FILE NO. 811-620
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 8
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INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
(Exact Name of Registrant as Specified in Charter)
26 Broadway, New York, New York 10004
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (212) 837-7898
JAMES H. BLUCK, ESQ.
Hughes Hubbard & Reed
One Battery Park Plaza
New York, New York 10004
(Name and Address of Agent for Service)
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<PAGE>
PART A. INFORMATION REQUIRED IN A PROSPECTUS
ITEM 1. COVER PAGE
Not applicable.
ITEM 2. SYNOPSIS
Not applicable.
ITEM 3. CONDENSED FINANCIAL INFORMATION
Not applicable.
ITEM 4. GENERAL DESCRIPTION OF THE REGISTRANT
(a) ORGANIZATION AND OPERATION. Institutional Investors Capital
Appreciation Fund, Inc. (the "Fund") was incorporated in New York as a
diversified, open-end management investment company on October 29, 1952. The
Fund provides Eligible Savings Institutions, as defined below, with a vehicle
for pooling their investments in certain equity securities which are believed
to have potential for capital appreciation. An "Eligible Savings Institution"
means: (i) a savings bank or savings and loan association which is organized
under the laws of the State of New York; (ii) a savings bank organized under
the laws of the United States or savings and loan institution organized under
the laws of the State of New York or of the United States which has been
converted from a savings bank organized under the laws of the State of New
York or results from the merger of such a converted institution to the extent
permitted by the New York State Banking Department; or (iii) a pension trust,
fund, plan or agreement in the State of New York participated in by one or
more such savings banks or savings and loan associations to provide retirement
benefits, death benefits or disability benefits and any or all of such
benefits for any or all of its or their active officers and employees.
Federal law may further restrict the eligibility of institutions
described in clause (ii) above to invest in the Fund. Each Eligible Savings
Institution should consult its own advisers with respect to limitations, if
any, imposed on its investments in the Fund by applicable banking laws or
regulations.
INVESTMENT OBJECTIVES. The primary investment objective of the Fund
is to achieve capital appreciation for its shareholders. The objective of
income is secondary. The Fund seeks to achieve these objectives by investing
primarily in equity securities of companies whose growth, earnings and
dividend prospects are promising and whose securities are reasonably priced,
in the opinion of the Fund's Investment Adviser. There is no assurance that
the Fund will achieve these objectives.
<PAGE>
Changes in these investment objectives may be made by the Board of
Directors of the Fund without shareholder approval whenever in its judgment
economic or market conditions warrant.
FUNDAMENTAL POLICIES. The following restrictions are fundamental
policies and cannot be changed without approval of a majority of the Fund's
outstanding voting securities.
The Fund may not:
(i) purchase securities of an issuer if such purchase would cause
more than 25% of the value of the Fund's total assets (taken at current value)
to be invested in the securities of any one issuer or group of issuers in the
same industry;
(ii) purchase securities of an issuer if such purchase would cause
more than 5% of any class of securities of such issuer to be held by the Fund;
(iii) purchase securities of an issuer (other than obligations of
the United States and its instrumentalities) if such purchase would cause more
than 5% of the Fund's total assets, taken at market value, to be invested in
the securities of such issuer;
(iv) invest in any issuer for the purpose of exercising control of
management;
(v) underwrite securities of other issuers;
(vi) purchase or sell real estate or real estate mortgage loans;
(vii) deal in commodities or commodities contracts;
(viii) loan money, except that, subject to the restrictions, if any,
imposed by the New York Banking Law, the Fund may (A) purchase debt
obligations and (B) make sales of federal funds (loans maturing in fewer than
seven days to depository institutions and generally made through the Federal
Reserve System);
(ix) purchase on margin or sell short any security, except that
the Fund may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;
(x) borrow money or mortgage or pledge any of its assets, except
that the Fund may borrow money from banks for temporary or emergency (but not
leveraging) purposes in an amount up to 5% of the Fund's total assets when the
borrowing is made, and may pledge up to 15% of its assets to secure such
borrowings;
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(xi) purchase or retain securities of an issuer if any officer,
director or employee of, or counsel for, the Fund is an officer, director or
employee of such issuer; or
(xii) write, purchase or sell puts, calls or combinations thereof,
except that the Fund may (A) write covered call options with respect to any or
all of its portfolio securities and (B) enter into closing purchase
transactions with respect to such options.
In addition to the foregoing, the Fund will not make any investment
or engage in any transaction which would cause the Fund's shares not to be
eligible for investment by savings banks under the laws of the State of New
York. That law effectively limits the types of investments which the Fund may
make by generally limiting savings banks to investing in investment companies
which invest in securities in which a savings bank may itself invest. As
currently in effect, the New York Banking Law and the Banking Department's
regulations thereunder and interpretations thereof operate to limit investment
by the Fund to "qualified equity securities" and "qualified debt securities"
in which a prudent person of discretion and intelligence in such matters who
is seeking a reasonable income and preservation of capital would invest. A
"qualified equity security" means an equity security which is, at the time of
acquisition, listed on the New York Stock Exchange or the American Stock
Exchange or for which representative high and low bid prices are regularly
quoted on the National Association of Securities Dealers Automated Quotation
System. A "qualified debt security" means a debt security which is not in
default as to either principal or interest when acquired. The Fund's
investments under the "prudent man" regulations of the Banking Department are
subject to the further restriction that the Fund may not invest in or
otherwise acquire any equity security (or security convertible into an equity
security) issued by any bank, trust company, savings bank, savings and loan
association, bank holding company, banking organization, life insurance
company, or corporation engaged principally in the issue, flotation,
underwriting, public sale or distribution of securities except to the extent
otherwise permitted by the Banking Department.
Restrictions and policies of the Fund which are based on the laws of
the State of New York applicable to savings banks and savings and loan
associations may be changed by any amendments to or changes in such laws or
the regulations promulgated thereunder or official interpretations of such
laws and regulations, without action by the Fund's shareholders.
<PAGE>
INVESTMENT POLICIES. In seeking to achieve its investment
objectives, it is expected that the Fund will invest at least 80% of its
assets in common stock, but it shall not be deemed inconsistent with this
policy to invest part of said assets in preferred stock and corporate debt
securities convertible into common stock. At most times, the Fund holds no
more liquid reserves than it believes necessary to provide for redemptions and
does not invest in fixed income securities to any substantial extent.
However, the Fund may, subject to restrictions, if any, imposed by the New
York Banking Law, (i) hold reserves of cash, (ii) invest temporarily in
securities issued or guaranteed by the United States government or its
instrumentalities or agencies and commercial paper and other obligations of
U.S. domestic corporations maturing within 270 days, (iii) write (sell)
covered call options listed on organized securities exchanges, and (iv) make
sales of federal funds.
See Item 13(a) for additional information relating to writing of
covered call options. See Item 13(d) for the discussion relating to portfolio
turnover.
OTHER INVESTMENT RESTRICTIONS. In addition to the restrictions
identified above as "Fundamental Policies", the Fund may not:
(i) invest in securities of any other investment company, except
as may be acquired as part of a merger, consolidation or other acquisition of
assets, and as may be consistent with applicable banking laws of the State of
New York;
(ii) purchase any security if, as a result of such transaction,
more than 10% in the aggregate of the Fund's total assets (at current value)
would be invested in (A) securities restricted as to disposition under federal
securities laws and (B) securities for which there are no readily available
market quotations; or
(iii) participate on a joint or joint and several basis in any
trading account in securities.
(b) Not applicable.
(c) RISK FACTORS. Investors should note that the value of the
shares of the Fund fluctuates in accordance with the value of the portfolio
securities held by the Fund. Accordingly, the value of an investment in the
Fund will fluctuate with changing market conditions so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Thus, one should not invest in the Fund primarily for current income or short-
term gain. Although the Fund invests primarily in common stock, the Fund is
not restricted in the proportion of its assets which may be invested in non-
equity securities, such as investment grade corporate bonds, commercial paper
and government securities. When deemed beneficial in the opinion of the
Fund's investment adviser for defensive purposes the Fund may invest up to
100% of its asset value in short-term investments.
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ITEM 5. MANAGEMENT OF THE FUND
(a) The directors of the Fund, in addition to reviewing the actions
of the Fund's Investment Adviser and administrator, decide upon matters of
general policy at their regular meetings. The Fund's officers supervise the
business operations of the Fund.
(b) Since May 19, 1995, Shay Assets Management Co. (the "Investment
Adviser") has served as the Fund's investment adviser, PFPC Inc. ("PFPC") has
served as its administrator, transfer agent, dividend paying agent and
shareholder servicing agent and PNC Bank, N.A. ("PNC Bank") has served as its
custodian. Shay Assets Management Co., PFPC and PNC Bank provide the services
that, prior to May 19, 1995, were provided to the Fund by Nationar. In
addition, Shay Financial Services Co., which is an affiliate of the Investment
Adviser, acts as the distributor of the Fund. See Item 7.
Investment decisions for the Fund are made by Shay Assets Management
Co., which was appointed as the Fund's investment adviser effective May 19,
1995. Subject to the general supervision of the Board of Directors of the
Fund and in conformity with the stated policies of the Fund, the Investment
Adviser manages the Fund's investment portfolio and is responsible for placing
purchase and sale orders for portfolio securities and other investments.
Under the investment advisory agreement between the Fund and the Investment
Adviser (the "Investment Advisory Agreement"), the Investment Adviser receives
a fee from the Fund computed at the annual rate of 0.75% of the first
$100,000,000 of the Fund's average daily net assets and 0.50% of the Fund's
average daily net assets in excess of $100,000,000. The fee payable to the
Investment Adviser is reduced (but not below zero) to the extent the expenses
of the Fund (exclusive of professional fees, e.g. legal and audit fees,
directors' fees and expenses and distribution expenses, if any, payable under
Rule 12b-1) exceed 1.10% of the Fund's average daily net assets during any
fiscal year during the term of the Investment Advisory Agreement. The total
amount paid by the Fund in 1995 in respect of investment advisory services
(including amounts paid to Shay Assets Management Co. and amounts paid to the
Fund's prior investment adviser, Nationar) was 0.75% of the Fund's average
daily net assets. Had the Investment Advisory Agreement and the Fund's
current agreements with its current administrator, transfer agent and
custodian been in effect during all of 1995, the fee payable to the Investment
Adviser (after all fee reductions) would have been 0.75% of the Fund's average
daily net assets.
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The Investment Adviser is a general partnership that consists of two
general partners, Shay Assets Management, Inc. and ACB Assets Management,
Inc., each of which holds a fifty-percent interest in the Investment Adviser.
Shay Assets Management, Inc., which is the managing partner of the Investment
Adviser, is controlled by Rodger D. Shay, who is a Vice President of the Fund.
ACB Assets Management, Inc. is an indirect wholly-owned subsidiary of
America's Community Bankers ("ACB"), the trade association representing
savings institutions in the United States. The Investment Adviser, with its
principal office located at 111 East Wacker Drive, Chicago, Illinois 60601, is
a registered investment adviser under the Investment Advisers Act of 1940 and
serves as investment adviser to Asset Management Fund, Inc., a registered
investment company comprising five fixed-income portfolios with aggregate net
assets of approximately $1.49 billion at March 31, 1996. In addition, the
Investment Adviser has served since May 19, 1995 as investment adviser to
M.S.B. Fund, Inc., which had net assets of $35.6 million at March 31, 1996.
