delegate discretionary powers, and to pay any
assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks,
bonds, securities or other property;
5. To invest any part or all of the Fund (including idle cash
balances) in certificates of deposit, demand or time deposits,
savings accounts, money market accounts or similar investments of
the Trustee (if the Trustee is a bank or similar financial
organiza-
<PAGE>
tion), the Prototype Sponsor or any affiliate of such Trustee or
Prototype Sponsor, which bear a reasonable rate of interest;
6. To provide sweep services without the receipt by the Trustee of
additional compensation or other consideration (other than
reimbursement of direct expenses properly and actually incurred in
the performance of such services);
7. To hold in the form of cash for distribution or investment such
portion of the Fund as, at any time and from time-to-time, the
Trustee shall deem prudent and deposit such cash in interest
bearing or noninterest bearing accounts.;
8. To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that
may be necessary or appropriate to carry out the powers herein
granted;
9. To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend
suits or legal or administrative proceedings, and to represent the
Plan in all suits and legal and administrative proceedings;
10. To employ suitable agents and counsel, to contract with agents to
perform administrative and recordkeeping duties and to pay their
reasonable expenses, fees and compensation, and such agent or
counsel may or may not be agent or counsel for the Employer;
11. To cause any part or all of the Fund, without limitation as to
amount, to be commingled with the funds of other trusts (including
trusts for qualified employee benefit plans) by causing such money
to be invested as a part of any pooled, common, collective or
commingled trust fund heretofore or hereafter created by any
trustee (if the Trustee is a bank), by the Prototype Sponsor, by
any affiliate bank of such a Trustee or by such a Trustee or the
Prototype Sponsor, or by such an affiliate in participation with
others; the instrument or instruments establishing such trust fund
or funds, as amended, being made part of this Plan and trust so
long as any portion of the Fund shall be invested through the
medium thereof.
12. Generally to do all such acts, execute all such instruments,
initiate such proceedings, and exercise all such rights and
privileges with relation to property constituting the Fund as if
the Trustee were the absolute owner thereof.
<PAGE>
5.05 DIVISION OF FUND INTO INVESTMENT FUNDS
The Employer may direct the Trustee (or Custodian) from time-to-time
to divide and redivide the Fund into one or more Investment Funds.
Such Investment Funds may include, but not be limited to, Investment
Funds representing the assets under the control of an investment
manager pursuant to Section 5.12 and Investment Funds representing
investment options available for individual direction by Participants
pursuant to Section 5.14. Upon each division or redivision, the
Employer may specify the part of the Fund to be allocated to each
such Investment Fund and the terms and conditions, if any, under
which the assets in such Investment Fund shall be invested.
5.06 COMPENSATION AND EXPENSES
The Trustee (or Custodian, if applicable) shall receive such
reasonable compensation as may be agreed upon by the Trustee (or
Custodian) and the Employer. The Trustee (or Custodian) shall be
entitled to reimbursement by the Employer for all proper expenses
incurred in carrying out his duties under this Plan, including
reasonable legal, accounting and actuarial expenses. If not paid by
the Employer, such compensation and expenses may be charged against
the Fund.
All taxes of any kind that may be levied or assessed under existing
or future laws upon, or in respect of, the Fund or the income thereof
shall be paid from the Fund.
5.07 NOT OBLIGATED TO QUESTION DATA
The Employer shall furnish the Trustee (or Custodian, if applicable)
and Plan Administrator the information which each party deems
necessary for the administration of the Plan including, but not
limited to, changes in a Participant's status, eligibility, mailing
addresses and other such data as may be required. The Trustee (or
Custodian) and Plan Administrator shall be entitled to act on such
information as is supplied them and shall have no duty or
responsibility to further verify or question such information.
5.08 LIABILITY FOR WITHHOLDING ON DISTRIBUTIONS
The Plan Administrator shall be responsible for withholding federal
income taxes from distributions from the Plan, unless the Participant
(or Beneficiary, where applicable) elects not to have such taxes
withheld. However, the Trustee (or Custodian) shall act as agent for
the Plan Administrator to withhold such taxes and to make the
appropriate distribution reports, subject to the Plan Administrator's
obligation to furnish all the necessary information to so withhold to
the Trustee (or Custodian).
<PAGE>
5.09 RESIGNATION OR REMOVAL OF TRUSTEE (OR CUSTODIAN) The Trustee (or
Custodian, if applicable) may resign at any time by giving 30 days
advance written notice to the Employer. The resignation shall become
effective 30 days after receipt of such notice unless a shorter
period is agreed upon.
The Employer may remove any Trustee (or Custodian) at any time by
giving written notice to such Trustee (or Custodian) and such removal
shall be effective 30 days after receipt of such notice unless a
shorter period is agreed upon. The Employer shall have the power to
appoint a successor Trustee (or Custodian).
Upon such resignation or removal, if the resigning or removed Trustee
(or Custodian) is the sole Trustee (or Custodian), he shall transfer
all of the assets of the Fund then held by him as expeditiously as
possible to the successor Trustee (or Custodian) after paying or
reserving such reasonable amount as he shall deem necessary to
provide for the expense in the settlement of the accounts and the
amount of any compensation due him and any sums chargeable against
the Fund for which he may be liable. If the Funds as reserved are not
sufficient for such purpose, then he shall be entitled to
reimbursement from the successor Trustee (or Custodian) out of the
assets in the successor Trustee's (or Custodian's) hands under this
Plan. If the amount reserved shall be in excess of the amount
actually needed, the former Trustee (or Custodian) shall return such
excess to the successor Trustee (or Custodian).
Upon receipt of such assets, the successor Trustee (or Custodian)
shall thereupon succeed to all of the powers and responsibilities
given to the Trustee (or Custodian) by this Plan.
The resigning or removed Trustee (or Custodian) shall render an
accounting to the Employer and unless objected to by the Employer
within 30 days of its receipt, the accounting shall be deemed to have
been approved and the resigning or removed Trustee (or Custodian)
<PAGE>
shall be released and discharged as to all matters set forth in the
accounting. Where a financial organization is serving as Trustee (or
Custodian) and it is merged with or bought by another organization
(or comes under the control of any federal or state agency), that
organization shall serve as the successor Trustee (or Custodian) of
this Plan, but only if it is the type of organization that can so
serve under applicable law.
Where the Trustee or Custodian is serving as a nonbank trustee or
<PAGE>
custodian pursuant to Section 1.401-12(n) of the Income Tax
Regulations, the Employer will appoint a successor Trustee (or
Custodian) upon notification by the Commissioner of Internal Revenue
that such substitution is required because the Trustee (or Custodian)
has failed to comply with the requirements of Section 1.401-12(n) or
is not keeping such records or making such returns or rendering such
statements as are required by forms or regulations.
5.10 DEGREE OF CARE
Limitations of Liability - The Trustee (or Custodian) shall not be
liable for any losses incurred by the Fund by any lawful direction to
invest communicated by the Employer, Plan Administrator or any
Participant or Beneficiary. The Trustee (or Custodian) shall be under
no liability for distributions made or other action taken or not
taken at the written direction of the Plan Administrator. It is
specifically understood that the Trustee (or Custodian) shall have no
duty or responsibility with respect to the determination of matters
pertaining to the eligibility of any Employee to become a Participant
or remain a Participant hereunder, the amount of benefit to which a
Participant or Beneficiary shall be entitled to receive hereunder,
whether a distribution to Participant or Beneficiary is appropriate
under the terms of the Plan or the size and type of any policy to be
purchased from any insurer for any Participant hereunder or similar
matters; it being understood that all such responsibilities under the
Plan are vested in the Plan Administrator.
5.11 INDEMNIFICATION OF PROTOTYPE SPONSOR AND TRUSTEE (OR
CUSTODIAN)
Notwithstanding any other provision herein, and except as may be
otherwise provided by ERISA, the Employer shall indemnify and hold
harmless the Trustee (or Custodian, if applicable) and the Prototype
Sponsor, their officers, directors, employees, agents, their heirs,
executors, successors and assigns, from and against any and all
liabilities, damages, judgments, settlements, losses, costs, charges,
or expenses (including legal expenses) at any time arising out of or
incurred in connection with any action taken by such parties in the
performance of their duties with respect to this Plan, unless there
has been a final adjudication of gross negligence or willful
misconduct in the performance of such duties.
Further, except as may be otherwise provided by ERISA, the Employer
will indemnify the Trustee (or custodian) and Prototype Sponsor from
any liability, claim or expense (including legal expense) which the
Trustee (or Custodian) and Prototype Sponsor shall incur by reason of
or which results, in whole or in part, from the Trustee's (or Custo-
<PAGE>
dian's) or Prototype Sponsor's reliance on the facts and other
directions and elections the Employer communicates or fails to
communicate.
5.12 INVESTMENT MANAGERS
A. Definition of Investment Manager - The Employer may appoint one or
more investment managers to make investment decisions with respect
to all or a portion of the Fund. The investment manager shall be
any firm or individual registered as an investment adviser under
the Investment Advisers Act of 1940, a bank as defined in said Act
or an insurance company qualified under the laws of more than one
state to perform services consisting of the management,
acquisition or disposition of any assets of the Plan.
B. Investment Manager's Authority - A separate Investment Fund shall
be established representing the assets of the Fund invested at the
direction of the investment manager. The investment manager so
appointed shall direct the Trustee (or Custodian, if applicable )
with respect to the investment of such Investment Fund. The
investments which may be acquired at the direction of the
investment manager are those described in Section 5.03(A) (for
Custodians) or Section 5.04(A) (for Trustees).
C. Written Agreement - The appointment of any investment manager
shall be by written agreement between the Employer and the
investment manager and a copy of such agreement (and any
modification or termination thereof) must be given to the Trustee
(or Custodian).
The agreement shall set forth, among other matters, the effective
date of the investment manager's appointment and an
acknowledgement by the investment manager that it is a fiduciary
of the Plan under ERISA.
D. Concerning the Trustee (or Custodian) - Written notice of each
appointment of an investment manager shall be given to the Trustee
(or Custodian) in advance of the effective date of such
appointment. Such notice shall specify which portion of the Fund
will constitute the Investment Fund subject to the investment
manager's direction. The Trustee (or Custodian) shall comply with
the investment direction given to it by the investment manager and
will not be liable for any loss which may result by reason of any
action (or inaction) it takes at the direction of the investment
manager.
<PAGE>
5.13 MATTERS RELATING TO INSURANCE
A. If a life insurance policy is to be purchased for a Participant,
the aggregate premium for certain life insurance for each
Participant must be less than a certain percentage of the
aggregate Employer Contributions and Forfeitures allocated to a
Partici-pant's Individual Account at any particular time as
follows:
<PAGE>
1. Ordinary Life Insurance - For purposes of these incidental
insurance provisions, ordinary life insurance contracts are
contracts with both nondecreasing death benefits and
nonincreasing premiums. If such contracts are purchased, less
than 50% of the aggregate Employer Contributions and
Forfeitures allocated to any Participant's Individual Account
will be used to pay the premiums attributable to them.
2. Term and Universal Life Insurance - No more than 25% of the
aggregate Employer Contributions and Forfeitures allocated to
any Participant's Individual Account will be used to pay the
premiums on term life insurance contracts, universal life
insurance contracts, and all other life insurance contracts
which are not ordinary life.
3. Combination - The sum of 50% of the ordinary life insurance
premiums and all other life insurance premiums will not exceed
25% of the aggregate Employer Contributions and Forfeitures
allocated to any Participant's Individual Account.
B. Any dividends or credits earned on insurance contracts for a Partici-
pant shall be allocated to such Participant's Individual Account.
C. Subject to Section 6.05, the contracts on a Participant's life will
be converted to cash or an annuity or distributed to the Participant
upon commencement of benefits.
D. The Trustee (or Custodian, if applicable) shall apply for and will be
the owner of any insurance contract(s) purchased under the terms of
this Plan. The insurance contract(s) must provide that proceeds will
be payable to the Trustee (or Custodian), however, the Trustee (or
Custodian) shall be required to pay over all proceeds of the
contract(s) to the Participant's designated Beneficiary in accordance
with the distribution provisions of this Plan. A Participant's spouse
will be the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made in accordance
with Section 6.05. Under no circumstances shall the Fund retain any
<PAGE>
part of the proceeds. In the event of any conflict between the terms
of this Plan and the terms of any insurance contract purchased
hereunder, the Plan provisions shall control.
E. The Plan Administrator may direct the Trustee (or Custodian) to sell
and distribute insurance or annuity contracts to a Participant (or
other party as may be permitted) in accordance with applicable law or
regulations.
5.14 DIRECTION OF INVESTMENTS BY PARTICIPANT
If so indicated in the Adoption Agreement, each Participant may
individually direct the Trustee (or Custodian, if applicable)
regarding the investment of part or all of his Individual Account. To
the extent so directed, the Employer, Plan Administrator, Trustee (or
Custodian) and all other fiduciaries are relieved of their fiduciary
responsibility under Section 404 of ERISA.
The Plan Administrator shall direct that a Separate Fund be
established in the name of each Participant who directs the
investment of part or all of his Individual Account. Each Separate
Fund shall be charged or credited (as appropriate) with the earnings,
gains, losses or expenses attributable to such Separate Fund. No
fiduciary shall be liable for any loss which results from a
Participant's individual direction. The assets subject to individual
direction shall not be invested in collectibles as that term is
defined in Section 408(m) of the Code.
The Plan Administrator shall establish such uniform and
nondiscriminatory rules relating to individual direction as it deems
necessary or advisable including, but not limited to, rules
describing (1) which portions of Participant's Individual Account can
be individually directed; (2) the frequency of investment changes;
(3) the forms and procedures for making investment changes; and (4)
the effect of a Participant's failure to make a valid direction.
Subject to the approval of the Prototype Sponsor, the Plan
Administrator may, in a uniform and nondiscriminatory manner, limit
the available investments for Participants' individual direction to
certain specified investment options (including, but not limited to,
certain mutual funds, investment contracts, deposit accounts and
group trusts). The Plan Administrator may permit, in a uniform and
nondiscriminatory manner, a Beneficiary of a deceased Participant to
individually direct in accordance with this Section.
<PAGE>
SECTION SIX VESTING AND DISTRIBUTION
6.01 DISTRIBUTION TO PARTICIPANT
A. When Distributable
1. Entitlement to Distribution - The Vested portion of a
Partici-pant's Individual Account shall be distributable to the
Participant upon the occurrence of any of the following events:
a. the Participant's Termination of Employment;
b. the Participant's attainment of Normal Retirement Age;
c. the Participant's Disability;
d. the termination of the Plan;
2. Written Request: When Distributed - A Participant entitled to
distribution who wishes to receive a distribution must submit a
written request to the Plan Administrator. Such request shall be
made upon a form provided by the Plan Administrator. Upon a valid
request, the Plan Administrator shall direct the Trustee (or
Custodian, if applicable) to commence distribution no later than
90 days following the later of:
a. the close of the Plan Year within which the event occurs which
entitles the Participant to distribution; or
b. the close of the Plan Year in which the request is received.
3. Special Rules for Withdrawals During Service - If this is a profit
sharing plan and the Adoption Agreement so provides, a Participant
who is not otherwise entitled to a distribution under Section 6.01
<PAGE>
(A)(1) may elect to receive a distribution of all or part of the
Vested portion of his Individual Account, subject to the
requirements of Section 6.05 and further subject to the following
limits:
a. Participant for 5 or more years. An Employee who has been a
Participant in the Plan for 5 or more years may withdraw up to
his entire Vested portion of his Individual Account.
b. Participant for less than 5 years. An Employee who has been a
Participant in the Plan for less than 5 years may withdraw
only the amount which has been in his Vested Individual
Account attributable to Employer Contributions for at least 2
<PAGE>
full Plan Years.
However, if the distribution is on account of hardship, the
Participant may withdraw up to his entire Vested portion of
his Individual Account. For purposes of the preceding
sentence, hardship is defined as an immediate and heavy
financial need of the Participant where such Participant lacks
other available resources. The following are the only
financial needs considered immediate and heavy: expenses
incurred or necessary for medical care, described in Section
213(d) of the Code, of the Employee, the Employee's spouse or
dependents; the purchase (excluding mortgage payments) of a
principal residence for the Employee; payment of tuition and
related educational fees for the next 12 months of
post-secondary education for the Employee, the Employee's
spouse, children or dependents; or the need to prevent the
eviction of the Employee from, or a foreclosure on the
mortgage of, the Employee's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
1) The employee has obtained all distributions, other than
hardship distributions, and all nontaxable loans under
all plan maintained by the Employer;
2) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts
necessary to pay any federal, state or local income taxes
or penalties reasonably anticipated to result from the
distribution)
4. Commencement of Benefits - Notwithstanding any other
provision, unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th day
after the latest of the close of the Plan Year in which:
a. the Participant attains Normal Retirement Age;
b. occurs the 10th anniversary of the year in which the Par-
ticipant commenced participation in the Plan; or
c. the Participant incurs a Termination of Employment.
B. Determining the Vested Portion - In determining the Vested portion of
<PAGE>
a Participant's Individual Account, the following rules apply:
1. Employer Contributions and Forfeitures - The Vested portion of
a Participant's Individual Account derived from Employer
Contributions and Forfeitures is determined by applying the
vesting schedule selected in the Adoption Agreement (or the
vesting schedule described in Section 6.01(C) if the Plan is a
Top-Heavy Plan).
2. Rollover and Transfer Contributions - A Participant is fully
Vested in his rollover contributions and transfer
contributions.
3. Fully Vested Under Certain Circumstances - A Participant is
fully Vested in his Individual Account if any of the following
occurs:
a. the Participant reaches Normal Retirement Age;
b. the Participant incurs a Disability;
c. the Participant dies;
d. the Plan is terminated or partially terminated; or
e. there exists a complete discontinuance of contributions
under the Plan.
4. Participants in a Prior Plan - If a Participant was a
participant in a Prior Plan on the Effective Date, his Vested
percentage shall not be less than it would have been under
such Prior Plan as computed on the Effective Date.
C. Minimum Vesting Schedule for Top-Heavy Plans - The following vesting
provisions apply for any Plan Year in which this Plan is a Top-Heavy
Plan.
Notwithstanding the other provisions of this Section 6.01 or the
vesting schedule selected in the Adoption Agreement (unless those
provisions or that schedule provide for more rapid vesting), a
Participant's Vested portion of his Individual Account attributable
to Employer Contributions and Forfeitures shall be determined in
accordance with the following minimum vesting schedule:
Years of Vesting Service Vested Percentage
1 0
2 20
3 40
4 60
<PAGE>
5 80
6 100
<PAGE>
This minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code, except those attributable
to employee contributions including benefits accrued before the
effective date of Section 416 of the Code and benefits accrued
before the Plan became a Top-Heavy Plan. Further, no decrease in a
Participant's Vested percentage may occur in the event the Plan's
status as a Top-Heavy Plan changes for any Plan Year. However, this
Section 6.01(C) does not apply to the Individual Account of any
Employee who does not have an Hour of Service after the Plan has
initially become a Top-Heavy Plan and such Employee's Individual
Account attributable to Employer Contributions and Forfeitures will
be determined without regard to this Section.
If this Plan ceases to be a Top-Heavy Plan, then in accordance with
the above restrictions, the vesting schedule as selected in the
Adoption Agreement will govern. If the vesting schedule under the
Plan shifts in or out of top-heavy status, such shift is an
amendment to the vesting schedule and the election in Section 9.04
applies.
D. Break in Vesting Service and Forfeitures - If a Participant incurs a
Termination of Employment, any portion of his Individual Account
which is not Vested shall be held in a suspense account. Such
suspense account shall share in any increase or decrease in the fair
market value of the assets of the Fund in accordance with Section 4
of the Plan. The disposition of such suspense account shall be as
follows:
1. No Breaks in Vesting Service - If a Participant neither receives
nor is deemed to receive a distribution pursuant to Section 6.01
(D)(2) or (3) and the Participant returns to the service of the
Employer before incurring 5 consecutive Breaks in Vesting Service,
there shall be no Forfeiture and the amount in such suspense
account shall be recredited to such Participant's Individual
Account.
2. Cash-out of Certain Participants - If the value of the Vested
portion of such Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500, the
Participant shall receive a distribution of the entire Vested
portion of such Individual Account and the portion which is not
Vested shall be treated as a Forfeiture and allocated in the year
of the cash-
<PAGE>
out. For purposes of this Section, if the value of the Vested
portion of a Participant's Individual Account is zero, the
Participant shall be deemed to have received a distribution of
such Vested Individual Account. A Participant's Vested Individual
Account balance shall not include accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code for Plan Years beginning prior to January 1, 1989.
3. Participants Who Elect to Receive Distributions - If such
Participant elects to receive a distribution, in accordance with
Section 6.02(B), of the value of the Vested portion of his
Individual Account derived from Employee and Employer
Contributions, the portion which is not Vested shall be treated as
a Forfeiture.
4. Re-employed Participants - If a Participant receives or is deemed
to receive a distribution pursuant to Section 6.01(D)(2) or (3)
above and the Participant resumes employment covered under this
Plan, the Participant's Employer-derived Individual Account
balance will be restored to the amount on the date of distribution
if the Participant repays to the Plan the full amount of the
distribution attributable to Employer Contributions before the
earlier of 5 years after the first date on which the Participant
is subsequently re-employed by the Employer, or the date the
Participant incurs 5 consecutive Breaks in Vesting Service
following the date of the distribution.
Amounts forfeited under Section 6.01(D) shall be allocated in
accordance with Section 3.01(C) as of the last day of the Plan
Year during which the Forfeiture arises. Any restoration of a
Participant's Individual Account pursuant to Section 6.01(D)(4)
shall be made from other Forfeitures, income or gain to the Fund
or contributions made by the Employer.
E. Distribution Prior to Full Vesting - If a distribution is made to a
Participant who was not then fully Vested in his Individual Account
derived from Employer Contributions and the Participant may increase
his Vested percentage in his Individual Account, then the following
rules shall apply:
1. a separate account will be established for the Participant's in-
terest in the Plan as of the time of the distribution, and
2. at any relevant time the Participant's Vested portion of the sep-
arate account will be equal to an amount ("X") determined by the
formula: X=P (AB + (R x D)) - (R x D) where "P" is the Vested
<PAGE>
percentage at the relevant time, "AB" is the separate account
balance at the relevant time; "D" is the amount of the
distribution; and "R" is the ratio of the separate account balance
at the relevant time to the separate account balance after
distribution.
6.02 FORM OF DISTRIBUTION TO A PARTICIPANT
A. Value of Individual Account Does Not Exceed $3,500 - If the value of
the Vested portion of a Participant's Individual Account derived from
Employee and Employer Contributions does not exceed $3,500,
distribution from the Plan shall be made to the Participant in a
single lump sum in lieu of all other forms of distribution from the
Plan.
B. Value of Individual Account Exceeds $3,500
1. If the value of the Vested portion of a Participant's Individual
Account derived from Employee and Employer Contributions exceeds
(or at the time of any prior distribution exceeded) $3,500, and
the Individual Account is immediately distributable, the
Participant and the Participants spouse (or where either the
Participant or the spouse died, the survivor) must consent to any
distribution of such Individual Account. The consent of the
Participant and the Participant's spouse shall be obtained in
writing within the 90-day period ending on the annuity starting
date. The annuity starting date is the first day of the first
period for which an amount is paid as an annuity or any other
form. The Plan Administrator shall notify the Participant and the
Participant's spouse of the right to defer any distribution until
the Participant's Individual Account is no longer immediately
distributable. Such notification shall include a general
description of the material features, and an explanation of the
relative values of, the optional forms of benefit available under
the Plan in a manner that would satisfy the notice requirements of
Section 417(a)(3) of the Code, and shall be provided no less than
30 days and no more than 90 days prior to the annuity starting
date. If a distribution is one to which Sections 401(a)(11) and
417 of the Internal Revenue Code do not apply, such distribution
may commence less than 30 days after the notice required under
Section 1.411(a)- 11(c) of the Income Tax Regulations is given,
provided that:
a. the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option), and
<PAGE>
b. the Participant, after receiving the notice, affirmatively
elects a distribution.
<PAGE>
Notwithstanding the foregoing, only the Participant need consent
to the commencement of a distribution in the form of a qualified
joint and survivor annuity while the Individual Account is
immediately distributable. Neither the consent of the Participant
nor the Participant's spouse shall be required to the extent that
a distribution is required to satisfy Section 401(a)(9) or Section
415 of the Code. In addition, upon termination of this Plan if the
Plan does not offer an annuity option (purchased from a commercial
provider), the Participant's Individual Account may, without the
Participant's consent, be distributed to the Participant or
transferred to another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975 (e)(7) of
the Code) within the same controlled group.
An Individual Account is immediately distributable if any part of
the Individual Account could be distributed to the Participant (or
surviving spouse) before the Participant attains or would have
attained (if not deceased) the later of Normal Retirement Age or
age 62.
2. For purposes of determining the applicability of the foregoing
consent requirements to distributions, made before the first day
of the first Plan year beginning after December 31, 1988, the
Vested portion of a Participant's Individual Account shall not
include amounts attributable to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) o the
Code.