(c) PORTFOLIO MANAGERS. The individuals with primary
responsibility for the day-to-day management of the Fund's portfolio are John
J. McCabe and Mark F. Trautman. Messrs. McCabe and Trautman have been
primarily responsible for the Fund's investments since August 1991, in the
case of Mr. McCabe, and March 1993, in the case of Mr. Trautman, initially as
employees of the Fund's former investment adviser, Nationar, and currently as
Portfolio Managers of Shay Assets Management Co.
Mr. McCabe is Senior Vice President of Shay Assets Management, Inc.,
the managing partner of the Investment Adviser. Mr. McCabe previously served
as Senior Vice President and Chief Investment Officer of Nationar, the former
investment adviser of the Fund, from August 1991 through May 1995, and in that
capacity had responsibility for the Fund's investments. Prior to joining
Nationar he served as Managing Director and Portfolio Manager at Sterling
Manhattan Corporation, an investment banking firm, for approximately three
years. Prior to that Mr. McCabe served in various positions at Bankers Trust
Company, including Director of Investment Research and Managing Director of
the Investment Management Group. Mr. McCabe is a director and past President
of the New York Society of Security Analysts, a past director of the Financial
Analysts Federation and a member and founding Governor of The Association for
Investment Management and Research.
Mr. Trautman is Vice President of Shay Assets Management, Inc.
Prior to May 20, 1995, Mr. Trautman served as Director of Mutual Funds
Investment of Nationar, the Fund's former investment adviser, and in that
capacity had responsibility for the Fund's investments. He also has served as
Portfolio Manager of M.S.B. Fund, Inc. since March 1993. From January 1992
through March 1993 he served as Senior Equity Analyst for the two funds. From
December 1988 through December 1991 Mr. Trautman was a Senior Associate with
Sterling Manhattan Corporation. From June 1987 through November 1988, Mr.
Trautman held the position of Treasury Analyst at Thomson McKinnon Securities,
Inc., a securities brokerage firm.
<PAGE>
(d) PFPC, 103 Bellevue Parkway, Wilmington, Delaware 19809, serves
as the Fund's administrative agent. Pursuant to the terms of the
Administration and Accounting Services Agreement between the Fund and PFPC,
which became effective May 19, 1995, PFPC performs various administrative
services for the Fund, including (i) maintenance of books and records, (ii)
preparation of various filings, reports, statements and returns filed with
governmental authorities or distributed to shareholders of the Fund and (iii)
computation of the Fund's net asset value for purposes of sales and
redemptions of shares.
PFPC also serves as the transfer agent, registrar and dividend
paying agent for the Fund and receives additional compensation in such
capacities. PNC Bank, Philadelphia, Pennsylvania, serves as custodian of the
Fund's investments. PFPC and PNC Bank are affiliates of PNC Bank Corp.
Subject to the fee waiver described below, the Fund pays PFPC for
its services as Administrator a fee computed at the annual rate of 0.10% of
the first $200 million of the Fund's average net assets, 0.075% of the next
$200 million of average net assets, with further reductions in the applicable
rate for net assets in excess of $400 million, subject to a minimum annual
charge of $80,400. PFPC and PNC Bank have agreed to waive 25% of the annual
minimum charges applicable under the Fund's administration, transfer agency
and custody agreements during the first year (which ends May 19, 1996) of
their respective agreements with the Fund.
(e) PFPC also serves as the transfer agent, registrar and dividend
paying agent for the Fund and receives compensation in that capacity in
addition to the compensation it receives as administrator. (See Item 5(d).)
(f) The Fund's operating expenses for the fiscal year ended
December 31, 1995, which include advisory fees but not brokerage commissions,
were 1.39% of the Fund's average daily net assets. Had the Investment
Advisory Agreement and the Fund's administration, transfer agency and custody
agreements with PFPC and PNC Bank been in effect during all of 1995, the
Fund's expense ratio would have been 1.52%, after all expense reductions on a
pro forma basis. Absent the expense limitations and fee reductions applicable
under such agreements in 1995, the foregoing percentage would have been 1.57%
of average net assets.
(g) Not applicable.
ITEM 5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
Not applicable.
<PAGE>
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES
(a) The capital stock of the Fund consists of a single class of
common shares with a par value of $1.00 per share. Each common share entitles
the holder to one vote for the election of directors and on all other matters.
These shares have non-cumulative voting rights which means that the holders of
more than 50% of the shares voting for the election of directors can elect
100% of the directors if they choose to do so and, in such event, the holders
of the remaining shares voting for the election of directors will not be able
to elect any person or persons to the Board of Directors. All shares have
equal rights to participate in any dividends declared and, in the event of
liquidation, in the assets of the Fund. Upon issuance and payment in
accordance with the terms herein described, the shares will be fully paid and
nonassessable. There are no conversion rights, preemptive rights or sinking
fund provisions with respect to the Fund's shares. Fractional share credits
entitle the holders thereof to dividends and distributions but no voting
rights.
Shares of stock of the Fund may not be sold or transferred to or be
owned by, any person other than an Eligible Savings Institution.
(b) As of March 31, 1996, Staten Island Savings Bank owned
approximately 32.97% of the outstanding shares of the Fund. This holding, if
it were maintained on the record date of any meeting of shareholders of the
Fund, would enable Staten Island Savings Bank to exercise a substantial
influence over the outcome of each matter submitted to a vote of the
shareholders of the Fund, including election of directors, and depending on
the number of shares present in person or represented by proxy at a meeting of
shareholders, may enable Staten Island Savings Bank to determine the outcome
of each such vote.
(c) Not applicable.
(d) Not applicable.
(e) Shareholder inquiries should be directed to the Fund c/o Shay
Financial Services Co., 111 East Wacker Drive, Suite 2600, Chicago, IL 60601
or by telephone at 800-527-3713.
(f) It is the Fund's policy to distribute substantially all of its
net investment income (income from dividends and interest, less expenses) and
net short-term capital gain, if any, as income dividends and to distribute
substantially all net long-term gain on sales of portfolio securities as
capital gain distributions. Income dividends are paid quarterly.
Distributions of net long-term capital gains, if any, realized during the
fiscal year, usually are distributed in December of such fiscal year.
<PAGE>
(g) Federal Income Tax Status. The Fund has elected to qualify and
intends to remain qualified as a regulated investment company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
the Fund should not be subject to federal income taxes on its net investment
income and capital gains, if any, that it distributes to its shareholders.
All dividends out of net investment income, together with
distributions of short-term capital gain, will be taxable as ordinary income
to shareholders whether or not reinvested. Any net long-term capital gain
distributed to shareholders will be taxable as long-term capital gains to
shareholders, whether or not reinvested and regardless of the length of time a
shareholder has owned its shares. A portion of dividends paid from net
investment income may qualify for the dividends-received deduction for
corporate shareholders. Shareholders that are tax exempt entities will not be
taxed on amounts distributed to them by the Fund.
The Fund expects to pay income dividends quarterly and capital gain
distributions annually, but there can be no assurance that there will be such
income or capital gain dividends or distributions. The Fund will notify
shareholders after the close of its fiscal year of the dollar amount and the
taxable status of that year's dividends and distributions.
Any gain or loss realized upon a sale or redemption of Fund shares
held as capital assets by a shareholder will generally be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise will be treated as short-term capital gain or loss. However, any
loss realized on the sale or redemption of Fund shares that have been held for
six months or less will be treated as long-term capital loss to the extent of
the amount of any capital gains dividend received by the shareholder with
respect to such shares.
Under U.S. Treasury Regulations, the Fund is required to withhold
and remit to the U.S. Treasury 31% of dividends, capital gain distributions
and redemption proceeds paid to shareholders that have not provided certain
certified information to the Fund. In order to avoid this withholding
requirement, a shareholder must certify that the taxpayer identification
number provided is correct and that the shareholder is not currently subject
to backup withholding or is exempt from backup withholding.
Shareholders are urged to consult their own tax advisers with
specific questions about the federal, state or local income tax implications
of an investment in the Fund.
(h) Not applicable.
<PAGE>
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED
(a) Shay Financial Services Co. (the "Distributor") acts as the
distributor of the Fund. The Distributor is a general partnership that
consists of two general partners, Shay Financial Services, Inc. and ACB
Securities, Inc., each of which holds a fifty-percent interest in the
Distributor. Shay Financial Services, Inc. is controlled by Rodger D. Shay, a
Vice President of the Fund. ACB Securities, Inc. is an indirect wholly-owned
subsidiary of ACB.
The Distributor is authorized to undertake certain activities in
connection with the sale of shares of the Fund, including informing potential
investors about the Fund through written materials, seminars and personal
contacts. The Distributor does not receive any compensation from the Fund in
connection with such services.
Orders to purchase shares of the Fund and a request for an
application to open an account should be directed to the Fund by telephoning
the Distributor at 800-527-3713. Payment must be in the form of federal funds
and should be received by PNC Bank prior to 4:00 P.M. on the next Business
Day, or the order will be canceled. Wire transfer instructions for federal
funds should be as follows: PNC Bank, Philadelphia, PA, ABA 0310-0005-3; BNF
Mutual Fund Services / 8529992181; From: (Name of Investor); Account Number:
(Investor's account number with the Fund); For purchase of Institutional
Investors Capital Appreciation; Amount: $ (Amount to be invested). The Fund
reserves the right to reject any purchase order.
Shareholders may elect to have dividends and capital gains
distributions of the Fund, when paid, reinvested in shares of the Fund at the
net asset value per share determined at the close of business on the ex-
dividend date. Dividends and capital gains distributions will be so
reinvested unless a contrary intention is stated by notice in writing to the
Fund. An election may be changed by the shareholder at any time prior to a
record date for a dividend or distribution by notice in writing to the Fund.
(b) Shares of the Fund will be sold at the net asset value per
share next determined after receipt of purchase orders by the Fund and are
offered by the Fund to Eligible Savings Institutions on a continuous basis
without sales charge. The net asset value of the Fund fluctuates daily.
<PAGE>
Net asset value per share of the Fund is determined as of 4:00 P.M.,
New York time, on each Business Day, except that net asset value need not be
determined on any day on which no purchase or redemption orders are received
by the Fund. (A "Business Day" is a day on which the New York Stock Exchange
is open for trading. The New York Stock Exchange is open Monday through
Friday except for the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.) Purchase orders received prior to 4:00 P.M., New York time,
on a Business Day are executed at the net asset value per share computed as of
4:00 P.M., New York time, on such day if payment by federal funds is received
by PNC Bank by 4:00 P.M. on the next Business Day. Orders received after 4:00
P.M., New York time, on a Business Day or on a day which is not a Business Day
are executed at the net asset value per share computed as of 4:00 P.M., New
York time, of the next Business Day.