C. Other Forms of Distribution to Participant - If the value of the
Vested portion of a Participant's Individual Account exceeds $3,500
and the Participant has properly waived the joint and survivor
annuity, as described in Section 6.05, the Participant may request in
writing that the Vested portion of his Individual Account be paid to
him in one or more of the following forms of payment: 91) in a lump
sum; (2) in installment payments over a period not to exceed the life
expectancy of the Participant or the joint and last survivor life
expectancy of the Participant and his designated Beneficiary; or (3)
applied to the purchase of an annuity contract.
Notwithstanding anything in this Section 6.02 to the contrary, a
Participant cannot elect payments in the form of an annuity if the
safe harbor rules of Section 6.05(F) apply.
<PAGE>
6.03 DISTRIBUTIONS UPON THE DEATH OF A PARTICIPANT
A. Designation of Beneficiary - Spousal Consent - Each Participant may
designate, upon a form provided by and delivered to the Plan
Administrator, one or more primary and contingent Beneficiaries to
receive all or a specified portion of his Individual Account in the
event of his death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and
delivering the proper form to the Plan Administrator.
In the event that a Participant wishes to designate a primary
Beneficiary who is not his spouse, his spouse must consent in writing
to such designation, and the spouse's consent must acknowledge the
effect of such designation and be witnessed by a notary public.
Notwithstanding this consent requirement, if the Participant
establishes to the satisfaction of the Plan Administrator that such
written consent may not be obtained because there is no spouse or the
spouse cannot be located, no consent shall be required. Any change of
Beneficiary will require a new spousal consent.
B. Payment to Beneficiary - If a Participant dies before his entire
Individual Account has been paid to him, such deceased Participant's
Individual Account shall be payable to any surviving Beneficiary
designated by the Participant, or, if no Beneficiary survives the
Participant, to the Participant's estate.
C. Written Request: When Distributed - A Beneficiary of a deceased
Participant entitled to a distribution who wishes to receive a
distribution must submit a written request to the Plan Administrator.
Such request shall be made upon a form provided by the Plan
Administrator. Upon a valid request, the Plan Administrator shall
direct the Trustee (or Custodian) to commence distribution no later
than 90 days following the later of:
1. the close of the Plan Year within which the Participant dies; or
2. the close of the Plan Year in which the request is received.
D. Location of Participant or Beneficiary Unknown - In the event that
all, or any portion, of the distribution payable to a Participant or
his Beneficiary hereunder shall, at the expiration of 5 years after
it becomes payable, remain unpaid solely by reason of the inability
of the Plan Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after further
diligent effort, to ascertain the whereabouts of such Participant or
his
<PAGE>
Beneficiary, the amount so distributable shall be forfeited and
allocated in accordance with the terms of the Plan. In the event a
Participant or Beneficiary is located subsequent to his benefit being
forfeited, such benefit shall be restored; provided, however, if all
or a portion of such amount has been lost by reason of escheat under
state law, the Participant or Beneficiary shall cease to be entitled
to the portion so lost.
6.04 FORM OF DISTRIBUTION TO BENEFICIARY
A. Value of Individual Account Does Not Exceed $3,500 - If the value of
the Participant's Individual Account derived from Employee and
Employer Contributions does not exceed $3,500, the Plan Administrator
shall direct the Trustee (or Custodian, if applicable) to make a
distribution to the Beneficiary in a single lump sum in lieu of all
other forms of distribution from the Plan.
B. Value of Individual Account Exceeds $3,500 - If the value of a
Par-ticipant's Individual Account derived from Employee and Employer
Contributions exceeds $3,500 the preretirement survivor annuity
requirements of Section 6.05 shall apply unless waived in accordance
with that Section or unless the safe harbor rules of Section 6.05(F)
apply.
C. Other Forms of Distribution to Beneficiary - If the value of a
Participant's Individual Account exceeds $3,500 and the Participant
has properly waived the preretirement survivor annuity, as described
in Section 6.05 (if applicable), the Beneficiary may, subject to the
requirements of Section 6.06, request in writing that the
Participant's Individual Account be paid to him as follows: (1) in a
lump sum; or (2) in installment payments over a period not to exceed
the life expectancy of such Beneficiary.
6.05 JOINT AND SURVIVOR ANNUITY REQUIREMENTS
A. The provisions of this Section shall apply to any Participant who is
credited with at least one Hour of Eligibility Service with the
Employer on or after August 23, 1984, and such other participants as
provided in Section 6.05(G).
<PAGE>
B. Qualified Joint and Survivor Annuity - Unless an optional form of
benefit is selected pursuant to a qualified election within the 90-
day period ending on the annuity starting date, a married
Partici-pant's Vested account balance will be paid in the form of a
qualified joint and survivor annuity and an unmarried Participant's
Vested
<PAGE>
account balance will be paid in the form of a life annuity. The
Participant may elect to have such annuity distributed upon
attainment of the earliest retirement age under the Plan.
C. Qualified Preretirement Survivor Annuity - Unless an option form of
benefit has been selected within the election period pursuant to a
qualified election, if a Participant dies before the annuity starting
date then the Participant's Vested account balance shall be applied
toward the purchase of an annuity for the life of the surviving
spouse. The surviving spouse may elect to have such annuity
distributed within a reasonable period after the Participant's death.
D. Definitions
1. Election Period - The period which begins on the first day of the
Plan Year in which the Participant attains age 35 and ends on the
date of the Participant's death. If a Participant separates from
service prior to the first day of the Plan Year in which age 35 is
attained, with respect to the account balance as of the date of
separation, the election period shall begin on the date of
separation.
Pre-age 35 waiver - A Participant who will not yet attain age 35
as of the end of any current Plan Year may make special qualified
election to waive the qualified preretirement survivor annuity for
the period beginning on the date of such election and ending on
the first day of the Plan Year in which the Participant will
attain age 35. Such election shall not be valid unless the
Participant receives a written explanation of the qualified
prere-tirement survivor annuity in such terms as are comparable to
the explanation required under Section 6.05(E)(1). Qualified
prere-tirement survivor annuity coverage will be automatically
reinstated as of the first day of the Plan Year in which the
Participant attains age 35. Any new waiver on or after such date
shall be subject to the full requirements of this Section 6.05.
2. Earliest Retirement Age - The earliest date on which, under the
Plan, the Participant could elect to receive retirement benefits.
3. Qualified Election - A waiver of a qualified joint and survivor
annuity or a qualified preretirement survivor annuity. Any waiver
of a qualified joint and survivor annuity or a qualified
prere-tirement survivor annuity shall not be effective unless: (a)
the Participant's spouse consents in writing to the election, (b)
the election designates a specific Beneficiary, including any
class of
<PAGE>
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the spouse expressly permits
designations by the Participant without any further spousal
consent); (c) the spouse's consent acknowledges the effect of the
election; and (d) the spouse's consent is witnessed by a plan
representative or notary public. Additionally, a Participant's
waiver of the qualified joint and survivor annuity shall not be
effective unless the election designates a form of benefit payment
which may not be changed without spousal consent (or the spouse
expressly permits designations by the Participant without any
further spousal consent). If it is established to the satisfaction
of a plan representative that there is no spouse or that the
spouse cannot be located, a waiver will be deemed a qualified
election.
Any consent by a spouse obtained under this provision (or
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to such spouse. A consent
that permits designations by the Participant without any
requirement of further consent by such spouse must acknowledge
that the spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where applicable, and
that the spouse voluntarily elects to relinquish either or both of
such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time before
the commencement of benefits. The number of revocations shall not
be limited. No consent obtained under this provision shall be
valid unless the Participant has received notice as provided in
Section 6.05(E) below.
4. Qualified Joint and Survivor Annuity - An immediate annuity for
the life of the Participant with a survivor annuity for the life
of the spouse which is not less than 50% and not more than 100% of
the amount of the annuity which is payable during the joint lives
of the Participant and the spouse and which is the amount of
beneficiary which can be purchased with the Participant's vested
account balance. The percentage of the survivor annuity under the
Plan shall be 50% (unless a different percentage is elected by the
Employer in the Adoption Agreement).
5. Spouse (surviving spouse) - The spouse or surviving spouse of the
Participant, provided that a former spouse will be treated as the
spouse or surviving spouse and a current spouse will not be
treated as the spouse or surviving spouse to the extent provided
under a qualified domestic relations order as described in Section
<PAGE>
414(p) of the Code.
6. Annuity Starting Date - The first day of the first period for
which an amount is paid as an annuity or any other form.
7. Vested Account Balance - The aggregate value of the Participant's
Vested account balances derived from Employer and Employee
contributions (including rollovers), whether Vested before or upon
death, including the proceeds of insurance contracts, if any, on
the Participant's life. The provisions of this Section 6.05 shall
apply to a Participant who is Vested in amounts attributable to
Employer Contributions, Employee contributions (or both) at the
time of death or distribution.
E. Notice Requirements
1. In the case of a qualified joint and survivor annuity, the Plan
Administrator shall no less than 30 days and not more than 90 days
prior to the annuity starting date provide each Participant a
written explanation of: (a) the terms and conditions of a
qualified joint and survivor annuity; (b) the Participant's right
to make and the effect of an election to waive the qualified joint
and survivor annuity form of benefit; (c) the rights of a
Partici-pant's spouse; and (d) the right to make, and the effect
of, a revocation of a previous election to waive the qualified
joint and survivor annuity.
2. In the case of a qualified preretirement annuity as described in
Section 6.05(C), the Plan Administrator shall provide each
Participant within the applicable period for such Participant a
written explanation of the qualified preretirement survivor
annuity in such terms and in such manner as would be comparable to
the explanation provided for meeting the requirements of Section
6.05(E)(1) applicable to a qualified joint and survivor annuity.
<PAGE>
The applicable period for a Participant is whichever of the
following periods ends last: (a) the period beginning with the
first day of the Plan Year in which the Participant attains age 32
and ending with the close of the Plan Year preceding the Plan Year
in which the Participant attains age 35; (b) a reasonable period
ending after the individual becomes a Participant; (c) a
reasonable period ending after Section 6.05(E)(3) ceases to apply
to the Participant; (d) a reasonable period ending after this
Section 6.05 first applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable period
ending
<PAGE>
after separation from service in the case of a Participant who
separates from service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (b), (c)
and (d) is the end of the two-year period beginning one year prior
to the date the applicable event occurs, and ending one year after
that date. In the case of a Participant who separates from service
before the Plan Year in which age 35 is attained, notice shall be
provided within the two-year period beginning one year prior to
separation and ending one year after separation. If such a
Participant thereafter returns to employment with the Employer,
the applicable period for such Participant shall be redetermined.
3. Notwithstanding the other requirements of this Section 6.05(E),
the respective notices prescribed by this Section 6.05(E), need
not be given to a Participant if (a) the Plan "fully subsidizes"
the costs of a qualified joint and survivor annuity or qualified
preretirement survivor annuity, and (b) the Plan does not allow
the Participant to waive the qualified joint and survivor annuity
or qualified preretirement survivor annuity and does not allow a
married Participant to designate a nonspouse beneficiary. For
purposes of this Section 6.05(E)(3), a plan fully subsidizes the
costs of a benefit if no increase in cost, or decrease in benefits
to the Participant may result from the Participants failure to
elect another benefit.
F. Safe Harbor Rules
1. If the Employer so indicates in the Adoption Agreement, this
Section 6.05(F) shall apply to a Participant in a profit sharing
plan, and shall always apply to any distribution, made on or after
the first day of the first Plan Year beginning after December 31,
1988, from or under a separate account attributable solely to
accumulated deductible employee contributions, as defined in
Section 72(o)(5)(B) of the Code, and maintained on behalf of a
Participant in a money purchase pension plan, (including a target
benefit plan) if the following conditions are satisfied:
a. the Participant does not or cannot elect payments in the form
of a life annuity; and
b. on the death of a participant, the Participant's Vested
account balance will be paid to the Participant's surviving
spouse, but if there is no surviving spouse, or if the sur-
<PAGE>
viving spouse has consented in a manner conforming to a
qualified election, then to the Participant's designated
beneficiary. The surviving spouse may elect to have
distribution of the Vested account balance commence within
the 90-day period following the date of the Participant's
death. The account balance shall be adjusted for gains or
losses occurring after the Participant's death in accordance
with the provisions of the Plan governing the adjustment of
account balances for other types of distributions. This
Section 6.05(F) shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct
or indirect transferee of a defined benefit plan, money
purchase plan, a target benefit plan, stock bonus, or profit
sharing plan which is subject to the survivor annuity
requirements of Section 401(a)(11) and Section 417 of the
code. If this Section 6.05(F) is operative, then the
provisions of this Section 6.05 other than Section 6.05(G)
shall be inoperative.