The net asset value of the Fund fluctuates daily. The net asset
value per share of the Fund is computed by dividing the total value of all
securities and other assets of the Fund, less liabilities, by the total number
of shares of the Fund outstanding. For purposes of such computation a
security listed on a national securities exchange or traded on the NASDAQ
National Market System is valued at the last reported sale price thereof on
the exchange or system where the security is principally traded. If no trade
occurs on such exchange or system on the date of computation, such security is
valued at the mean of the last bid and asked prices on such day on such
exchange or system. Securities not listed on a national securities exchange
or traded on the NASDAQ National Market System but traded in an over-the-
counter market are valued at the mean of the last bid and asked prices prior
to the computation. Short-term interest-bearing investments for which market
quotations are not available are valued at cost plus discount earned. Short-
term investments (purchased without a discount or premium) are valued at cost,
which approximates market value. Other securities are valued at their fair
value as determined in good faith by the Board of Directors of the Fund.
Securities underlying outstanding call options written by the Fund
are valued at their market price as determined above. Premiums received on
the sale of call options are included in the net asset value; however, the
current market value of outstanding options written by the Fund are deducted
in computing net asset value. The current market value of an option listed on
an organized securities exchange is based on the last sales price on such
exchange prior to 4:00 P.M., New York time, or, if none, the mean of the last
bid and asked prices as of 4:00 P.M., New York time.
(c) Not applicable.
(d) The minimum initial investment in the shares of the Fund by an
investor is $20,000. There are no restrictions on the amount of subsequent
purchases of shares or on the dollar value of shares which must be owned by an
investor after its initial purchase. Each Eligible Savings Institution,
however, should consult its own advisers with respect to limitations, if any,
imposed on its investments in the Fund by applicable banking laws or
regulations. (See Item 8.)
<PAGE>
(e) Not applicable.
(f) Not applicable.
ITEM 8. REDEMPTION OR REPURCHASE
(a) A shareholder is entitled, subject to the exceptions described
in this Item 8(a) and in Item 8(d), to redeem at any time all or any portion
of the shares credited to its account by submitting a request for redemption
in proper form on a Business Day and can be made by telephone or in writing.
Redemption requests should be directed to the Fund by telephoning the
Distributor at 800-527-3713 or by sending a request to the Fund, c/o Shay
Financial Services Co., 111 East Wacker Drive, Suite 2600, Chicago, IL 60601.
The Fund redeems shares at their net asset value next determined after the
Distributor receives the redemption request.
Upon the receipt of such request in proper form as described below,
the shareholder will receive from the Fund the amount of the net asset value
of the redeemed shares which will be determined in accordance with the
procedures described in paragraph 1 below. The option to require the Fund to
purchase all or any part of the shares held by a shareholder may be exercised
only in accordance with the following:
1. The net asset value applicable to any such redemption will
be computed as of 4:00 P.M., New York time, on the day on which
notice of redemption is received, if received on a Business Day
before 4:00 P.M., New York time; if the notice of redemption is not
received on a Business Day, or if such notice is received after 4:00
P.M., New York time, on a Business Day, then the net asset value
will be computed as of 4:00 P.M., New York time, on the next
succeeding Business Day. Proceeds will normally be wired in federal
funds to the shareholder's bank or other account shown on the Fund's
records, the next Business Day, but in no event more than seven days
following a request in proper form. Such computations will apply
only to the extent of 2500 shares or 10% of the total number of
shares owned on the date of giving such notice by the holder
presenting shares for redemption, whichever is greater. The
computation of net asset value of any excess number of shares as to
which notice is received from a shareholder will be made at 4:00
P.M., New York time, on the Business Day next succeeding the date of
the first computation, subject to the maximum limitation of the
greater of 2500 shares or 10% of the total number of shares owned on
the date of giving such notice, with continuing like computations on
each succeeding Business Day, until the net asset value for all
shares for which notice has been received has been so determined.
The procedures for computation of redemption prices for large
redemptions contained in the second and third sentences of this
paragraph 1 may be waived by the Board of Directors in the event
that it determines that such restrictions are not in the best
interests of the Fund and its shareholders.
<PAGE>
2. The redemption price will be paid by the Fund within seven
Business Days after receipt of the notice of redemption in good
order by the Distributor, provided that the certificates for the
shares to be redeemed, if any, have been surrendered duly endorsed
for transfer, guaranteed and delivered to PFPC. In the event that
the net asset value of any shares is computed on a day other than
the day of delivery of notice of redemption, then the redemption
price of such shares will be paid by the Fund within seven Business
Days after such day of computation. (See Item 8(d).)
Any such payment may be made in whole or in part in kind, in
securities or other assets of the Fund, if the Board of Directors
determines that, by reason of the closing of the New York Stock
Exchange or otherwise, the orderly liquidation of securities owned
by the Fund is impracticable, or payment in cash would be
prejudicial to the best interests of the remaining shareholders of
the Fund, provided that in making any such payment in kind, the Fund
will, as nearly as may be practicable, deliver securities or other
assets of a market value representing the same proportionate
interest in the assets of the Fund as is represented by the shares
so to be paid for; whenever delivery of securities or other assets
is so to be made, such delivery will be made as promptly as
practicable after receipt by the Distributor of a request for
redemption in proper form accompanied by such other documents as may
be required by the Fund.
(b) Not applicable.
(c) Not applicable.
(d) Redemptions may be suspended in the event that trading on the
New York Stock Exchange is suspended or restricted, in the event that an
emergency makes determination of net asset value or disposition of Fund
portfolio securities not reasonably practicable, both as determined under the
rules of the Securities and Exchange Commission, or in the event that the
Securities and Exchange Commission by order permits suspension for the
protection of shareholders.
<PAGE>
The right of redemption may also be suspended or payment in
satisfaction of redemptions postponed for such other periods as may be
established by the Board of Directors if the Board of Directors determines
that it is contrary to the best interests of the Fund and its other
shareholders to commit the Fund to an earlier repurchase of any or all shares
offered for redemption, but such determination will be made only when a prior
request for redemption remains unaccepted or when the Board of Directors
expressly concludes that by reason of the number of shares offered or the
condition of the securities markets, there is doubt as to the ability of the
Fund to liquidate sufficient assets to raise the necessary funds within an
earlier time without undue sacrifice and that the existence of extraordinary
conditions requires adoption of an emergency measure. Requests for redemption
received during a period when the right to redeem is suspended may be
withdrawn at any time until redemptions are recommended.
Redemptions may also be limited, and the date of payment postponed,
as set forth in numbered paragraphs 1 and 2 of Item 8(a).
ITEM 9. PENDING LEGAL PROCEEDINGS
Not applicable.
<PAGE>
PART B. INFORMATION REQUIRED IN A STATEMENT
OF ADDITIONAL INFORMATION
ITEM 10. COVER PAGE
Not applicable.
ITEM 11. TABLE OF CONTENTS
Not applicable.
ITEM 12. GENERAL INFORMATION AND HISTORY
See Item 4(a).
ITEM 13. INVESTMENT OBJECTIVES AND POLICIES
(a) The primary investment objective of the Fund is to achieve
capital appreciation for its shareholders. The objective of income is
secondary. The Fund seeks to achieve these objectives by investing primarily
in common stocks of companies whose growth, earnings and dividend prospects
are promising and whose securities are reasonably priced, in the opinion of
its investment adviser. Although the Fund invests primarily in common stocks,
the Fund is not restricted in the proportion of its assets which may be
invested in non-equity securities, such as investment grade corporate bonds,
commercial paper and government securities; and, when deemed beneficial in the
opinion of the Fund's Investment Adviser for defensive purposes, a substantial
proportion of the assets of the Fund may be invested temporarily in such
securities. The Fund does not have any present intention of investing in
nonconvertible debt securities of the lowest investment grade, which
securities have some speculative characteristics. The Fund does not invest in
the securities of issuers which, together with any predecessors, have a record
of less than three years of continuous operation.
<PAGE>
COVERED CALL OPTIONS. The Fund may engage in writing (selling) call
options listed on organized securities exchanges with respect to securities
owned by the Fund (called "covered" options). Except in the circumstances
described below, the Fund will not sell any security subject to a call option
written by the Fund so long as that option is outstanding. Call options are
currently listed on the Chicago Board Options Exchange and the New York,
American, Midwest and Pacific Stock Exchanges. A call option gives the
purchaser the right to buy a security from the Fund at a fixed price (the
"exercise price") at any time prior to the expiration of the option contract
regardless of the market price of the security at that time. In return for
such right, the purchaser pays the Fund a premium which the Fund retains
whether or not the option is exercised. The premium represents consideration
to the Fund for undertaking the option obligation and thereby foregoing
(during the period of the option) the opportunity to profit from an increase
in the market price of the underlying security above the exercise price. For
example, assume the Fund owns 100 shares of XYZ and that, at a time when the
market price of XYZ was $50 per share, the Fund wrote a six month call option
on those shares at an exercise price of $50 for a premium of $500 (less
transaction costs).[FN]* If the price of XYZ declined to $40 per share the
call would not likely be exercised. The 100 XYZ shares would have declined
$1,000 in value and the Fund would have received income in the amount of $500.
On the other hand, should the price of XYZ rise to $60 per share the call
would likely be exercised with the result that, in exchange for the $500
premium, the Fund would have foregone the $1,000 appreciation on the
underlying shares.
When an option is written the securities subject to the option will
be segregated or otherwise held for delivery in accordance with the
requirements of any applicable securities exchange. The Fund may purchase
call options only for the purpose of closing out a previous option commitment
(called a "closing purchase transaction"). A closing purchase transaction is
made by buying an option with identical terms as an option previously written,
resulting in the cancellation of the Fund's previous option obligation. If
the Fund wishes to sell securities on which it has options outstanding it
would execute a closing purchase transaction prior to selling the securities.
A profit or loss may be realized on a closing purchase transaction if the
amount paid to purchase a call option previously written is less or more than
the amount received from its sale.
- -------------------------
[FN]
* In general, brokerage commissions associated with buying and selling call
options are higher than those associated with other securities
transactions.
<PAGE>
The writing of covered call options involves certain risks. An
option position may be closed out only on an exchange which provides a market
for an option of the same series. Although the Fund will generally write only
those call options for which there appears to be an active market, there is no
assurance that an active market on an exchange will exist for any particular
option at any particular time. If the Fund as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it
would, as a result, be subject to any price decline in the underlying
security. If such a situation were to arise, the Fund's Investment Adviser
would determine whether to hold the underlying securities and risk
depreciation in their market value or to sell the securities and substitute
cash or other securities as collateral for the option obligation.
In general, premiums received on options which are not exercised and
gains or losses realized on closing purchase transactions are treated as short-
term capital gains or losses. When an option is exercised the premium is
added to the exercise price and the resulting gain or loss is characterized as
a short or long-term capital gain or loss depending on the holding period of
the underlying securities.
As described in Item 6(g), it is the Fund's intention to qualify in
each year for treatment as a regulated investment company under Subchapter M
of the Code for federal income tax purposes. One of the requirements for such
qualifications is that income derived from gains from the sale or other
dispositions of securities, including options, held for less than three months
must be less than 30% of the Fund's gross income. This requirement may limit
the extent to which the Fund may sell call options. Accordingly, the Fund may
limit its writing of options on securities which have been held for less than
three months, its writing of options which expire in less than three months,
and its effecting of closing purchase transactions or closing sale
transactions with respect to options written within three months of such
transactions. The Fund may effect sales of securities that have been held for
at least three months in order to realize gains to maintain its tax
qualification.
The Board of Directors has directed the Fund's Investment Adviser to
write options only in situations where the exercise price plus the premium
(less transaction costs) would, at the time the option is written, equal a
price at which the Investment Adviser would recommend selling the underlying
securities because of fundamental investment considerations. Consequently,
the Fund does not believe that option writing has a material effect on the
Fund's portfolio turn-over rate and it is believed that option writing may
contribute both to the capital appreciation and income objectives of the Fund.
In addition, the Board of Directors has directed the Investment Adviser to
restrict option writing so that no more than 15% of the Fund's total assets
may be subject to outstanding options at any time. These restrictions may be
changed by the Board of Directors whenever such changes appear to be in the
best interest of the Fund.
(b) Not applicable.
(c) Not applicable.
<PAGE>
(d) PORTFOLIO TURNOVER. Although the Fund does not intend to
engage in substantial short-term trading, it may, in order to take advantage
of new investment opportunities or to preserve gains or limit losses, sell
portfolio securities without regard to the length of time that they have been
held. The Fund's portfolio turnover rate was 23%, 59% and 85% in 1993, 1994
and 1995, respectively. The portfolio turnover rate is determined by dividing
the amount of the lesser of the purchases or sales during the year by the
average value of the Fund's portfolio securities during such year. The
portfolio turnover rate of the Fund is not normally expected to exceed 75% but
may do so if investment objectives and policies in the light of market
conditions require more frequent trades. The increase in the turnover rate
from 1993 to 1994 reflects primarily additional purchases and sales resulting
from an increase in the number of security holdings to improve
diversification, sales of securities to enable investment in securities which
in the opinion of the Fund's investment adviser at the time offered more
attractive fundamentals and sales of securities to satisfy redemptions.
ITEM 14. MANAGEMENT OF THE FUND
(a) The Fund has fifteen directors who are elected for staggered
terms of three years each. The directors and officers of the Fund, together
with their addresses and ages, the years of expiration of their terms as
directors and their principal occupations for the last five years (together
with other relevant experience), are set forth in the following table.
<PAGE>
POSITION(S) HELD WITH
REGISTRANT AND EXPIRATION
NAME, AGE, ADDRESS AND PRINCIPAL OCCUPATION OF TERM AS A DIRECTOR
- ------------------------------------------- --------------------------
HARRY P. DOHERTY (Age 53)[FN]* President, Director (1997)
15 Beach Street
Staten Island, NY 10304
Chairman of the Board and Chief Executive Officer, Staten Island Savings
Bank.
TIMOTHY A. DEMPSEY (Age 62)[FN]* Executive Vice President,
18 Oakland Avenue Director (1998)
P.O. Box Drawer A
Warwick, NY 10990-0501
President and Chief Executive Officer, Warwick Savings Bank.
MICHAEL R. KALLET (Age 45)[FN]* Vice President, Director
182 Main Street (1999)
Oneida, NY 13421
President and Chief Executive Officer, Oneida Savings Bank.
RALPH F. BROUTY (Age 66) Director (1997)
111 Clinton Street
Watertown, NY 13601
President and Chief Executive Officer, Watertown Savings Bank.
ROBERT P. CAPONE (Age 41) Director (1999)
10 Bank Street
White Plains, NY 10606
Chairman of the Board, President and Chief Executive Officer, Community
Mutual Savings Bank.
CHRIS C. GAGAS (Age 65) Director (1999)
214 West First Street
Oswego, NY 13126
Chairman of the Board, President and Chief Executive Officer, Oswego City
Savings Bank.
<PAGE>
EDWARD P. HENSON (Age 57) Director (1999)
303 Merrick Road
Lynbrook, NY 11563
President, Jamaica Savings Bank.
STEPHEN J. KELLY (Age 42) Director (1997)
23 Montgomery Street
Rhinebeck, NY 12572
President and Chief Executive Officer, Rhinebeck Savings Bank.
CLIFFORD E. KELSEY, JR. (Age 63) Director (1998)
1 South Church Street
Goshen, NY 10924
President and Chief Executive Officer, Goshen Savings Bank.
ROBERT E. KERNAN, JR. (Age 53) Director (1999)
19 Cayuga Street
Seneca Falls, NY 13148
President and Chief Executive Officer, Seneca Falls Savings Bank.
JOSEPH L. MANCINO (Age 58) Director (1998)
1400 Old Northern Boulevard
Roslyn, NY 11576
Chairman, President and Chief Executive Officer, The Roslyn Savings Bank.
WILLIAM A. MCKENNA, JR. (Age 59) Director (1997)
71-02 Forest Avenue
Ridgewood, NY 11385
Chairman of the Board, President and Chief Executive Officer, Ridgewood
Savings Bank.
VINCENT F. PALAGIANO (Age 55) Director (1997)
209 Havemeyer Street
Brooklyn, NY 11211
Chairman, President and Chief Executive Officer, The Dime Savings Bank of
Williamsburgh.
<PAGE>
CHARLES M. SPROCK (Age 56) Director (1998)
100 On the Mall
Rome, NY 13340
Chairman of the Board, President and Chief Executive Officer, The Rome
Savings Bank.
JOHN M. TSIMBINOS (Age 58) Director (1998)
1122 Franklin Avenue
Garden City, NY 11530
Chairman of the Board and Chief Executive Officer, Roosevelt Savings Bank.
RODGER D. SHAY (Age 59) Vice President and Assistant
9200 South Dadeland Boulevard Secretary
Miami, FL 33156
Mr. Shay has been President, Chief Executive Officer and member of the
Managing Board of Shay Assets Management Co. since 1990 and President and
Director of Shay Assets Management, Inc., the managing partner of Shay
Assets Management Co., since 1990. Mr. Shay also has served as President,
Chief Executive Officer and member of the Managing Board of Shay Financial
Services Co. since 1990 and President and Director of Shay Financial
Services, Inc., the managing partner of Shay Financial Services Co., since
1990. He also serves or has previously served in the following capacities:
President and a Director, Asset Management Fund, Inc. and Vice President and
Assistant Secretary of M.S.B. Fund, Inc., each a registered investment
company; Director from 1986 to 1991 and President from 1986 to 1992, U.S.
League Securities, Inc.; Director from 1985 to 1991, and Executive Vice
President from 1989 to 1992, USL Assets Management, Inc. (previously Vice
Chairman from 1986 to 1989 and President, including of a predecessor, from
1981 to 1986). Director, First Home Savings Bank, S.L.A. since 1990;
President of Bolton Shay and Company and Director and officer of its
affiliates from 1981 to 1985. He previously was employed by certain
subsidiaries of Merrill Lynch & Co. from 1955 to 1981, where he served in
various executive positions including Chairman of the Board of Merrill Lynch
Government Securities, Inc., Chairman of the Board of Merrill Lynch Money
Market Securities, Inc. and Managing Director of the Debt Trading Division
of Merrill Lynch, Pierce, Fenner & Smith Inc. Mr. Shay has served as Vice
President and Assistant Secretary of the Fund since May 1995.
<PAGE>
EDWARD E. SAMMONS, JR. (Age 56) Vice President and Secretary
111 East Wacker Drive
Chicago, IL 60601
Mr. Sammons has been Executive Vice President and member of the Managing
Board of Shay Assets Management Co. since 1990 and Executive Vice President
of Shay Assets Management, Inc., the managing partner of Shay Assets
Management Co., since 1990. Mr. Sammons also has served as Executive Vice
President and member of the Managing Board of Shay Financial Services Co.
since 1990 and Executive Vice President of Shay Financial Services, Inc.
since 1990. He also serves or has previously served in the following
capacities: Vice President, Treasurer and Secretary of Asset Management
Fund, Inc. and Vice President and Secretary of M.S.B Fund, Inc., each a
registered investment company; President, USL Assets Management, Inc. from
1986 to 1992 (previously Senior Vice President, including of a predecessor,
from 1983 to 1986) and a Director from 1989 to 1991. Executive Vice
President from 1990 to 1992 and a Director from 1990 to 1991 of U.S. League
Securities, Inc.; Vice President, from 1987 to 1990, Advance America Funds,
Inc.; and Senior Vice President and Manager of Fixed Income Securities,
Republic National Bank in Dallas from 1962 to 1983. Mr. Sammons has served
as Vice President and Secretary of the Fund since May 1995.
JOHN J. McCABE (Age 52) Vice President
26 Broadway
New York, New York 10004
Mr. McCabe has been a Senior Vice President of Shay Assets Management, Inc.
since June 1995. From August 1991 to May 1995 Mr. McCabe was Senior Vice
President and Chief Investment Officer of Nationar, a trust company which
served as the Fund's investment adviser prior to May 1995. Prior to joining
Nationar he served as Managing Director and Portfolio Manager at Sterling
Manhattan Corporation, an investment banking firm, for approximately three
years and in various positions at Bankers Trust Company, including Director
of Investment Research and Managing Director of the Investment Management
Group. Mr. McCabe is a director and past President of the New York Society
of Security Analysts, a past director of the Financial Analysts Federation
and a member and founding Governor of The Association for Investment
Management and Research.
<PAGE>
MARK F. TRAUTMAN (Age 30) Vice President
26 Broadway
New York, New York 10004
Mr. Trautman has been a Vice President of Shay Assets Management, Inc. since
June 1995 and has been Portfolio Manager of the Fund since March 1993. From
March 1993 through May 1995, he served as Director of Mutual Funds Investment of
Nationar. He also serves as Vice President and Portfolio Manager of M.S.B.
Fund, Inc. From January 1992 through March 1993 he served as Senior Equity
Analyst for the two funds. Mr. Trautman previously served as Portfolio Manager
and Senior Equity Analyst for Institutional Investors Tax-Advantaged Income
Fund, Inc. From December 1988 through December 1991 Mr. Trautman was a Senior
Associate with Sterling Manhattan Corporation, an investment banking firm. From
June 1987 through November 1988, Mr. Trautman held the position of Treasury
Analyst at Thomson McKinnon Securities, Inc., a securities brokerage firm.
JAY F. NUSBLATT (Age 35) Treasurer
103 Bellevue Parkway
Wilmington, Delaware 19809
Mr. Nusblatt has been Vice President and Director of Fund Accounting and
Administration of PFPC Inc., the Fund's administrator, since March 1993. He
was previously employed as an Assistant Vice President of Fund/Plan
Services, Inc., with responsibility for financial reporting and fund
administration, 1989 to 1993. Mr. Nusblatt also serves as Treasurer of
M.S.B. Fund, Inc.
- ------------------------
[FN]
* These directors are regarded as interested persons under the Investment
Company Act of 1940 by virtue of their positions as officers of the Fund.
<PAGE>
See Items 5 and 16 for additional information concerning the
organizations with which Messrs. Shay, Sammons, McCabe, Trautman and Nusblatt
are affiliated.
Harry P. Doherty and William A. McKenna are directors of M.S.B.
Fund, Inc., a registered investment company affiliated with the Fund by virtue
of having a common investment adviser. Messrs. Shay, Sammons, McCabe,
Trautman and Nusblatt also are officers of M.S.B. Fund, Inc.
The Fund has an Executive Committee, composed of Messrs. Doherty,
Dempsey, Kallet and McKenna, which meets from time to time between meetings of
the Board to consider matters concerning the Fund. Subject to limitations
provided by law and the Fund's by-laws, the Executive Committee is authorized
to exercise the power and authority of the Board of Directors as may be
necessary during intervals between meetings of the Board of Directors.