2. The Participant may waive the spousal death benefit described in
this Section 6.05(F) at any time provided that no such waiver
shall be effective unless it satisfies the conditions of Section
6.05(D)(3) (other than the notification requirement referred to
therein) that would apply to the Participant's waiver of the
qualified preretirement survivor annuity.
3. For purposes of this Section 6.05(F), Vested account balance shall
mean, in the case of a money purchase pension plan or a target
benefit plan, the Participant's separate account balance
attributable solely to accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the
Code. In the case of a profit sharing plan, Vested account balance
shall have the same meaning as provided in Section 6.05(D)(7).
G. Transitional Rules
1. Any living Participant not receiving benefits on August 23, 1984,
who would otherwise not receive the benefits prescribed by the
previous subsections of this Section 6.05 must be given the
opportunity to elect to have the prior subsections of this Section
apply if such Participant is credited with at least one Hour of
Service under this Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and such Participant had at
least 10 Years of Vesting Service when he or she separated from
service.
<PAGE>
2. Any living Participant not receiving benefits on August 23, 1984,
who was credited with at least one Hour of Service under this Plan
or a predecessor plan on or after September 2, 1974, and who is
not otherwise credited with any service in a Plan Year beginning
on or after January 1, 1976, must be given the opportunity to have
his or her benefits paid in accordance with Section 6.05(G)(4).
3. The respective opportunities to elect (as described in Section
6.05(G)(1) and (2) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to said
Participants.
4. Any Participant who has elected pursuant to Section 6.05(G)(2) and
any Participant who does not elect under Section 6.05(G)(1) or who
meets the requirements of Section 6.05(G)(1) except that such
Participant does not have at least 10 Years of Vesting Service
when he or she separates from service, shall have his or her
benefits distributed in accordance with all of the following
requirements if benefits would have been payable in the form of a
life annuity:
a. Automatic Joint and Survivor Annuity - If benefits in the form
of a life annuity become payable to a married Participant who:
1. begins to receive payments under the Plan on or after Normal
Retirement Age; or
2. dies on or after Normal Retirement Age while still working
for the Employer; or
3. begins to receive payments on or after the qualified early
retirement age; or
<PAGE>
4. separates from service on or after attaining Normal
Retirement Age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the
payment of benefits under the Plan and thereafter dies
before beginning to receive such benefits;
then such benefits will be received under this Plan in the
form of a qualified joint and survivor annuity, unless the
Participant has elected otherwise during the election
period. The election period must begin at least 6 months
before the Participant attains qualified early retirement
age and ends not more than 90 days before the commencement
of
<PAGE>
benefits. Any election hereunder will be in writing and may
be changed by the Participant at any time.
b. Election of Early Survivor Annuity - A Participant who is
employed after attaining the qualified early retirement age
will be given the opportunity to elect, during the election
period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have
been made to the spouse under the qualified joint and survivor
annuity if the Participant had retirement on the day before
his or her death. Any election under this provision will be in
writing and may be changed by the Participant at any time. The
election period begins on the later of (1) the 90th day before
the Participant attains the qualified early retirement age, or
92) the date on which participation begins, and ends on the
date the Participant terminates employment.
c. For purposes of Section 6.05(G)(4):
1. Qualified early retirement age is the latest of:
a. the earliest date, under the Plan, on which the Parti-
cipant may elect to receive retirement benefits,
b. the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
c. the date the Participant begins participation.
2. Qualified joint and survivor annuity is an annuity for the
life of the Participant with a survivor annuity for the
life of the spouse as described in Section 6.05(D)(4) of
this Plan.
6.06 DISTRIBUTION REQUIREMENTS
A. General Rules
1. Subject to Section 6.05 Joint and Survivor Annuity Requirements, the
requirements of this Section shall apply to any distribution of a
Participant's interest and will take precedence over any
inconsistent provisions of this Plan. Unless otherwise specified,
the provisions of this Section 6.06 apply to calendar years
beginning after December 31, 1984.
2. All distributions required under this Section 6.06 shall be deter-
<PAGE>
mined and made in accordance with the Income Tax Regulations under
Section 401(a)(9), including the minimum distribution incidental
benefit requirement of Section 1.401(a)(9)-2 of the regulations.
B. Required Beginning Date - The entire interest of a Participant must be
distributed or begin to be distributed no later than the Participant's
required beginning date.
C. Limits on Distribution Periods - As of the first distribution calendar
year, distributions, if not made in a single sum, may only be made over
one of the following periods (or a combination thereof):
1. the life of the Participant,
2. the life of the Participant and a designated Beneficiary,
3. a period certain not extending beyond the life expectancy of the
Participant, or
4. a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a designated Beneficiary.
D. Determination of Amount to be Distributed Each Year - If the
Partici-pant's interest is to be distributed in other than a single
sum, the following minimum distribution rules shall apply on or after
the required beginning date:
1. Individual Account
a. If a Participant's benefit is to be distributed over (1) a per-
iod not extending beyond the life expectancy of the Participant
or the joint life and last survivor expectancy of the Partici-
pant and the Participant's designated Beneficiary or (2) a per-
iod not extending beyond the life expectancy of the designated
Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first dis-
tribution calendar year, must at least equal the quotient ob-
tained by dividing the Participant's benefit by the applicable
life expectancy.
b. For calendar years beginning before January 1, 1989, if the
Par-ticipant's spouse is not the designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is
paid within the life expectancy of the Participant.
c. For calendar years beginning after December 31, 1988, the amount
to be distributed each year, beginning with distributions for
<PAGE>
the first distribution calendar year shall not be less than the
quotient obtained by dividing the Participant's benefit by the
lesser of (1) the applicable life expectancy or (2) if the
Par-ticipant's spouse is not the designated Beneficiary, the
applicable divisor determined from the table set forth in Q&A-4
of Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in Section
6.05(D)(1)(a) above as the relevant divisor without regard to
regulations 1.401(a)(9)-2.
<PAGE>
d. The minimum distribution required for the Participant's first
distribution calendar year must be made on or before the
Parti-cipant's required beginning date. The minimum distribution
for other calendar years, including the minimum distribution for
the distribution calendar year in which the Employee's required
beginning date occurs, must be made on or before December 31 of
that distribution calendar year.
2. Other Forms - If the Participant's benefit is distributed in the form
of an annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements of
Section 401(a)(9) of the Code and the regulations thereunder.
E. Death Distribution Provisions
1. Distribution Beginning Before Death - If the Participant dies after
distribution of his or her interest has begun, the remaining portion
of such interest will continue to be distributed at least as rapidly
as under the method of distribution being used prior to the
Partici-pant's death.
2. Distribution Beginning After Death - If the Participant dies before
distribution of his or her interest begins, distribution of the
Par-ticipant's entire interest shall be completed by December 31 of
the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made to
receive distributions in accordance with (a) or (b) below:
a. if any portion of the Participant's interest is payable to a
designated Beneficiary, distributions may be made over the life
or over a period certain not greater than the life expectancy of
the designated Beneficiary commencing on or before December 31
of the calendar year immediately following the calendar year in
which the Participant died;
<PAGE>
b. if the designated Beneficiary is the Participant's surviving
spouse, the date distributions are required to begin in
accordance with (a) above shall not be earlier than the later of
(1) December 31 of the calendar year immediately following the
calendar year in which the Participant dies or (2) December 31
of the calendar year in which the Participant would have
attained age 70 1/2.
If the Participant has not made an election pursuant to this
Section 6.05(E)(2) by the time of his or her death, the
Par-ticipant's designated Beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin
under this Section 6.05(E)(2), or (2) December 31 of the
calendar year which contains the fifth anniversary of the date
of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does
not elect a method of distribution, distribution of the
Participant's entire interest must be completed by December 31
of the calendar year containing the fifth anniversary of the
Participant's death.
3. For purposes of Section 6.06(E)(2) above, if the surviving spouse
dies after the Participant, but before payments to such spouse begin,
the provisions of Section 6.06(E)(2), with the exception of paragraph
(b) therein, shall be applied as if the surviving spouse were the
Participant.
4. For purposes of this Section 6.06(E), any amount paid to a child of
the Participant will be treated as if it had been paid to the
surviving spouse if the amount becomes payable to the surviving
spouse when the child reaches the age of majority.
5. For purposes of this Section 6.06(E), distribution of a Participant's
interest is considered to begin on the Participant's required
beginning date (or, if Section 6.06(E)(3) above is applicable, the
date distribution is required to begin to the surviving spouse
pursuant to Section 6.06(E)(2) above). If distribution in the form of
an annuity irrevocably commences to the Participant before the
required beginning date, the date distribution is considered to begin
is the date distribution actually commences.
F. Definitions
1. Applicable Life Expectancy - The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Parti-
<PAGE>
cipant (or designated Beneficiary) as of the Participant's (or
designated Beneficiary's) birthday in the applicable calendar year
reduced by one for each calendar year which has elapsed since the
date life expectancy was first calculated. If life expectancy is
being recalculated, the applicable life expectancy shall be the life
expectancy as so recalculated. The applicable calendar year shall be
the first distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
2. Designated Beneficiary - The individual who is designated as the
Beneficiary under the Plan in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
3. Distribution Calendar Year - A calendar year for which a minimum
distribution is required. For distributions beginning before the
Par-ticipant's death, the first distribution calendar year is the
calendar year immediately preceding the calendar year which contains
the Participant's required beginning date. For distributions
beginning after the Participant's death, the first distribution
calendar year is the calendar year in which distributions are
required to begin pursuant to Section 6.05(E) above.
4. Life Expectancy - Life expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or spouse, in the case
of distributions described in Section 6.05(E)(2)(b) above) by the
time distributions are required to begin, life expectancies shall be
recalculated annually. Such election shall be irrevocable as to the
Participant (or spouse) and shall apply to all subsequent years. The
life expectancy of a nonspouse Beneficiary may not be recalculated.
5. Participant's Benefit
a. The account balance as of the last valuation date in the
valuation calendar year (the calendar year immediately preceding
the distribution calendar year) increased by the amount of any
Contributions or Forfeitures allocated to the account balance as
of dates in the valuation calendar year after the valuation date
and decreased by distributions made in the valuation calendar
year after the valuation date.
<PAGE>
b. Exception for second distribution calendar year. For purposes
<PAGE>
of paragraph (a) above, if any portion of the minimum
distribution for the first distribution calendar year is made in
the second distribution calendar year on or before the required
beginning date, the amount of the minimum distribution made in
the second distribution calendar year shall be treated as if it
had been made in the immediately preceding distribution calendar
year.
6. Required Beginning Date
a. General Rule - The required beginning date of a Participant is
the first day of April of the calendar year following the
calendar year in which the Participant attains age 70 1/2.
b. Transitional Rules - The required beginning date of a
Participant who attains age 70 1/2 before January 1, 1988, shall
be determined in accordance with (1) or (2) below:
(1) Non 5% Owners - The required beginning date of a
Participant who is not a 5% owner is the first day of April
of the calendar year following the calendar year in which
the later of retirement or attainment of age 70 1/2 occurs.
(2) 5% Owners - The required beginning date of a Participant
who is a 5% owner during any year beginning after December
31, 1979, is the first day of April following the later of:
(a) the calendar year in which the Participant attains age
70 1/2, or
(b) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
5% owner, or the calendar year in which the Participant
retires.
The required beginning date of a Participant who is not
a 5% owner who attains age 70 1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1,
1990.
(c) 5% Owner - A Participant is treated as a 5% owner for
purposes of this Section 6.06(F)(6) if such Participant
is a 5% owner as defined in Section 416(i) of the Code
(determined in accordance with Section 416 but without
regard to whether the Plan is top-heavy) at any time
<PAGE>
during the Plan Year ending with or within the calendar
year in which such owner attains age 66 1/2 or any
subsequent Plan Year.
(d) Once distributions have begun to a 5% owner under this
Section 6.06(F)(6) they must continue to be
distributed, even if the Participant ceases to be a 5%
owner in a subsequent year.
G. Transitional Rule
1. Notwithstanding the other requirements of this Section 6.06 and
subject to the requirements of Section 6.05, Joint and Survivor
Annuity Requirements, distribution on behalf of any Employee,
including a 5% owner, may be made in accordance with all of the
following requirements (regardless of when such distribution
commences):
a. The distribution by the Fund is one which would not have
disqualified such Fund under Section 401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of 1984.
b. The distribution is in accordance with a method of distribution
designated by the Employee whose interest in the Fund is being
distributed or, if the Employee is deceased, by a Beneficiary of
such Employee.
c. Such designation was in writing, was signed by the Employee or the
Beneficiary, and was made before January 1, 1984.
d. The Employee had accrued a benefit under the Plan as of December
31, 1983.
e. The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made, and in
the case of any distribution upon the Employee's death, the
Beneficiaries of the Employee listed in order of priority.