Each of the directors of the Fund is an officer or director of an
Eligible Savings Institution or of a holding company which controls one or
more Eligible Savings Institutions. (See Item 15(b).) Any of such Eligible
Savings Institutions may from time to time purchase at its discretion
sufficient shares of the Fund so that its holding may exceed 5% of the then
outstanding shares of the Fund. Eligible Savings Institutions are not
restricted by the Fund as to the number of shares of the Fund that they may
purchase or hold. Each Eligible Savings Institution, however, should consult
its own advisers with respect to limitations, if any, imposed on its
investments in the Fund by applicable banking laws or regulations.
(b) See Item 14(a)
(c) The directors of the Funds receive compensation for their
services as directors of the Fund at the rate of $250 for each meeting of the
Board of Directors attended and a $1,500 annual retainer per director payable
at the end of each quarter. The Board of Directors meets quarterly. In
recognition of the additional responsibilities and duties performed by the
President of the Fund, the Board of Directors has authorized an additional
annual retainer of $1,000 for the President of the Fund, payable at the end of
each quarter, which is in addition to compensation the President receives as a
director. The other officers of the Fund do not receive any compensation from
the Fund other than the compensation they may receive as directors of the
Fund. Directors serving on a committee of the Board of Directors receive
additional compensation of $125 for each committee meeting attended in person
if the meeting is held on a date on which a meeting of the Board of Directors
is not held. The total amount of such compensation paid to the directors and
officer for 1995, when the Board of Directors met monthly, was $28,400. The
Fund also reimburses directors and officers for their reasonable expenses
incurred in attending meetings or otherwise in connection with their attention
to the affairs of the Fund. In 1995 the total amount of such reimbursed
expenses was $17,148. The Fund does not provide officers and directors
directly or indirectly with any pension or retirement benefits for their
services to the Fund.
<PAGE>
The following table sets forth the aggregate compensation received
during 1995 by each director of the Fund from the Fund and any other
investment company having the same investment adviser. Such compensation does
not include reimbursements to the directors for their expenses incurred in
connection with their activities as directors.
<TABLE>
<CAPTION>
Aggregate Total Compensation from
Compensation Fund and Fund Complex
Name of Director from Fund Paid to Directors
- ---------------- ------------ -----------------------
<S> <C> <C>
Ralph F. Brouty $1,950 $5,900 <F1>
Robert P. Capone $2,250 $4,500 <F2>
Timothy A. Dempsey $2,250 $6,500 <F1>
Harry P. Doherty $2,900 $7,800 <F1>
Chris C. Gagas $1,350 $2,700 <F2>
Michael R. Kallet $1,950 $3,900 <F2>
Stephen J. Kelly $1,950 $3,900 <F2>
Clifford E. Kelsey, Jr. $2,250 $4,500 <F2>
Robert E. Kernan, Jr. $1,950 $3,900 <F2>
William A. McKenna, Jr. $1,950 $7,200 <F1>
Charles M. Sprock $1,650 $3,300 <F2>
John M. Tsimbinos $2,100 $4,200 <F2>
- ----------------------
<FN>
<F1> Includes compensation received as a director or officer of two other
investment companies having the same investment adviser as the Fund.
<F2> Includes compensation received as a director or officer of one other
investment company having the same investment adviser as the Fund.
</FN>
</TABLE>
<PAGE>
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
(a) As of March 31, 1996, Staten Island Savings Bank, 15 Beach
Street, Staten Island, New York, owned approximately 32.97% of the outstanding
shares of the Fund. As a result of such ownership, Staten Island Savings
Bank, which is organized as a New York mutual savings bank, is deemed to be a
controlling person of the Fund. See Item 6(b) for a discussion of the effect
of such ownership on the rights of other shareholders.
(b) As of March 31, 1996, the following persons owned of record
and, to the best of the Fund's knowledge, beneficially more than 5% of the
Fund's outstanding securities:
<TABLE>
<CAPTION>
Name and Address Percentage Ownership
---------------- --------------------
<S> <C>
Ridgewood Savings Bank 15.90%
71-02 Forest Avenue
Ridgewood, New York 11385
Staten Island Savings Bank 32.97%
15 Beach Street
Staten Island, New York 10304
Warwick Savings Bank 5.46%
18 Oakland Avenue
P.O. Box 591
Warwick, NY 10990-0591
Watertown Savings Bank 15.98%
111 Clinton Street
Watertown, New York 13601
</TABLE>
(c) Although no officer or director of the Fund owns any equity
securities of the Fund, each director of the Fund is an officer or director of
an Eligible Savings Institution or of a holding company which controls one or
more Eligible Savings Institutions, and it is expected that such Eligible
Savings Institutions may, from time to time, purchase shares of the Fund. All
such directors disclaim beneficial ownership of any such shares.
<PAGE>
ITEM 16. INVESTMENT ADVISORY AND OTHER SERVICES
(a) Investment decisions for the Fund are made by the Fund's
Investment Adviser, Shay Assets Management Co. The Investment Adviser is
responsible for placing purchase and sale orders for portfolio securities and
other investments. Under the Investment Advisory Agreement, the Investment
Adviser receives for its investment management services a fee from the Fund
computed at the annual rate of 0.75% of the first $100,000,000 of the Fund's
average daily net assets and 0.50% of the Fund's average daily net assets in
excess of $100,000,000. The fee payable to the Investment Adviser is reduced
(but not below zero) to the extent the expenses of the Fund (exclusive of
professional fees, e.g. legal and audit fees, directors' fees and expenses and
distribution expenses, if any, payable under Rule 12b-1) exceed 1.10% of the
Fund's average daily net assets during any fiscal year during the term of the
Fund's agreement with the Investment Adviser. The Investment Advisory
Agreement also provides for a reduction in the fee payable to the Investment
Adviser to the extent the expenses of the Fund would exceed any applicable
limit established pursuant to the statutes or regulations of any jurisdictions
in which the Fund's shares are qualified for offer and sale. However, the
Fund's shares are not offered or sold in any jurisdiction that imposes such a
limitation. The total amount paid by the Fund in 1995 in respect of
investment advisory services (including amounts paid to Shay Assets Management
Co. and amounts paid to the Fund's prior investment adviser, Nationar) was
0.75% of the Fund's average daily net assets. Had the Investment Advisory
Agreement and the Fund's current agreements with its current administrator,
transfer agent and custodian been in effect during all of 1995, the fee
payable to the Investment Adviser (after all fee reductions) would have been
0.75% of the Fund's average daily net assets. See Item 5(b).
Shay Assets Management Co. is an Illinois general partnership that
consists of two general partners, Shay Assets Management, Inc. and ACB Assets
Management, Inc., each of which holds a fifty-percent interest in the
partnership. Shay Assets Management, Inc., the managing partner of the
Investment Adviser, is controlled by Rodger D. Shay, who is a Vice President
of the Fund. ACB Assets Management, Inc. is a wholly-owned subsidiary of ACB
Investment Services, Inc., which is a wholly-owned subsidiary of Community
Bankers Service Corporation, which in turn is a wholly-owned subsidiary of
America's Community Bankers ("ACB"), the trade association representing
savings institutions in the United States. The Investment Adviser is a
registered investment adviser under the Investment Advisers Act of 1940 and
serves as investment adviser to Asset Management Fund, Inc., a registered
investment company comprising five fixed-income portfolios with aggregate net
assets of approximately $1.49 billion at March 31, 1996. The Investment
Adviser also serves as investment adviser to M.S.B. Fund, Inc. which had net
assets of $35.6 million at March 31, 1996. The Investment Adviser's principal
office is located at 111 East Wacker Drive, Chicago, Illinois 60601.
<PAGE>
Messrs. Rodger D. Shay, Edward E. Sammons, Jr., John J. McCabe and
Mark F. Trautman, each of whom is an officer of the Fund, are affiliated
persons of the Investment Adviser. See Item 14 for a list of the capacities
in which they are affiliated with the Fund and the Investment Adviser.
Under the Investment Advisory Agreement, the Investment Adviser is
not liable to the Fund for any error of judgment or mistake of law or for any
loss suffered by the Fund, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless disregard by it of its
obligations and duties under the agreement.
The Investment Advisory Agreement will continue in effect from year
to year, subject to termination by the Fund or the Investment Adviser as
described below, if such continuance is approved at least annually by the vote
of the Fund's Board of Directors and a majority of the directors of the Fund
who are not "interested persons" of the Fund or of the Investment Adviser.
The Investment Adviser may terminate the Investment Advisory
Agreement only after the third anniversary of the date of the Agreement (i.e.
after May 19, 1998) upon 90 days' written notice to the Fund. The Investment
Advisory Agreement can be terminated at any time without penalty by the Fund
upon 30 days' written notice to the Investment Adviser. The Investment
Advisory Agreement will terminate automatically in the event of its
assignment.
(b) Subject to the general supervision of the Board of Directors,
the Investment Adviser manages the investment operations of the Fund and the
composition of the Fund's portfolio of securities and investments (including
cash) belonging to the Fund. The Investment Adviser also provides such office
and other facilities as may be required by the Fund and is responsible for the
costs of preparing and keeping minutes of meetings of the Board of Directors.
See Item 16(a).
(c) The Fund is responsible for the payment of its expenses. Such
expenses include, without limitation, the fees payable to the Fund's
Investment Adviser, administrator, transfer agent, shareholder servicing
agent, dividend paying agent and custodian, brokerage fees and expenses,
filing fees for the registration or qualification of the Fund's shares under
federal or state securities laws, taxes, interest, the cost of liability
insurance, fidelity bonds, indemnification expenses, legal and auditing fees
and expenses, any costs, expenses or losses arising out of any liability of,
or claim for damages or other relief asserted against, the Fund for violation
of any law, expenses of preparing and printing prospectuses, proxy materials,
reports and notices and of mailing the same to shareholders and regulatory
authorities, the compensation and expenses of the Fund's directors and
officers who are not affiliated with the Fund's Investment Adviser or
administrator and any extraordinary expenses incurred by the Fund. See also
Item 16(a).
<PAGE>
A statement of operational expenses is included in each annual and
semi-annual report to shareholders.
Any expenses incurred in promoting the sale of shares of the Fund
are borne by the Fund's distributor, Shay Financial Services Co.
("Distributor"), an affiliate of the Investment Adviser. The Distributor does
not receive any compensation from the Fund.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) PNC Bank, Philadelphia, Pennsylvania, is the custodian of the
Fund and in that capacity maintains custody of the investments (including
cash) of the Fund. PNC Bank and PFPC are affiliates of PNC Bank Corp. See
Item 5(d).
Arthur Andersen LLP, 1601 Market Street, Philadelphia, Pennsylvania
has been appointed to serve as the Fund's independent auditors for fiscal year
1996 and in that capacity audits the Fund's annual financial statements.
(i) Not applicable.