2. A distribution upon death will not be covered by this transitional
rule unless the information in the designation contains the required
information described above with respect to the distributions to be
made upon the death of the Employee.
3. For any distribution which commences before January 1, 1984, but con-
tinues after December 31, 1983, the Employee, or the Beneficiary, to
<PAGE>
whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is
being made if the method of distribution was specified in writing and
the distribution satisfies the requirements in Sections 6.06(G)(1)(a)
and (e).
4. If a designation is revoked, any subsequent distribution must satisfy
the requirements of Section 401(a)(9) of the Code and the regulations
thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Plan must distribute by the
end of the calendar year following the calendar year in which the
revocation occurs the total amount not yet distributed which would
have been required to have been distributed to satisfy Section
401(a)(9) of the Code and the regulations thereunder, but for the
Section 242 (b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements in Section 1.401(a)(9)-2
of the Income Tax Regulations. Any changes in the designation will be
considered to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be
made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount
is transferred or rolled over from one plan to another plan, the
rules in Q&A J-2 and Q&A J-3 shall apply.
6.07 ANNUITY CONTRACTS
Any annuity contract distributed under the Plan (if permitted or required
by this Section 6) must be nontransferable. The terms of any annuity
contract purchased and distributed by the Plan to a Participant or spouse
shall comply with the requirements of the Plan.
<PAGE>
6.08 LOANS TO PARTICIPANTS
If the Adoption Agreement so indicates, a Participant may receive a loan
from the Fund, subject to the following rules:
A. Loans shall be made available to all Participants on a reasonably
equivalent basis.
B. Loans shall not be made available to Highly Compensated Employees (as
defined in Section 414(q) of the Code) in an amount greater than the
amount made available to other Employees.
<PAGE>
C. Loans must be adequately secured and bear a reasonable interest rate.
D. No Participant loan shall exceed the present value of the Vested por-
tion of a Participant's Individual Account.
E. A Participant must obtain the consent of his or her spouse, if any, to
the use of the Individual Account as security for the loan. Spousal
consent shall be obtained no earlier than the beginning of the 90 day
period that ends on the date on which the loan is to be so secured. The
consent must be in writing, must acknowledge the effect of the loan,
and must be witnessed by a plan representative or notary public. Such
consent shall thereafter be binding with respect to the consenting
spouse or any subsequent spouse with respect to that loan. A new
consent shall be required if the account balance is used for
renegotiation, extension, renewal, or other revision of the loan.
F. In the event of default, foreclosure on the note and attachment of se-
curity will not occur until a distributable event occurs in the Plan.
G. No loans will be made to any shareholder-employee or Owner-Employee.
For purposes of this requirement, a shareholder-employee means an
employee or officer of an electing small business (Subchapter S)
corporation who owns (or is considered as owning within the meaning of
Section 318(a)(1) of the Code), on any day during the taxable year of
such corporation, more than 5% of the outstanding stock of the
corporation.
If a valid spousal consent has been obtained in accordance with
6.08(E), then, notwithstanding any other provisions of this Plan, the
portion of the Participant's Vested Individual Account used as a
security interest held by the Plan by reason of a loan outstanding to
the Participant shall be taken into account for purposes of determining
the amount of the account balance payable at the time of death or
distribution, but only if the reduction is used as repayment of the
loan. If less than 100% of the Participant's Vested Individual Account
(determined without regard to the preceding sentence) is payable to the
surviving spouse, then the account balance shall be adjusted by first
reducing the Vested Individual Account by the amount of the security
used as repayment of the loan, and then determining the benefit payable
to the surviving spouse.
No loan to any Participant can be made to the extent that such loan
when added to the outstanding balance of all other loans to the
Participant would exceed the lesser of (a) $50,000 reduced by the
excess (if any) of the highest outstanding balance of loans during the
one year
<PAGE>
period ending on the day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan is made, or (b) 50%
of the present value of the nonforfeitable Individual Account of the
Participant or, if greater, the total Individual Account up to $10,000.
For the purpose of the above limitation, all loans from all plans of
the Employer and other members of a group of employers described in
Sections 414(b), 414(c), and 414(m) of the Code are aggregated.
Furthermore, any loan shall by its terms require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly, over a period not extending beyond 5 years
from the date of the loan, unless such loan is used to acquire a
dwelling unit which within a reasonable time (determined at the time
the loan is made) will be used as the principal residence of the
Participant. An assignment or pledge of any portion of the
Participant's interest in the Plan and a loan, pledge, or assignment
with respect to any insurance contract purchased under the Plan, will
be treated as a loan under this paragraph.
The Plan Administrator shall administer the loan program in accordance
with a written document. Such written document shall include, at a
minimum, the following: (i) the identity of the person or positions
authorized to administer the Participant loan program; (ii) the
procedure for applying for loans; (iii) the basis on which loans will
be approved or denied; (iv) limitations (if any) on the types and
amounts of loans offered; (v) the procedure under the program for
determining a reasonable rate of interest; (vi) the types of collateral
which may secure a Participant loan; and (vii) the events constituting
default and the steps that will be taken to preserve Plan assets in the
event of such default.
6.09 DISTRIBUTION IN KIND
The Plan Administrator may cause any distribution under this Plan to be
made either in a form actually held in the Fund, or in cash by converting
assets other than cash into cash, or in any combination of the two
foregoing ways.
6.10 DIRECT ROLLOVERS OF ELIGIBLE ROLLOVER DISTRIBUTIONS
A. Direct Rollover Option - This Section applies to distributions made on
or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this
Section, a distributee may elect, at the time and in the manner prescribed
by the Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
<PAGE>
B. Definitions
1. Eligible rollover distribution - An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include:
a. any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for
the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period
of ten years or more;
b. any distribution to the extent such distribution is required un-
der Section 401(a)(9) of the Code; and
c. the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrea-
lized appreciation with respect to employer securities).
2. Eligible retirement plan - An eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b) of
the
<PAGE>
Code, an annuity plan described in Section 403(a) of the Code, or a
qualified trust described in Section 401(a) of the Code, that accepts
the distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
3. Distributee - A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in Section 414(p) of the Code, are distributees with regard
to the interest of the spouse or former spouse.
4. Direct rollover - A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
SECTION SEVEN CLAIMS PROCEDURE
7.01 FILING A CLAIM FOR PLAN DISTRIBUTIONS
<PAGE>
A Participant or Beneficiary who desires to make a claim for the Vested
portion of the Participant's Individual Account shall file a written
request with the Plan Administrator on a form to be furnished to him by
the Plan Administrator for such purpose. The request shall set forth the
basis of the claim. The Plan Administrator is authorized to conduct such
examinations as may be necessary to facilitate the payment of any benefits
to which the Participant or Beneficiary may be entitled under the terms of
the Plan.
7.02 DENIAL OF CLAIM
Whenever a claim for a Plan distribution by any Participant or Beneficiary
has been wholly or partially denied, the Plan Administrator must furnish
such Participant or Beneficiary written notice of the denial within 60
days of the date the original claim was filed. This notice shall set forth
the specific reasons for the denial, specific reference to pertinent Plan
provisions on which the denial is based, a description of any additional
information or material needed to perfect the claim, an explanation of why
such additional information or material is necessary and an explanation of
the procedures for appeal.
7.03 REMEDIES AVAILABLE
The Participant or Beneficiary shall have 60 days from receipt of the
denial notice in which to make written application for review by the Plan
Administrator. The Participant or Beneficiary may request that the review
be in the nature of a hearing. The Participant or Beneficiary shall have
the right to representation, to review pertinent documents and to submit
comments in writing. The Plan Administrator shall issue a decision on such
review within 60 days after receipt of an application for review as
provided for in Section 7.02. Upon a decision unfavorable to the
Participant or Beneficiary, such Participant or Beneficiary shall be
entitled to bring such actions in law or equity as may be necessary or
appropriate to protect or clarify his right to benefits under this Plan.
SECTION EIGHT PLAN ADMINISTRATOR
8.01 EMPLOYER IS PLAN ADMINISTRATOR
A. The Employer shall be the Plan Administrator unless the managing body
of the Employer designates a person or persons other than the Employer
as the Plan Administrator and so notifies the Prototype Sponsor and the
Trustee (or Custodian, if applicable). The Employer shall also be the
Plan Administrator if the person or persons so designated cease to be
the Plan Administrator.
B. If the managing body of the Employer designates a person or persons
other than the Employer as Plan Administrator, such person or persons
<PAGE>
shall serve at the pleasure of the Employer and shall serve pursuant to
such procedures as such managing body may provide. Each such person
shall be bonded as may be required by law.
8.02 POWERS AND DUTIES OF THE PLAN ADMINISTRATOR
A. The Plan Administrator may, by appointment, allocate the duties of the
Plan Administrator among several individuals or entities. Such
appointments shall not be effective until the party designated accepts
such appointment in writing.
B. The Plan Administrator shall have the authority to control and manage
the operation and administration of the Plan. The Plan Administrator
shall administer the Plan for the exclusive benefit of the Participants
and their Beneficiaries in accordance with the specific terms of the
Plan.
C. The Plan Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the follow-
ing:
1. To determine all questions of interpretation or policy in a manner
consistent with the Plan's documents and the Plan Administrator's
construction or determination in good faith shall be conclusive and
binding on all persons except as otherwise provided herein or by
law. Any interpretation or construction shall be done in a
nondiscriminatory manner and shall be consistent with the intent
that the Plan shall continue to be deemed a qualified plan under the
terms of Section 401(a) of the Code, as amended from time-to-time,
and shall comply with the terms of ERISA, as amended from
time-to-time;
2. To determine all questions relating to the eligibility of Employees
to become or remain Participants hereunder;
3. To compute the amounts necessary or desirable to be contributed to
the Plan;
4. To compute the amount and kind of benefits to which a Participant or
Beneficiary shall be entitled under the Plan and to direct the
Trustee (or Custodian, if applicable) with respect to all
disbursements under the Plan, and, when requested by the Trustee (or
Custodian), to furnish the Trustee (or Custodian) with instructions,
in writing, on matters pertaining to the Plan and the Trustee (or
Custodian) may rely and act thereon;
<PAGE>
5. To maintain all records necessary for the administration of the
Plan;
6. To be responsible for preparing and filing such disclosure and tax
forms as may be required from time-to-time by the Secretary of Labor
or the Secretary of the Treasury; and
<PAGE>
7. To furnish each Employee, Participant or Beneficiary such notices,
information and reports under such circumstances as may be required
by law.
D. The Plan Administrator shall have all of the powers necessary or
appropriate to accomplish his duties under the Plan, including, but not
limited to, the following:
1. To appoint and retain such persons as may be necessary to carry out
the functions of the Plan Administrator;
2. To appoint and retain counsel, specialists or other persons as the
Plan Administrator deems necessary or advisable in the administra-
tion of the Plan;
3. To resolve all questions of administration of the Plan;
4. To establish such uniform and nondiscriminatory rules which it deems
necessary to carry out the terms of the Plan;
5. To make any adjustments in a uniform and nondiscriminatory manner
which it deems necessary to correct any arithmetical or accounting
errors which may have been made for any Plan Year; and
6. To correct any defect, supply any omission or reconcile any
inconsistency in such manner and to such extent as shall be deemed
necessary or advisable to carry out the purpose of the Plan.
8.03 EXPENSES AND COMPENSATION
All reasonable expenses of administration including, but not limited to,
those involved in retaining necessary professional assistance may be paid
from the assets of the Fund. Alternatively, the Employer may, in its
discretion, pay such expenses. The Employer shall furnish the Plan
Administrator with such clerical and other assistance as the Plan
Administrator may need in the performance of his duties.
8.04 INFORMATION FROM EMPLOYER
To enable the Plan Administrator to perform his duties, the Employer shall
<PAGE>
supply full and timely information to the Plan Administrator (or his
designated agents) on all matters relating to the Compensation of all
Participants, their regular employment, retirement, death, Disability or
Termination of Employment, and such other pertinent facts as the Plan
Administrator (or his agents) may require. The Plan Administrator shall
advise the Trustee (or Custodian, if applicable) of such of the foregoing
facts as may be pertinent to the Trustee's (or Custodian's) duties under
the Plan. The Plan Administrator (or his agents) is entitled to rely on
such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
SECTION NINE AMENDMENT AND TERMINATION
9.01 RIGHT OF PROTOTYPE SPONSOR TO AMEND THE PLAN
A. The Employer, by adopting the Plan, expressly delegates to the
Prototype Sponsor the power, but no the duty, to amend the Plan
without any further action or consent of the Employer as the Prototype
Sponsor deems necessary for the purpose of adjusting the Plan to
comply with all laws and regulations governing pension or profit
sharing plans. Specifically, it is understood that the amendments may
be made unilaterally by the Prototype Sponsor. However, it shall be
understood that the Prototype Sponsor shall be under no obligation to
amend the Plan documents and the Employer expressly waives any rights
or claims against the Prototype Sponsor for not exercising this power
to amend. For purposes of Prototype Sponsor amendments, the mass
sub-mitter shall be recognized as the agent of the Prototype Sponsor.
If the Prototype Sponsor does not adopt the amendments made by the
mass submitter, it will no longer be identical to or a minor modifier
of the mass submitter plan.
B. An amendment by the Prototype Sponsor shall be accomplished by giving
written notice to the Employer of the amendment to be made. The notice
shall set forth the text of such amendment and the date such amendment
is to be effective. Such amendment shall take effect unless within the
30 day period after such notice is provided, or within such shorter
period as the notice may specify, the Employer gives the Prototype
Sponsor written notice of refusal to consent to the amendment. Such
written notice of refusal shall have the effect of withdrawing the Plan
as a prototype plan and shall cause the Plan to be considered an
individually designed plan. The right of the Prototype Sponsor to cause
the Plan to be amended shall terminate should the Plan cease to conform
as a prototype plan as provided in this or any other section.
9.02 RIGHT OF EMPLOYER TO AMEND THE PLAN
<PAGE>
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when such
language is necessary to satisfy Section 415 or Section 416 of the Code
because of the required aggregation of multiple plans, and (3) add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for any
other reason, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, will no longer participate in this prototype
plan and will be considered to have an individually designed plan.
An Employer who wishes to amend the Plan to change the options it has
chosen in the Adoption Agreement must complete and deliver a new Adoption
Agreement to the Prototype Sponsor and Trustee (or Custodian, if
applicable). Such amendment shall become effective upon execution by the
Employer and Trustee (or Custodian).
The Employer further reserves the right to replace the Plan in its
entirety by adopting another retirement plan which the Employer designates
as a replacement plan.
9.03 LIMITATION ON POWER TO AMEND
No amendment to the Plan shall be effective to the extent that it has the
effect of decreasing a Participant's accrued benefit. Notwithstanding the
preceding sentence, a Participant's Individual Account may be reduced to
the extent permitted under Section 412(c)(8) of the Code. For purposes of
this paragraph, a plan amendment which has the effect of decreasing a
Par-ticipant's Individual Account or eliminating an optional form of
benefit with respect to benefits attributable to service before the
amendment shall be treated as reducing an accrued benefit. Furthermore, if
the vesting schedule of a Plan is amended, in the case of an Employee who
is a Participant as of the later of the date such amendment is adopted or
the date it becomes effective, the Vested percentage (determined as of
such date) of such Employee's Individual Account derived from Employer
Contributions will not be less than the percentage computed under the Plan
without regard to such amendment.
<PAGE>
9.04 AMENDMENT OF VESTING SCHEDULE
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the
Partici-pant's Vested percentage, or if the Plan is deemed amended by an
automatic change to or from a top-heavy vesting schedule, each Participant
with at least 3 Years of Vesting Service with the Employer may elect,
within the time set forth below, to have the Vested percentage computed
under the Plan without regard to such amendment.
<PAGE>
For Participants who do not have at least 1 Hour of Service in any Plan
Year beginning after December 31, 1988, the preceding sentence shall be
applied by substituting "5 Years of Vesting Service" for "3 Years of
Vesting Service" where such language appears.
The Period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end the later
of:
A. 60 days after the amendment is adopted;
B. 60 days after the amendment becomes effective; or
C. 60 days after the Participant is issued written notice of the amendment
by the Employer or Plan Administrator.
9.05 PERMANENCY
The Employer expects to continue this Plan and make the necessary
contributions thereto indefinitely, but such continuance and payment is
not assumed as a contractual obligation. Neither the Adoption Agreement
nor the Plan nor any amendment or modification thereof nor the making of
contributions hereunder shall be construed as giving any Participant or
any person whomsoever any legal or equitable right against the Employer,
the Trustee (or Custodian, if applicable) the Plan Administrator or the
Prototype Sponsor except as specifically provided herein, or as provided
by law.
9.06 METHOD AND PROCEDURE FOR TERMINATION
The Plan may be terminated by the Employer at any time by appropriate
action of its managing body. Such termination shall be effective on the
date specified by the Employer. The Plan shall terminate if the Employer
shall be dissolved, terminated, or declared bankrupt. Written notice of
the termination and effective date thereof shall be given to the Trustee
(or Custodian), Plan Administrator, Prototype Sponsor, Participants and
Beneficiaries of deceased Participants, and the required filings (such as
the Form 5500 series and others) must be made with the Internal Revenue
Service and any other regulatory body as required by current laws and
regulations. Until all of the assets have been distributed from the Fund,
the Employer must keep the Plan in compliance with current laws and
regulations by (a) making appropriate amendments to the Plan and (b)
taking such other measures as may be required.
9.07 CONTINUANCE OF PLAN BY SUCCESSOR EMPLOYER
Notwithstanding the preceding Section 9.06, a successor of the Employer
may continue the Plan and be substituted in the place of the present
Employer. The successor and the present Employer (or, if deceased, the
executor of the estate of a deceased Self-Employed Individual who was the
<PAGE>
Employer) must execute a written instrument authorizing such substitution
and the successor must complete and sign a new plan document.
9.08 FAILURE OF PLAN QUALIFICATION
If the Plan fails to retain its qualified status, the Plan will no longer
be considered to be part of a prototype plan, and such Employer can no
longer participate under this prototype. In such event, the Plan will be
considered an individually designed plan.
SECTION TEN MISCELLANEOUS
10.01 STATE COMMUNITY PROPERTY LAWS
The terms and conditions of this Plan shall be applicable without regard
to the community property laws of any state.
10.02 HEADINGS
The headings of the Plan have been inserted for convenience of reference
only and are to be ignored in any construction of the provisions hereof.
10.03 GENDER AND NUMBER
Whenever any words are used herein in the masculine gender they shall be
construed as though they were also used in the feminine gender in all
cases where they would so apply, and whenever any words are used herein in
the singular form they shall be construed as though they were also used in
the plural form in all cases where they would so apply.
10.04 PLAN MERGER OR CONSOLIDATION
In the case of any merger or consolidation of the Plan with, or transfer
of assets or liabilities of such Plan to, any other plan, each Participant
shall be entitled to receive benefits immediately after the merger,
consolidation, or transfer (if the Plan had then terminated) which are
equal to or greater than the benefits he would have been entitled to
receive immediately before the merger, consolidation, or transfer (if the
Plan had then terminated). The Trustee (or Custodian) has the authority to
enter into merger agreements or agreements to directly transfer the assets
of this Plan but only if such agreements are made with trustees or
custodians of other retirement plans described in Section 401(a) of the
Code.
10.05 STANDARD OF FIDUCIARY CONDUCT
The Employer, Plan Administrator, Trustee and any other fiduciary under
this Plan shall discharge their duties with respect to this Plan solely in
the interests of Participants and their Beneficiaries and with the care,
skill, prudence and diligence under the circumstances then prevailing that
a prudent man acting in like capacity and familiar with such matters would
use in the conduct of an enterprise of a like character and with like
<PAGE>
aims. No fiduciary shall cause the Plan to engage in any transaction
known as a "prohibited transaction" under ERISA.
10.06 GENERAL UNDERTAKING OF ALL PARTIES
All parties to this Plan and all persons claiming any interest whatsoever
hereunder agree to perform any and all acts and execute any and all
documents and papers which may be necessary or desirable for the carrying
out of this Plan and any of its provisions.
<PAGE>
10.07 AGREEMENT BINDS HEIRS, ETC.
This Plan shall be binding upon the heirs, executors, administrators,
successors and assigns, as those terms shall apply to any and all parties
hereto, present and future.
10.08 DETERMINATION OF TOP-HEAVY STATUS
A. For any Plan Year beginning after December 31, 1983, this Plan is a
Top-Heavy Plan if any of the following conditions exist:
1. If the top-heavy ratio for this Plan exceeds 60% and this Plan is
not part of any required aggregation group or permissive aggregation
group of plans.
2. If this Plan is part of a required aggregation group of plans but
not part of a permissive aggregation group and the top-heavy ratio
for the group of plans exceeds 60%.
3. If this Plan is a part of a required aggregation group and part of a
permissive aggregation group of plans and the top-heavy ratio for
the permissive aggregation group exceeds 60%.
For purposes of this Section 10.08, the following terms shall have
the meanings indicated below:
B. Key Employee - Any Employee or former Employee (and the beneficiaries
of such Employee) who at any time during the determination period was
an officer of the Employer if such individual's annual compensation
exceeds 50% of the dollar limitation under Section 415(b)(1)(A) of the
Code, an owner (or considered an owner under Section 318 of the Code)
of one of the 10 largest interests in the Employer if such individual's
compensation exceeds 100% of the dollar limitation under Section 415(c)
(1)(A) of the Code, a 5% owner of the Employer, or a 1% owner of the
Employer who has an annual compensation of more than $150,000. Annual
compensation means compensation as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludable from the Employee's
<PAGE>
gross income under Section 125, Section 402(a)(8), Section 402(h) or
Section 403(b) of the Code. The determination period is the Plan Year
containing the determination date and the 4 preceding Plan Years.
The determination of who is a Key Employee will be made in accordance
with Section 416(i)(1) of the Code and the regulations thereunder.
C. Top-heavy ratio
1. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
has not maintained any defined benefit plan which during the 5-year
period ending on the determination date(s) has or has had accrued
benefits, the top-heavy ratio for this Plan alone or for the
required or permissive aggregation group as appropriate is a
fraction, the numerator of which is the sum of the account balances
of all Key Employees as of the determination date(s) (including any
part of any account balance distributed in the 5-year period ending
on the determination date(s)), and the denominator of which is the
sum of all account balances (including any part of any account
balance distributed in the 5-year period ending on the determination
date(s)), both computed in accordance with Section 416 of the Code
and the regulations thereunder. Both the numerator and the
denominator of the top-heavy ratio are increased to reflect any
contribution not actually made as of the determination date, but
which is required to be taken into account on that date under
Section 416 of the Code and the regulations thereunder.
2. If the Employer maintains one or more defined contribution plans
(including any simplified employee pension plan) and the Employer
maintains or has maintained one or more defined benefit plans which
during the 5-year period ending on the determination date(s) has or
has had any accrued benefits, the top-heavy ratio for any required
or permissive aggregation group as appropriate is a fraction, the
numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all Key Employees,
determined in accordance with (1) above, and the present value of
accrued benefits under the aggregated defined benefit plan or plans
for all Key Employees as of the determination date(s), and the
denominator of which is the sum of the account balances under the
aggregated defined contribution plan or plans for all Participants,
determined in accordance with (1) above, and the present value of
accrued benefits under the defined benefit plan or plans for all
Participants as of the determination date(s), all determined in
accordance with Section 416 of the Code and the regulations there-
<PAGE>
under. The accrued benefits under a defined benefit plan in both the
numerator and denominator of the top-heavy ratio are increased for
any distribution of an accrued benefit made in the 5-year period
ending on the determination date.
3. For purposes of (1) and (2) above, the value of account balances and
the present value of accrued benefits will be determined as of the
most recent valuation date that falls within or ends with the 12-
month period ending on the determination date, except as provided in
Section 416 of the Code and the regulations thereunder for the first
and second plan years of a defined benefit plan. The account
balances and accrued benefits of a Participant (a) who is not a Key
Employee but who was a Key Employee in a Prior Year, or (b) who has
not been credited with at least one Hour of Service with any
employer maintaining the plan at any time during the 5-year period
ending on the determination date will be disregarded. The
calculation of the top-heavy ratio, and the extent to which
distributions, rollovers, and transfers are taken into account will
be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions will not
be taken into account for purposes of computing the top-heavy ratio.
When aggregating plans the value of account balances and accrued
benefits will be calculated with reference to the determination
dates that fall within the same calendar year.
The accrued benefit of a Participant other than a Key Employee shall
be determined under (a) the method, if any, that uniformly applies
for accrual purposes under all defined benefit plans maintained by
the Employer, or (b) if there is no such method, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted
under the fractional rule of Section 411(b)(1)(C) of the Code.
4. Permissive aggregation group: The required aggregation group of
plans plus any other plan or plans of the Employer which, when
considered as a group with the required aggregation group, would
continue to satisfy the requirements of Sections 401(a)(4) and 410
of the Code.