<PAGE>
ITEM 17. BROKERAGE ALLOCATION
(a) Transactions in portfolio securities were effected during the
calendar year 1995 through a total of six brokers, drawn from a list of
brokers selected by the Investment Adviser and Nationar, which was the Fund's
investment adviser prior to May 19, 1995, on the basis of their ability to
provide efficient execution of portfolio transactions and investment research
and statistical information. A majority of these transactions in listed
securities were executed on national securities exchanges through member
firms. However, when the Investment Adviser believes that a better price can
be obtained for the Fund, portfolio transactions may be executed in the third
market. Portfolio transactions in unlisted securities are executed in the
over-the-counter market through principal market makers. The brokerage list
is reviewed continually in an effort to obtain maximum advantage from
investment research and statistical information made available by brokers, and
allocation among the brokers is made on the basis of best price and execution
consistent with obtaining research and statistical information at reasonable
cost. The Investment Adviser is thus authorized to pay a brokerage commission
in excess of that which another broker might have charged for effecting the
same transaction in recognition of the value of efficient execution and
research and statistical information provided by the selected broker. In
1995, 100% of the Fund's brokerage (attributable to purchases of $38,204,473
and proceeds from sales of $38,086,014) was placed with brokers who provided
investment research and statistical information to the Fund's investment
adviser. The total amount of brokerage commissions paid in 1993, 1994 and
1995 was approximately $79,708, $96,758 and $101,024, respectively.
(b) Not applicable.
(c) The primary aim of the Fund in allocation of portfolio
transactions to various brokers is the attainment of the best price and
execution. Consistent with this primary aim, the Fund's Investment Adviser
will give principal consideration to attainment of the best price and to the
execution efficiency, settlement capability, and financial condition of the
broker. The Investment Adviser may also consider various additional criteria,
including the size and type of transaction, the nature and character of the
markets for the security to be purchased or sold, the broker's ability to
provide quality research and statistical services, and the reasonableness of
any spread or commissions under the circumstances and in light of the
brokerage and research services provided. While the Fund's Investment Adviser
generally seeks competitive spreads or commissions, the Fund may not
necessarily pay the lowest spread or commission available on each transaction.
The research and statistical information provided to the Investment
Adviser consists primarily of written reports and presentations analyzing
specific companies, industry sectors, the stock market and the economy. To
the extent that such research and information are used by the Investment
Adviser in rendering investment advice to the Fund, they tend to reduce the
Investment Adviser's expenses.
The Investment Adviser monitors the reasonableness of the
commissions paid by the Fund based on its experience in the market, and
information as to brokerage commissions paid by the Fund is reviewed
periodically by the Board of Directors.
<PAGE>
Research, statistical and other services furnished by brokers
through whom the Fund executes portfolio transactions may be used by the
Investment Adviser in acting as adviser to other funds or clients; conversely,
such information provided by dealers who have executed transaction orders on
behalf of the Investment Adviser's other clients may be used by the Investment
Adviser in carrying out its obligations to the Fund. Not all such services
may be useful in connection with advising the Fund.
Neither the Fund nor any of its officers or directors nor its
Investment Adviser is affiliated with any broker employed by the Fund in
connection with the purchase or sale of portfolio securities or other
investments.
(d) Not applicable.
(e) Not applicable.
ITEM 18. STOCK AND OTHER SECURITIES
(a) See Item 6(a).
(b) Not applicable.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
(a) See Item 7.
(b) Shares of the Fund may be purchased or redeemed at the Fund's
net asset value per share next determined after receipt of an order for
purchase or redemption as described in Items 7 and 8, subject to the
exceptions described in Item 8. See Item 7(b) for a description of the
methods used to value the Fund's assets. The following computation
demonstrates by way of example the manner in which the net asset value of the
Fund was determined as of 4:00 P.M., New York time, on December 31, 1995.
<TABLE>
<CAPTION>
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
DECEMBER 31, 1995 VALUATION SHEET
<S> <C>
Common stock..................................... $49,029,625
Commercial paper................................. 6,335,000
Cash............................................. 1,000,810
Dividends and interest receivable................ 95,980
Prepaid expenses................................. 13,348
Total assets................................ $56,474,763
Less:
Payable for securities purchased................. 1,165,085
Accrued expenses payable......................... 42,695
Investment advisory fees payable................. 33,004
Net assets.................................. $55,233,979
Number of shares outstanding..................... 453,657
Net asset value, offering and redemption
price per share................................. $121.75
</TABLE>
<PAGE>
(c) Not applicable.
ITEM 20. TAX STATUS
It is the Fund's policy to distribute substantially all of its net
investment income (income from dividends and interest, less expenses) and net
short-term capital gain, if any, as income dividends and to distribute
substantially all net long-term capital gain (net of short-term capital loss)
on sales of portfolio securities as capital gain distributions. In the event
the Fund fails to distribute to shareholders in a calendar year an amount
equal to the sum of (i) 98% of its ordinary income (excluding capital gain),
(ii) 98% of its capital gain net income (determined for the applicable twelve-
month test period), and (iii) the amount, if any, of ordinary income and
capital gain not distributed in the preceding calendar year, it would be
subject to a nondeductible 4% excise tax on the amounts not distributed.
Because the Fund expects to distribute all of its net investment income and
net capital gain, it does not expect to incur a liability for this tax.
In general, the portion of the income dividends paid by the Fund out
of dividends received by the Fund from domestic corporations with respect to
shares which are held by the Fund for at least 46 days (excluding certain
periods during which the Fund's risk of loss is diminished), other than with
respect to certain cumulative dividends on preferred stock and designated as
such by the Fund will be eligible, whether paid in cash or in additional
shares, for the federal income tax 70% dividends-received deduction that is
available to certain corporate taxpayers. Because a portion of the income
dividends paid by the Fund will be paid out of, in addition to such qualifying
dividends, other income such as interest income and net short-term capital
gains realized by the Fund, less than 100% of the income dividends will be
eligible for the 70% dividends-received deduction. Income dividends paid on
shares of the Fund will not be eligible for the dividends-received deduction
if the corporate shareholder holds such shares less than 46 days.
<PAGE>
Other Code provisions may also limit the availability of the
dividends-received deduction to shareholders. For example, the 70% dividends-
received deduction cannot, in general, exceed 70% of a corporation's taxable
income (determined without regard to the 70% dividends-received deduction).
In addition, the Code reduces the 70% dividends-received deduction with
respect to portfolio stock where debt is attributable to the investment in
such stock. Further, Code Section 596 provides for an 8% reduction in the
dividends-received deduction otherwise allowable to certain thrift
institutions, including mutual savings banks (or capital stock banks that
operate under mutual savings bank laws), savings and loan associations and
cooperative banks, if they compute their bad debt deduction in accordance with
the percentage of income method provided in Section 593(b)(2) of the Code.
The effect of Section 596 is to reduce the 70% dividends-received deduction
for a thrift to which such section applies to 64.4% (70% - (70% x .08)) of the
dividends received. Therefore, thrifts utilizing the percentage of income
method for determining their bad debt reserves will not receive the full
benefit of the dividends-received deduction. In addition, the 70% dividends-
received deduction is not permitted for purposes of calculating a
shareholder's alternative minimum tax.
Shareholders should consult their own tax advisers concerning these
and other matters that may be applicable to their specific tax situation,
including the effects of any changes in the tax law.
ITEM 21. UNDERWRITERS
See Item 7(a).
ITEM 22. CALCULATION OF PERFORMANCE DATA
(a) Not applicable.
(b) From time to time, the Fund may advertise the total return and
the average annual total return of the Fund over specified periods. Such
information is based on historical results and is not intended to indicate or
predict future performance of the Fund. Total return shows the percentage
change in the value of an investment in the Fund over a specified period of
time, assuming (i) a hypothetical investment of $1,000 at the beginning of the
period, (ii) reinvestment of all dividends and distributions and (iii)
deduction of all applicable charges and expenses. The Fund's average annual
total return represents the annual compounded growth rate that would produce
the total return achieved over the applicable period. Comparisons of total
returns on a year-to-year basis may facilitate an understanding of how the
Fund is affected by changing market conditions. The average annual total
return permits an investor to identify the overall rate of return achieved by
the Fund during a multi-year period without regard to year-to-year variations.
The performance information reported by the Fund does not take into account
any federal or state income taxes that may be payable by an investor. The
Fund may also include comparative performance information in advertising or
marketing the Fund's shares as described below.
<PAGE>
The following table sets forth the total return on an investment in the
Fund for the one- , three-, five- and ten-year periods ended December 31,
1995, and the average annual total return for such periods.
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
<TABLE>
<CAPTION>
PERIODS ENDED DECEMBER 31, 1995
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Total Return.................. 24.90% 49.28% 90.73% 188.18%
Average Annual Total Return... 24.90% 14.29% 13.78% 11.16%
</TABLE>
The foregoing information is a statement of the past record of the Fund
and should not be construed as a representation or prediction of future
results. The investment return and principal value of an investment in the
Fund will fluctuate with changing market conditions so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
From time to time the Fund's performance may be compared to the Dow Jones
Industrial Average and the Standard and Poor's 500 Composite Price Index,
which are groups of unmanaged securities, and to the Lipper All Equity Funds
Average and the Lipper Growth and Income Funds Average. The Fund's
performance also may be compared to the returns payable on U.S. Treasury
securities, to the Federal Funds Rate and to the advance rates quoted by a
Federal Home Loan Bank. The Fund's performance also may be compared to that
of other mutual funds through ratings or rankings or appropriate averages
based on specified factors over specified periods of time reported or
published by such entities as AMG Data, Barron's, Business Week, CDA
Investment Technologies, Inc., Changing Times, Chicago Tribune, Consumer
Reports, the Donoghue Organization, The Economist, Financial Times, Forbes,
Fortune, Futures, Income Opportunities, Investment Advisor, Investment Company
Data, Inc., Kiplinger's Personal Finance, Lipper Analytical Services, Inc.,
Media General Financial Services, Money, Morningstar, Inc., Mutual Funds
Market News, Newsweek, The New York Times, No-Load Fund Investor, Smart Money,
Standard & Poor's, Strategic Data, Success, Time, U.S. News and World Report,
USA Today, Value Line, The Wall Street Journal and Worth Magazine.
<PAGE>
ITEM 23. FINANCIAL STATEMENTS
The audited financial statements of the Fund for the fiscal year ended
December 31, 1995, including the notes thereto and the report of Arthur
Andersen LLP, contained in the Fund's Annual Report to shareholders for the
year ended December 31, 1995 (the "Annual Report") are hereby incorporated by
reference to the Annual Report. Such financial statements have been audited by
Arthur Andersen LLP and have been incorporated by reference herein in reliance
on the report of Arthur Andersen LLP and the authority of such firm as experts
in accounting and auditing. Except as set forth above, no other portion of
the Annual Report is incorporated herein.
The Fund will provide a copy of the Annual Report without charge to each
person to whom this Registration Statement is delivered. Requests should be
directed to the Fund c/o Shay Financial Services, Co., 111 East Wacker Drive,
Suite 2600, Chicago, IL 60601 or by telephone at 800-527-3713.
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
The following financial statements, including the notes thereto and
the report of Arthur Andersen LLP, are contained in the Fund's Annual Report
to Shareholders for the fiscal year ended December 31, 1995 are incorporated
by reference into Part B of this Amendment to the Registration Statement:
(i) Schedule of Investments as of December 31, 1995
(ii) Statement of Assets and Liabilities as of December 31,
1995
(iii) Statement of Operations for the year ended December 31,
1995
(iv) Statements of Changes in Net Assets for each of the years
in the two-year period ended December 31, 1995
(v) Financial Highlights, Selected Data for Each Share of
Capital Stock Outstanding Throughout Each Year for each
of the years in the five-year period ended December 31,
1995
(vi) Notes to Financial Statements
(vii) Report of Independent Auditors (Arthur Andersen LLP,
dated February 15, 1996)
(b) Exhibits:
(1) Certificate of Incorporation of the registrant, as amended
(a) Certificate of Incorporation, filed with the New York
Secretary of State October 29, 1952. Previously
filed with Amendment No. 4.