<PAGE>
5. Required aggregation group: (a) Each qualified plan of the Employer
in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the
Plan has terminated), and (b) any other qualified plan of the
Employer which enables a plan described in (a) to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
<PAGE>
6. Determination date: For any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan Year. For the first Plan
Year of the Plan, the last day of that year.
7. Valuation date: For purposes of calculating the top-heavy ratio,
the valuation date shall be the last day of each Plan Year.
8. Present value: For purposes of establishing the "present value" of
benefits under a defined benefit plan to compute the top-heavy
ratio, any benefit shall be discounted only for mortality and
interest based on the interest rate and mortality table specified
for this purpose in the defined benefit plan.
10.09 SPECIAL LIMITATIONS FOR OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is
established and one or more other trades or businesses, this Plan and the
plan established for other trades or businesses must, when looked at as a
single plan, satisfy Sections 401(a) and (d) of the Code for the employees
of those trades or businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies Sections 401(a) and (d) of the Code and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trade or business which is controlled must
be as favorable as those provided for him under the most favorable plan of
the trade or business which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or
more Owner-Employees, will be considered to control a trade or business if
the Owner-Employee, or two or more Owner-Employees, together:
A. own the entire interest in a unincorporated trade or business, or
B. in the case of a partnership, own more than 50% of either the capital
interest or the profit interest in the partnership. For purposes of
the preceding sentence, an Owner-Employee, or two or more Owner-Employ-
ees, shall be treated as owning any interest in a partnership which is
<PAGE>
owned, directly or indirectly, by a partnership which such
Owner-Employee, or such two or more Owner-Employees, are considered to
control within the meaning of the preceding sentence.
10.10 INALIENABILITY OF BENEFITS
No benefit or interest available hereunder will be subject to assignment
or alienation, either voluntarily or involuntarily. The preceding sentence
shall also apply to the creation, assignment, or recognition of a right to
any benefit payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined to be a qualified
domestic relations order, as defined in Section 414(p) of the Code.
Generally, a domestic relations order cannot be a qualified domestic
relations order until January 1, 1985. However, in the case of a domestic
relations order entered before such date, the Plan Administrator:
(1) shall treat such order as a qualified domestic relations order if
such Plan Administrator is paying benefits pursuant to such order on
such date, and
(2) may treat any other such order entered before such date as a
qualified domestic relations order even if such order does not meet
the requirements of Section 414(p) of the Code.
#709 (1/94) 1994 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
National Standardized Money Purchase Pension Plan
ADOPTION AGREEMENT
______________________________________________________________________________
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
_______________________________________________________________________________
Address:
_______________________________________________________________________________
City: __________________________ State:________________ Zip:_____________
Telephone _______________ Federal Tax Identification Number _____________
Income Tax Year End
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation [ ] Other
(Specify)____________________________________________________
Nature of Business
(Describe)_____________________________________________
Plan Sequence No. (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________Date Business Established______________
Date of Birth_______________________Marital Status________________________
Home Address______________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a money purchase pension
plan by the Employer.
The Effective Date of this Plan is , 19 .
<PAGE>
NOTE: The effective date is usually the first day of the
Plan Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
money purchase pension plan (a Prior Plan).
The Prior Plan was initially effective on ________, 19___. The
Effective Date of this amendment and restatement is ___, 19__.
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing (enter 0, 1 or 2) Years of Eligibility Service. NOTE: If
more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years
of Eligibility Service required will be deemed to be 0.
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except those checked below:
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the
Employer) and the Employer under which retirement benefits were
the subject of good faith bargaining unless the agreement
provides that such Employees are to be included in the Plan, and
except those Employees who are non-resident aliens pursuant to
Section 410(b) (3)(C) of the Code and who received no earned
income from the Employer which constitutes income from sources
within the United States.
SECTION 4. EMPLOYER CONTRIBUTION FORMULA Check and Complete either
Option A or B
<PAGE>
Option A: [ ] Nonintegrated Formula: For each Plan Year the
Employer will contribute for each qualifying Participant an
amount equal to __% (not to exceed 25%) of the qualifying
Participant's Compensation for the Plan Year.
Option B: [ ] Integrated Formula: For each Plan Year, the Employer
will contribute for each qualifying Participant an amount
equal to the sum of the amounts determined in Step 1 and
Step 2:
Step 1. An amount equal to ___% (the base contribution per-
centage) of the Participant's Compensation for the
Plan Year up to the integration level, plus
Step 2. An amount equal to ___% (not to exceed the base
contribution percentage by more than the lesser of:
(1) the base contribution percentage, or (2) the
money purchase maximum disparity rate as described
in Section 3.01(b)(3) of the Plan) of such
Participant's Compensation for the Plan Year in
excess of the integration level.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $________ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
SECTION 5. VESTING Complete Parts A and B
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows (Choose
one):
_______________________________________________________________________________
YEARS OF VESTING SERVICE
(Complete Option A [ ] Option B [ ] Option C [ ] Option D [ ] if Chosen)
_______________________________________________________________________________
VESTED PERCENTAGE
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
_______________________________________________________________________________
<PAGE>
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. _____ Hours of Service (no more than 1,000) shall be required to
constitute a Year of Vesting Service or a Year of Eligibility
Service.
Part B. _____ Hours of Service (no more than 500) must be exceeded to avoid
a Break in Vesting Service or a Break in Eligibility Service.
NOTE: The number of hours in Part A must be greater than the number
of hours in Part B.
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not checked
for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the Plan
be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to Sec-
tion 5.14 of the Plan? [ ] Yes [ ] No
SECTION 9. JOINT AND SURVIVOR ANNUITY
The survivor annuity portion of the Joint and Survivor Annuity shall be
a percentage equal to ____% (at least 50% but no more than 100%) of the
amount paid to the Participant prior to his or her death.
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of the
Code, which provides post-retirement medical benefits allocated to
separate accounts for key employees as defined in Section 419A(d)(3) of
the Code or an individual medical account, as defined in Section 415(1)
(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
<PAGE>
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made to
the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic Plan
Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the corres-
ponding Basic Plan Document.
Signature for Employer___________________________Date Signed__________
Type Name_____________________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers, or
[ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization____________________________________________________
Signature_________________________________________________________________
Type Name_________________________________________________________________
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Option B. [ ] Individual Trustee(s)
Signature ________________________________________________________________
Signature_________________________________________________________________
Type Name________________________ Type Name_______________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype
Sponsor_______________________________________________________________________
Address_______________________________________________________________________
Telephone Number______________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
profit sharing plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in Section
415(l)(2) of the Code, under which amounts are treated as annual additions
with respect to any Participant in this Plan.
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a regional
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans will
limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.)_________________
____________________________________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide
below the language which will satisfy the 1.0 limitation of Section
415(e) of the Code. Such language must preclude Employer discretion.
(Complete)_________________________________________________________
<PAGE>
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
________________________________________________________________
#713(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Standardized Profit Sharing Plan
ADOPTION AGREEMENT
-----------------------------------------------------------------------------
SECTION 1. EMPLOYER INFORMATION
Name of Employer:
-------------------------------------------------------
Address_______________________________________________________________
City: _______________________State:______________________ Zip:______________
Telephone: _________________ Federal Tax Identification Number______________
Income Tax Year End __________________________
Type of Business (Check only one) [ ] Sole Proprietorship [ ] Partnership [ ]
Corporation [ ] Other (Specify)_______________
Nature of Business
(Describe)_______________________________________________
Plan Sequence No. __________ (Enter 001 if this is the first qualified plan
the Employer has ever maintained, enter 002 if it is the second, etc.)
For a plan which covers only the owner of the business, please provide the
following information about the owner:
Social Security No._________________ Date Business Established ____________
Date of Birth________________________ Marital Status_______________________
Home Address
____________________________________________________________________________
SECTION 2. EFFECTIVE DATES Check and complete Option A or B
Option A: [ ] This is the initial adoption of a profit sharing plan by
the Employer. The Effective Date of this Plan is ________, 19 .
<PAGE>
NOTE: The effective date is usually the first day of the Plan
Year in which this Adoption Agreement is signed.
Option B: [ ] This is an amendment and restatement of an existing
profit sharing plan (a Prior Plan). The Prior Plan was initially
effective on _____________. The Effective Date of this amendment
and restatement is ________________. NOTE: The effective date
is usually the first day of the Plan Year in which this Adoption
Agreement is signed.
SECTION 3. ELIGIBILITY REQUIREMENTS Complete Parts A, B and C
Part A. Years of Eligibility Service Requirement:
An Employee will be eligible to become a Participant in the Plan after
completing _______ (enter 0, 1 or 2) Years of Eligibility Service. NOTE:
If more than 1 year is selected, the immediate 100% vesting schedule of
Section 5, Option C will automatically apply. If left blank, the Years of
Eligibility Service required will be deemed to be 0.
Part B. Age Requirement:
An Employee will be eligible to become a Participant in the Plan after
attaining age ____________ (no more than 21). NOTE: If left blank, it
will be deemed there is no age requirement for eligibility.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part C. Class of Employees Eligible to Participate:
All Employees shall be eligible to become a Participant in the Plan,
except the following (if checked):
[ ] Those Employees included in a unit of Employees covered by the
terms of a collective bargaining agreement between Employee
representatives (the term "Employee representatives" does not
include any organization more than half of whose members are
Employees who are owners, officers or executives of the Employer)
and the Employer under which retirement benefits were the subject
of good faith bargaining unless the agreement provides that such
Employees are to be included in the Plan, and except those
Employees who are non-resident aliens pursuant to Section 410(b)
(3)(C) of the Code and who received no earned income from the
Employer which constitutes income from sources within the United
States.
SECTION 4. EMPLOYER CONTRIBUTION AND ALLOCATION FORMULA
Part A. Contribution Formula
For each Plan Year the Employer will contribute an amount to be
determined from year to year.
<PAGE>
Part B. Allocation Formula: (Check Option 1 or 2)
Option 1: [ ] Pro Rata Formula. Employer Contributions and Forfeitures
shall be allocated to the Individual Accounts of qualifying
Participants in the ratio that each qualifying Participant's
Compensation for the Plan Year bears to the total Compensation
of all qualifying Participants for the Plan Year.
Option 2: [ ] Integrated Formula: Employer Contributions and
Forfeitures shall be allocated as follows (Start with Step 3 if
this Plan is not a Top-Heavy Plan):
Step 1. Employer Contributions and Forfeitures shall first be
allocated pro rata to qualifying Participants in the
manner described in Section 4, Part B, Option 1. The
percent so allocated shall not exceed 3% of each
qualifying Participant's Compensation.
Step 2. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 1 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that each qualifying Participant's Compensation for the
Plan Year in excess of the integration level bears to all
qualifying Participants' Compensation in excess of the
integration level, but not in excess of 3%.
Step 3. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 2 shall be allocated to each
qualifying Participant's Individual Account in the ratio
that the sum of each qualifying Participant's total
Compensation and Compensation in excess of the
integration level bears to the sum of all qualifying
Participants' total Compensation and Compensation in
excess of the integration level, but not in excess of the
profit sharing maximum disparity rate as described in
Section 3.01(B)(3) of the Plan.
Step 4. Any Employer Contributions and Forfeitures remaining
after the allocation in Step 3 shall be allocated pro rata
to qualifying Participants in the manner described in
Section 4, Part B, Option 1.
The integration level shall be (Choose one):
Option 1: [ ] The Taxable Wage Base
Option 2: [ ] $______ (a dollar amount less than the Taxable Wage Base)
Option 3: [ ] ______% of the Taxable Wage Base
<PAGE>
NOTE: If no box is checked, the integration level shall be the Taxable
Wage Base.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
SECTION 5. VESTING
A Participant shall become Vested in his or her Individual Account
attributable to Employer Contributions and Forfeitures as follows
(Choose one):
_______________________________________________________________________________
YEARS OF VESTING SERVICE
Option A [ ] Option B [ ] Option C [ ] Option D [ ] (Complete if Chosen)
_______________________________________________________________________________
VESTED PERCENTAGE
1 0% 0% 100% ____%
2 0% 20% 100% ____%
3 100% 40% 100% ____% (not less than 20%)
4 100% 60% 100% ____% (not less than 40%)
5 100% 80% 100% ____% (not less than 60%)
6 100% 100% 100% ____% (not less than 80%)
_______________________________________________________________________________
NOTE: If left blank, Option C, 100% vesting, will be deemed to be selected.
SECTION 6. NORMAL RETIREMENT AGE
The Normal Retirement Age under the Plan is age _____ (not to exceed 65).
NOTE: If left blank, the Normal Retirement Age will be deemed to be age
59 1/2.
SECTION 7. HOURS REQUIRED Complete Parts A and B
Part A. ________ Hours of Service (no more than 1,000) shall be
required to constitute a Year of Vesting Service or a Year of
Eligibility Service.
Part B. ________ Hours of Service (no more than 500) must be exceeded to
avoid a Break in Vesting Service or a Break in Eligibility
Service.
NOTE: The number of hours in Part A must be greater than the
number of hours in Part B.
<PAGE>
SECTION 8. OTHER OPTIONS Answer "Yes" or "No" to each of the following
questions by checking the appropriate box. If a box is not
checked for a question, the answer will be deemed to be "No."
A. Loans: Will loans to Participants pursuant to Section 6.08 of the
Plan be permitted? [ ] Yes [ ] No
B. Participant Direction of Investments: Will Participants be permitted
to direct the investment of their Individual Accounts pursuant to
Section 5.14 of the Plan? [ ] Yes [ ] No
C. In-Service Withdrawals: Will Participants be permitted to make
withdrawals during service pursuant to Section 6.01(A)(3) of the
Plan? [ ] Yes [ ] No
NOTE: If the Plan is being adopted to amend and replace a Prior Plan
which permitted in-service withdrawals you must answer "Yes."
Check here if such withdrawals will be permitted only on account of
hardship. [ ]
SECTION 9. JOINT AND SURVIVOR ANNUITY
Part A. Retirement Equity Act Safe Harbor:
Will the safe harbor provisions of Section 6.05(F) of the Plan
apply (Choose only one Option)?
Option 1: [ ] Yes
Option 2: [ ] No
NOTE: You must select "No" if you are adopting this Plan as an
amendment and restatement of a Prior Plan that was subject to the
joint and survivor annuity requirements.
Part B. Survivor Annuity Percentage: (Complete only if your answer in
Section 9, Part A is "No.")
The survivor annuity portion of the Joint and Survivor Annuity
shall be a percentage equal to _____ (at least 50% but no more
than 100%) of the amount paid to the Participant prior to his or
her death.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
SECTION 10. ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan
(including a welfare benefit fund, as defined in Section 419(e) of the
Code, which provides post-retirement medical benefits allocated to
separate accounts for key employees as defined in Section 419A(d) (3)
of the Code or an individual medical account, as defined in Section
415(1)(2) of the Code) in addition to this Plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) may
<PAGE>
not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under
Section 401 of the Code. If the Employer who adopts or maintains
multiple plans wishes to obtain reliance that the Employer's plan(s)
are qualified, application for a determination letter should be made
to the appropriate Key District Director of Internal Revenue.
This Adoption Agreement may be used only in conjunction with Basic
Plan Document No. 03.
SECTION 11. EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I
state the following:
1. I acknowledge that I have relied upon my own advisors regarding
the completion of this Adoption Agreement and the legal and tax
implications of adopting this Plan.
2. I understand that my failure to properly complete this Adoption
Agreement may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any
amendments made to the Plan and will notify me should it
discontinue or abandon the Plan.
4. I have received a copy of this Adoption Agreement and the
corresponding Basic Plan Document.
Signature for Employer_____________________________Date Signed_______________
Type Name____________________________________________________________________
SECTION 12. TRUSTEE OR CUSTODIAN Check and complete only one option
Option A. [ ] Financial Organization as Trustee or Custodian
Check One: [ ] Custodian, [ ] Trustee without full trust powers,
or [ ] Trustee with full trust powers
NOTE: Custodian will be deemed selected if no box is checked.
Financial Organization____________________________________________________
Signature_________________________________________________________________
<PAGE>
Type Name_________________________________________________________________
Option B. [ ] Individual Trustee(s)
Signature ________________________________________________________________
Signature_________________________________________________________________
Type Name _____________________________ Type Name_________________________
SECTION 13. PROTOTYPE SPONSOR
Name of Prototype Sponsor
Address___________________________________________________________________
Telephone Number__________________________________________________________
SECTION 14. LIMITATION ON ALLOCATIONS - More Than One Plan If you maintain or
ever maintained another qualified plan (other than a paired standardized
money purchase pension plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a Participant or could become a
Participant, you must complete this section. You must also complete this
section if you maintain a welfare benefit fund, as defined in Section
419(e) of the Code, or an individual medical account, as defined in
Section 415(l)(2) of the Code, under which amounts are
treated as annual additions with respect to any Participant in this Plan.
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or
prototype plan:
1. [ ] The provisions of Section 3.05(B)(1) through 3.05(B)(6) of
the Plan will apply as if the other plan were a master or
prototype plan.
2. [ ] Other method. (Provide the method under which the plans
will limit total annual additions to the maximum permissible
amount, and will properly reduce any excess amounts, in a
manner that precludes Employer discretion.) ________________
____________________________________________________________
Part B. If the Participant is or has ever been a participant in a
<PAGE>
defined benefit plan maintained by the Employer, the Employer will
provide below the language which will satisfy the 1.0 limitation of
Section 415(e) of the Code. Such language must preclude Employer
discretion. (Complete)____________________________________________
Part C. Compensation will mean all of each Participant's (Choose one):
Option 1: [ ] Section 3121(a) wages
Option 2: [ ] Section 3401(a) wages
Option 3: 415 safe-harbor compensation
NOTE: If no box is checked, Option 2 will be deemed to be selected.
Part D. The limitation year is the following 12-consecutive month period:
____________________________________________________________________
#705(12/90)L90 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
Simplified Standardized Money Purchase Pension Plan
ADOPTION AGREEMENT
---------------------------------------------------------------------
EMPLOYER INFORMATION
Name of
Employer_____________________________Telephone________________________
Business
Address______________________________________________________________
City__________________________State________________________Zip_________
Federal Tax Identification Number_________________Income Tax Year
End_________
Type of Business (Check only one)
[ ] Sole Proprietorship [ ] Partnership [ ] Corporation [ ] Other
(Specify)__________________________________________
Plan Sequence No._________ Enter 001 if this is the first qualified plan the
Employer has ever maintained, enter 002 if it is the second, etc. For a Plan
which covers only the owner of the business, please provide the following
information about the owner:
Social Security No._________________Date Business
Established_________________
Date of Birth_______________________Marital
Status____________________________
Home Address_______________________________________________________________
EFFECTIVE DATES Check and complete Option A or B
Option A. [ ] This is the initial adoption of a money purchase pension plan
by the Employer.
The Effective Date of this Plan is ______________________, 19____.
NOTE: The effective date is usually the first day of the Plan Year
in which this Adoption Agreement is signed.
Option B. [ ] This is an amendment and restatement of an existing
<PAGE>
money purchase pension plan (a prior plan) NOTE: The effective
date is usually the first day of the Plan Year in which this
Adoption Agreement is signed.
The Prior Plan was initially effective on _________________, 19_____.
The Effective Date of this amendment and restatement is _____, 19___.
PLAN PROVISIONS Complete Parts A through E
Part A. Service Requirement: An Employee will be eligible to become a Par-
ticipant in the Plan after completing _____ (enter 0, 1 or 2) Years
of Eligibility Service. NOTE: If left blank, the Years of Eligibil-
ity Service required will be deemed to be 0.
Part B. Age Requirement: An Employee will be eligible to become a Partici-
pant in the Plan after attaining age _____ (no more than 21).
NOTE: If left blank, it will be deemed there is no age requirement
for eligibility.
Part C. 100% Vesting: A Participant shall be fully Vested at all times in
his or her Individual Account.
Part D. Normal Retirement Age: The Normal Retirement Age under the Plan is
age 59 1/2.
Part E. Contribution Formula: For each Plan Year the Employer will
contribute for each qualifying Participant an amount equal to ______%
(not to exceed 25%) of the qualifying Participant's Compensation for
the Plan Year.
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
EMPLOYER SIGNATURE Important: Please read before signing
I am an authorized representative of the Employer named above and I state the
following:
1. I acknowledge that I have relied upon my own advisors regarding the
completion of this Adoption Agreement and the legal and tax implications of
adopting this Plan.
2. I understand that my failure to properly complete this Adoption Agreement
may result in disqualification of the Plan.
3. I understand that the Prototype Sponsor will inform me of any amendments made
to the Plan and will notify me should it discontinue or abandon the Plan.
<PAGE>
4. I have received a copy of this Adoption Agreement and the corresponding
Basic Plan Document.
Signature for Employer_____________________Date
Signed_________________________
Type Name______________________________________________________
TRUSTEE OR CUSTODIAN
[ ] Check this box only if a financial organization is named as Trustee and
it has full trust powers.
Trustee or Custodian_______________________________________________
Signature________________________________________________________
Type Name______________________________________________________
PROTOTYPE SPONSOR
Name of Prototype Sponsor_________________________________________
Address____________________________
Telephone Number______________________
ADDITIONAL PLANS
An Employer who has ever maintained or who later adopts any plan (including a
welfare benefit fund, as defined in Section 419(e) of the Code, which provides
post-retirement medical benefits allocated to separate accounts for key
employees as defined in Section 419A(d)(3) of the Code or an individual medical
account, as defined in Section 415(l)(2) of the Code) in addition to this Plan
(other than a paired standardized profit sharing plan using Basic Plan Document
No. 03) may not rely on the opinion letter issued by the National Office of the
Internal Revenue Service as evidence that this Plan is qualified under Section
401 of the Code. If the Employer who adopts or maintains multiple plans wishes
to obtain reliance that the Employer's plan(s) are qualified, application for a
determination letter should be made to the appropriate Key District Director of
Internal Revenue. This Adoption agreement may be used only in conjunction with
Basic Plan Document No. 03.
LIMITATION ON ALLOCATIONS More Than One Plan
If you maintain or ever maintained another qualified plan (other than a paired
standardized profit sharing plan using Basic Plan Document No. 03) in which any
Participant in this Plan is (or was) a participant or could become a
participant, you must complete this section. You must also complete this section
if you maintain a welfare benefit fund, as defined in Section 419(e) of the
code, or an individual medical account, as defined in Section 415(l)(2) of the
Code, under which amounts are treated as annual additions with respect to any
<PAGE>
Participant in this Plan.
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
Part A. If the Participant is covered under another qualified defined
contribution plan maintained by the Employer, other than a master or prototype
plan:
1. [ ] The provisions of Sections 3.05(B)(1) through 3.05(b)(6) of the
Plan will apply as if the other plan were a master or prototype
plan.
2. [ ] Other method. (Provide the method under which the plans will lim-
it total annual additions to the maximum permissible amount, and
will properly reduce any excess amounts, in a manner that pre-
cludes Employer discretion.)____________________________________
Part B. If the Participant is or has ever been a participant in a defined
benefit plan maintained by the Employer, the Employer will provide below the
language which will satisfy the 1.0 limitation of Section 415(e) of the Code.
Such language must preclude Employer discretion.
Part C. The limitation year is the following 12-consecutive month period:_____
---------------------------------------
#726(12/90) 1990 Universal Pensions, Inc., Brainerd, MN 56401
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM EXCEL
MIDAS GOLD SHARES, INC. SEMI-ANNUAL REPORT AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CAPTION>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 28,358,916
<INVESTMENTS-AT-VALUE> 30,695,998
<RECEIVABLES> 551,908
<ASSETS-OTHER> 2,736,726
<OTHER-ITEMS-ASSETS> 11,005
<TOTAL-ASSETS> 33,995,637
<PAYABLE-FOR-SECURITIES> 260,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,728,643
<TOTAL-LIABILITIES> 4,988,643
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 23,623,770
<SHARES-COMMON-STOCK> 2,208,711
<SHARES-COMMON-PRIOR> 2,329,855
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3,046,142
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,337,082
<NET-ASSETS> 29,006,994
<DIVIDEND-INCOME> 846,003
<INTEREST-INCOME> 247,350
<OTHER-INCOME> 0
<EXPENSES-NET> 1,087,844
<NET-INVESTMENT-INCOME> 5,509
<REALIZED-GAINS-CURRENT> 3,364,915
<APPREC-INCREASE-CURRENT> (2,712,993)
<NET-CHANGE-FROM-OPS> 657,431
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,905,985
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 36,345,648
<NUMBER-OF-SHARES-REDEEMED> 36,708,963
<SHARES-REINVESTED> 242,171
<NET-CHANGE-IN-ASSETS> (7,595,687)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 3,581,361
<OVERDISTRIB-NII-PRIOR> 0
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<INTEREST-EXPENSE> 45,746
<GROSS-EXPENSE> 1,087,844
<AVERAGE-NET-ASSETS> 37,127,342
<PER-SHARE-NAV-BEGIN> 15.71
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (1.13)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 1.45
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.13
<EXPENSE-RATIO> 3
<AVG-DEBT-OUTSTANDING> 464,223
<AVG-DEBT-PER-SHARE> 0
</TABLE>