(b) Certificate of Amendment of Certificate of
Incorporation, amending Article THIRD thereof, filed
with the New York Secretary of State September 13,
1957. Previously filed with Amendment No. 4.
<PAGE>
(c) Certificate of Amendment of Certificate of
Incorporation, amending Article TWELFTH thereof,
filed with the New York Secretary of State January
16, 1958. Previously filed with Amendment No. 4.
(d) Certificate of Amendment of Certificate of
Incorporation, amending the capital of the
Corporation, filed with the New York Secretary of
State December 12, 1958. Previously filed with
Amendment No. 4.
(e) Certificate of Amendment of Certificate of
Incorporation, amending Article FOURTH thereof, filed
with the New York Secretary of State April 14, 1960.
Previously filed with Amendment No. 4.
(f) Certificate of Change of Institutional Investors
Mutual Fund, Inc., changing the post office address
of the Fund, filed with the New York Secretary of
State March 23, 1965. Previously filed with
Amendment No. 4.
(g) Certificate of Amendment of Certificate of
Incorporation, amending Article THIRD thereof, filed
with the New York Secretary of State March 16, 1970.
Previously filed with Amendment No. 4.
(h) Certificate of Amendment of Certificate of
Incorporation, amending Article FOURTH thereof, filed
with the New York Secretary of State June 25, 1982.
Previously filed with Amendment No. 4.
(i) Certificate of Amendment of Certificate of
Incorporation, amending Article FIRST thereof, filed
with the New York Secretary of State July 12, 1983.
Previously filed with Amendment No. 4.
(2) By-Laws, as amended. Previously filed with Amendment No.
4.
(3) Not applicable
(4) Instruments defining rights of security holders
<PAGE>
(a) Form of Certificate for Common Stock. Previously
filed with Amendment No. 2.
(b) Articles Third, Fourth and Twelfth of Certificate of
Incorporation (See Exhibit 1.)
(c) Articles II, VIII, IX and XVI of By-Laws (See Exhibit
2.)
(5) Investment Advisory Agreement between the Registrant and
Shay Assets Management Co. (EX-99.B5)
(6) Not applicable
(7) Not applicable
(8) Custody Agreement
(a) Custodian Services Agreement dated as of May 19, 1995
between the Registrant and PNC Bank, National
Association (EX-99.B8a)
(b) Custodian Services Fees Agreement dated as of May 19,
1995 between the Registrant and PNC Bank, National
Association (EX-99.B8b)
(c) Administration and Accounting, Transfer Agency and
Custodian Services Fee Waivers Agreement dated as of
May 19, 1995 between the Registrant, PNC Bank,
National Association and PFPC Inc. (EX-99.B8c)
(9) Other Material Contracts
(a) Administration and Accounting Services Agreement
dated as of May 19, 1995 between the Registrant and
PFPC Inc. (EX-99.B9a)
(b) Transfer Agency Services Agreement dated as of May
19, 1995 between the Registrant and PFPC Inc.
(EX-99.B9b)
(c) Distribution Agreement dated as of September 20, 1995
between the Registrant and Shay Financial Services
Co. (EX-99.B9c)
(10) Not applicable
(11) Consent of Arthur Andersen LLP (EX-99.B11)
<PAGE>
(12) Not applicable
(13) Not applicable
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) Financial Data Schedule (EX-27)
(18) Not applicable
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
SIVCO Corp., a New York corporation and a wholly-owned subsidiary of
Staten Island Savings Bank, is deemed to be under common control with the
Registrant.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of March 31, 1996, there were 25 record holders of common stock
of the Fund.
ITEM 27. INDEMNIFICATION
Sections 721-726 of the New York Business Corporation Law provide
that New York corporations shall have the power and, in certain cases the
obligation, to indemnify officers and directors against certain liabilities.
Article TWELFTH of the Fund's Certificate of Incorporation provides that the
Fund shall indemnify each officer and director against the reasonable
expenses, costs and counsel fees incurred by him in connection with any claim,
action, suit or proceeding to which he may be made a party by reason of having
been a director or officer of the Fund, except where such officer or director
is finally adjudicated to be liable for negligence or misconduct in the
performance of his duties as such director or officer and except that in the
case of settlement of such claim, action, suit or proceeding such
indemnification must be authorized by a majority of the non-interested
directors or pursuant to an opinion of independent counsel that such director
or officer has not been derelict in the performance of his duties as such
director or officer. Notwithstanding the provisions of New York State law,
however, under the Investment Company Act of 1940 the Fund may not, and the
Fund will not, indemnify any officer or director for any liability, whether or
not there has been an adjudication of liability, arising by reason of
"Disabling Conduct," i.e., willful misfeasance, bad faith, gross negligence or
reckless disregard of duty.
<PAGE>
In addition, the Fund has entered into a Directors and Officers
Liability Insurance Policy, covering the period August 1, 1995 to July 31,
1996, which will insure the directors and officers of the Fund against loss
which any directors or officers of the Fund may be obligated to pay by reason
of claims based on any actual or alleged breach of duty, neglect, error,
misstatement, misleading statement, omission or other act done or wrongfully
attempted or any matter claimed against them solely by reason of their being a
director or officer. The Fund may not enter into an insurance policy which
would protect any officer or director against liability incurred by such
officer or director by reason of his Disabling Conduct or which would protect
or purport to protect any officer or director against any loss arising from
fines or penalties imposed by law or matters which may be deemed uninsurable
under the law. The foregoing notwithstanding, the Fund may enter into an
insurance policy protecting the Fund against damages caused by the Disabling
Conduct of any officer or director, provided that the terms of such policy
shall require that any payments under the policy shall be made directly to the
Fund and that the insurer shall be subrogated to the rights of the Fund to
recover from such officer or director.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Fund pursuant to the foregoing provisions, or otherwise, the
Fund has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Investment Company Act of 1940 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Fund of expenses incurred or paid by a director, officer or
controlling person of the Fund in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Fund will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Investment
Company Act of 1940 and will be governed by the final adjudication of such
issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Incorporated herein by reference from Items 5 and 16 are the
following: the description of the business of Shay Assets Management Co. (the
"Investment Adviser"), the information concerning the organization and general
partners of Shay Financial Services Co. (the "Distributor") and the
biographical information pertaining to Messrs. Shay, Sammons, McCabe and
Trautman.
<PAGE>
From its formation on September 1, 1990 until June 1994, the
Investment Adviser was engaged in business only in connection with rendering
services to Asset Management Fund, Inc., a registered investment company.
From June 1994 to February 1995, the Investment Adviser was the Sub-Adviser
providing portfolio management services for the U.S. Mortgage Securities
Portfolio of Nationar Funds, Inc. Since May 19, 1995, the Investment Adviser
has served as investment adviser to the Fund and M.S.B. Fund, Inc. The
Investment Adviser also acted as investment adviser to Institutional Investors
Tax-Advantaged Income Fund, Inc. from May 19, 1995 to March 15, 1996. In
addition, in late 1995, the Investment Adviser was selected as the investment
adviser to several savings banks located in New York State on a non-
discretionary basis.
The Investment Adviser is a general partnership that consists of two
general partners, Shay Assets Management, Inc. ("S.A.M.") and ACB Assets
Management, Inc. ("ACBAM"), each of which holds a fifty-percent interest in
the partnership. S.A.M. is the managing partner of the Investment Adviser.
S.A.M. is controlled by Rodger D. Shay, who is a Vice President of the Fund.
ACB Assets Management, Inc. is a wholly-owned subsidiary of ACB Investment
Services, Inc., which is a wholly-owned subsidiary of Community Bankers
Service Corporation, which in turn is a wholly-owned subsidiary of America's
Community Bankers ("ACB"), the trade association representing savings
institutions in the United States, formerly Savings & Community Bankers of
America. The Investment Adviser, with its principal office located at 111
East Wacker Drive, Chicago, Illinois 60601, is a registered investment adviser
under the Investment Advisers Act of 1940. The principal executive office of
ACB Assets Management, Inc. and of its parent companies (other than ACB, which
is located in Washington, D.C.) is located at 111 East Wacker Drive, Chicago,
Illinois 60601.
The Managing Board of the Investment Adviser consists of Rodger D.
Shay, Edward E. Sammons, Jr., Brian Patrick Smith and James F. McKenna. See
the Statement of Additional Information for information concerning the
business and professional activities of Messrs. Shay and Sammons. Brian
Patrick Smith and James F. McKenna are affiliates of ACBAM and are members of
the Managing Board of the Investment Adviser and the Managing Board of the
Distributor. Mr. Smith is the President and a Director of Community Bankers
Service Corporation and holds other executive positions with ACB. Mr. McKenna
is a member of the Board of Directors of ACB, Community Bankers Service
Corporation and other ACB affiliates. His principal occupation is Chief
Executive Officer of a federal savings bank, North Shore Bank, F.S.B., located
at 15700 West Blue Mound Road, Brookfield, Wisconsin. Community Bankers
Service Corporation owns a majority of the outstanding shares of First
Financial Trust Company, formerly Savings and Community Bankers Trust Company
("Trust Company").
<PAGE>
S.A.M., the managing partner of the Investment Adviser, is located
at 111 E. Wacker Drive, Chicago, Illinois 60601 and at 9200 South Dadeland
Blvd. (Suite 812), Miami, FL 33156. S.A.M. also has offices in New York City
and Summit, New Jersey. S.A.M. is owned by Rodger D. Shay, Arthur M.
Berardelli, Barbara M. Quesep and Rodger D. Shay, Jr. Each such person is
also a shareholder and a Vice President of Shay Financial Services, Inc.
("S.F.S.") and of Shay Government Securities, Inc. ("S.G.S."). Rodger D.
Shay, Jr. is also a Senior Vice President of S.A.M. Roy R. Hingston and
Robert T. Podraza are also Vice Presidents of S.A.M., S.F.S. and S.G.S.
S.G.S. is the managing partner of Shay Government Securities Co.
("Shay Government"), a registered government securities dealer with its
principal place of business at 5605 North MacArthur Blvd., Irving, Texas that
is under common control with the Investment Adviser and the Distributor by
virtue of the substantially identical ownership of the general partners.
Rodger D. Shay is President, Chief Executive Officer and a member of the
Managing Board of Shay Government and the controlling shareholder of S.G.S.
Edward E. Sammons, Jr. is Executive Vice President of Shay Government and a
member of its Managing Board and is Executive Vice President of S.G.S.
Rodger D. Shay is a shareholder of First Home Savings Bank, S.L.A.,
48 West Main Street, Pennsville, New Jersey 08070 and has been a member of its
Board of Directors since December 1990. Additionally, Mr. Shay indirectly
owns 24 percent of the outstanding shares of the Trust Co. by virtue of his
status as controlling shareholder of Shay Investment Services, Inc.
ITEM 29. PRINCIPAL UNDERWRITERS
Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All books and other documents required to be maintained pursuant to
Rule 31a-1(b) (4) and (b) (10) are in the physical possession of the Fund's
Secretary, 111 East Wacker Drive, Chicago, Illinois 60601; accounts, books and
other documents required by Rule 31a-1(b) (5) through (7) and (b) (11) and
Rule 31a-1(f) are in the physical possession of Shay Assets Management Co.,
111 East Wacker Drive, Chicago, Illinois 60601; all other books, accounts and
other documents required to be maintained under Section 31(a) of the
Investment Company Act of 1940 and the Rules promulgated thereunder are in the
physical possession of PFPC Inc., 103 Bellevue Parkway, Wilmington, Delaware
19809.
<PAGE>
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereto duly authorized, in the City of New York
and State of New York on the 29th day of April, 1996.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ Mark F. Trautman
---------------------------------------------
Mark F. Trautman
Vice President
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
<S> <C>
EX-99.B5 Investment Advisory Agreement dated as of May 19, 1995 between the
Registrant and Shay Assets Management Co.
EX-99.B8a Custodian Services Agreement dated as of May 19, 1995 between the
Registrant and PNC Bank, National Association.
EX-99.B8b Custodian Services Fees Agreement dated as of May 19, 1995 between
the Registrant and PNC Bank, National Association.
EX-99.B8c Administration and Accounting, Transfer Agency and Custodian
Services Fee Waivers Agreement dated as of May 19, 1995 between
the Registrant, PNC Bank, National Association and PFPC Inc.
EX-99.B9a Administration and Accounting Services Agreement dated as of May
19, 1995 between the Registrant and PFPC Inc.
EX-99.B9b Transfer Agency Services Agreement dated as of May 19, 1995
between the Registrant and PFPC Inc.
EX-99.B9c Distribution Agreement dated as of May 19, 1995 between the
Registrant and Shay Financial Services Co.
EX-99.B11 Consent of Arthur Andersen LLP.
EX-27 Financial Data Schedule.
</TABLE>
INVESTMENT ADVISORY AGREEMENT
This Agreement made and entered into as of May 19, 1995, by and
between Institutional Investors Capital Appreciation Fund, Inc., a New York
corporation (the "Fund"), and Shay Assets Management Co., an Illinois general
partnership (the "Adviser"):
WITNESSETH:
WHEREAS, the Fund is an open-end diversified management investment
company incorporated in New York on October 29, 1952; and
WHEREAS, the Fund desires to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to render such
services;
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth the parties hereto agree as follows:
1. Advisory Services. The Fund hereby appoints the Adviser to act
as investment adviser to the Fund with respect to the assets belonging to the
Fund's common stock, $1.00 par value, for the period and on the terms set forth
in this Agreement. Shares of the Fund's common stock, $1.00 par value, are
referred to herein as "Fund Shares". The Adviser accepts such appointment and
agrees to render the services herein set forth, for the compensation herein
provided. The Fund, at its option, may also appoint the Adviser to act as
investment adviser to the Fund hereunder with respect to the assets belonging
to any other class of capital stock of the Fund from time to time created, but
the Adviser shall not be required to accept any such appointment. The Adviser
shall furnish investment research and advice to the Fund and shall manage the
investment and reinvestment of the assets and its business affairs and matters
incidental thereto, all subject to the supervision of the Board of Directors of
the Fund and subject to the provisions of the Certificate of Incorporation (as
defined in paragraph 3(a) of this Agreement) and By-Laws (as defined in
paragraph 3(b) of this Agreement) of the Fund and any resolution, rules or
regulations adopted by the Board of Directors of the Fund. The Adviser shall
for all purposes herein provided be deemed to be an independent contractor and
shall, unless otherwise expressly provided herein or authorized by the Board of
Directors of the Fund from time to time, have no authority to act for or
represent the Fund in any way or otherwise be deemed an agent for the Fund.
The Fund shall also be free to retain, at its own expense, other persons to
provide it with any services whatsoever including, but not limited to,
statistical, factual or technical information or advice. The services of the
Adviser herein provided are not to be deemed exclusive and the Adviser shall be
free to render similar services or other services to others.
<PAGE>
2. Duties of the Adviser. Subject to the general supervision of
the Board of Directors of the Fund, the Adviser shall, employing its
discretion, manage the investment operations of the Fund and the composition of
the portfolio of securities and investments (including cash) belonging to the
Fund, including the purchase, retention and disposition thereof and the
execution of agreements relating thereto, in accordance with the investment
objective, policies and restrictions of the Fund as stated in the Prospectus
(as defined in paragraph 3(f) of this Agreement), Registration Statement (as
defined in paragraph 3(d) of this Agreement), Certificate of Incorporation and
By-Laws of the Fund and subject to the following understandings:
(a) The Adviser shall furnish a continuous investment program for
the Fund and determine from time to time what investments or securities will be
purchased, retained or sold by the Fund, and what portion of the assets will be
invested or held uninvested as cash.
(b) The Adviser shall use its best judgment in the performance of
its duties under this Agreement.
(c) The Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Certificate of
Incorporation, the By-Laws and Prospectus of the Fund and with the instructions
and directions of the Board of Directors of the Fund and will conform to and
comply with the requirements of the Investment Company Act of 1940, as amended
from time to time, and the rules and regulations of the Securities and Exchange
Commission thereunder (collectively, the "1940 Act") and all other applicable
Federal and state laws and regulations including without limitation the
provisions of the Internal Revenue Code, as amended from time to time,
applicable to the Fund as a regulated investment company.
(d) The Adviser shall determine the securities and other investments
to be purchased or sold by the Fund and, as agent for the Fund, will effect
transactions pursuant to its determinations either directly with the issuer or
with any broker and/or dealer in such securities. In placing orders with
brokers and/or dealers the Adviser intends to seek the best price and execution
for purchases and sales and will comply with such policies with respect to
brokerage as are set forth in the Fund's Registration Statement and Prospectus
or as the Fund's Board of Directors may adopt from time to time. On occasions
when the Adviser deems the purchase or sale of a security to be in the best
interest of the Fund as well as other customers, the Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be sold or purchased in order to obtain the best
price and execution. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
the Adviser in a manner it considers to be equitable and consistent with its
fiduciary obligations to the Fund and, if applicable, to such other customers.
<PAGE>
(e) The Adviser shall maintain books and records with respect to the
portfolio transactions of the Fund and shall render to the Fund's Board of
Directors such periodic and special reports as the Board of Directors may
reasonably request.
(f) The Adviser shall provide the Fund's custodian and administrator
on each business day with information relating to all transactions concerning
the assets of the Fund, except redemptions of and any subscriptions for Fund
Shares, and will provide on a timely basis to the Fund's administrator and
other persons providing services to the Fund such information as the
administrator or such other persons may reasonably request in connection with
the performance of their respective duties and obligations with respect to the
Fund.
(g) The Adviser will report to the Board of Directors of the Fund at
each meeting thereof all changes in the investments and other assets of the
Fund since the prior report, and will keep the Board of Directors informed of
material developments affecting the Fund and the Adviser, and on its own
initiative, will furnish the Board of Directors from time to time with such
information as the Adviser may believe appropriate for this purpose, whether
concerning the individual companies whose securities are included in the Fund's
holdings, the industries in which they engage, or the economic, social or
political conditions prevailing in each country in which the Fund maintains
investments. The Adviser also will furnish the Board of Directors with such
statistical and analytical information with respect to securities and other
investments of the Fund as the Adviser may believe appropriate or as the Board
of Directors may reasonably request. The Adviser shall prepare and furnish to
the Board of Directors all such other written materials and documents as may be
requested or as may otherwise be necessary or appropriate in connection with
meetings of the Board of Directors, and, if the Secretary of the Fund is an
officer, director, or employee of the Adviser or any of its affiliated persons,
the Adviser shall cause to be prepared and shall bear the costs of preparing
and keeping the minutes of the meetings of the Board of Directors and
committees thereof and of meetings of the stockholders of the Fund.
(h) The Adviser shall furnish such office and other facilities as
may be required by the Fund.
3. Delivery of Documents. The Fund has delivered, or will deliver
promptly, copies of each of the following documents to the Adviser and will
promptly notify and deliver to it all future amendments and supplements if any:
<PAGE>
(a) Certificate of incorporation of the Fund, as filed with the
Secretary of State of the State of New York and in effect on the date hereof
and as amended or restated from time to time (the "Certificate of
Incorporation").
(b) By-Laws of the Fund, as in effect on the date hereof and as
amended or restated from time to time (the "By-Laws").
(c) Certified resolutions of the Board of Directors of the Fund and
of the Fund's stockholders, respectively, authorizing the appointment of the
Adviser and approving the form of this Agreement.
(d) Registration Statement under the 1940 Act and, if applicable,
the Securities Act of 1933, as amended, on Form N-1A (the "Registration
Statement") as filed with the Securities and Exchange Commission (the
"Commission") and in effect on the date hereof relating to the Fund, and all
subsequent amendments thereto.
(e) Notification of Registration under the 1940 Act on Form N-8A as
filed with the Commission.
(f) Prospectus or Prospectuses and Statement or Statements of
Additional Information of the Fund, if any, as currently in effect and as
amended or supplemented from time to time, being herein called the
"Prospectus".
4. Employees of the Adviser. The Adviser shall authorize and
permit any of its directors, officers and employees who may be elected as
Directors or officers of the Fund to serve in the capacities in which they are
elected.
5. Books and Records. The Adviser shall keep the Fund's books and
records required to be maintained by it pursuant to paragraph 2(e) of this
Agreement. The Adviser agrees that all records which it maintains for the Fund
are the property to the Fund and it will promptly surrender any of such records
to the Fund upon the Fund's request. The Adviser further agrees to preserve
for the period prescribed by Rule 31a-2 of the Commission under the 1940 Act
any such records as are required to be maintained by the Adviser with respect
to the Fund hereunder or by Rule 31a-1 of the Commission under the 1940 Act, as
such rule may be amended from time to time, and any other applicable rule that
may be adopted by the Commission.
<PAGE>
6. Expenses. During the term of this Agreement the Adviser will
pay all expenses (including without limitation the compensation of all its
directors, officers and employees serving as Directors or officers of the Fund
pursuant to paragraph 4 of this Agreement) incurred by it in connection with
its activities under this Agreement other than the cost of the securities and
investments purchased for the Fund (including taxes and brokerage commissions,
if any). The Adviser also shall pay the salaries, fees and expenses of
Directors, officers and employees of the Fund who are affiliated persons of the
Adviser or affiliated persons of any affiliated person of the Adviser. All
other expenses shall be borne by the Fund, subject to the limitations and
reimbursements provided for in paragraphs 7 and 8 hereof.
7. Compensation and General Expense Limitation.
(a) For the services provided and expenses borne by the Adviser
pursuant to this Agreement, the Fund shall pay to the Adviser compensation
based on the annual percentage of the Fund's average daily net assets paid
monthly, as follows: 0.75% of the first $100 million and 0.50% over $100
million; provided, however, that if the Restricted Expenses (as defined below)
of the Fund with respect to any fiscal year of the Fund exceed an amount (the
"Restricted Expense Cap") equal to 1.10% of the average daily net asset value
of the Fund during such fiscal year, the fee payable to the Adviser with
respect to such fiscal year shall be reduced by the amount of such excess, but
not below zero. The fee payable to the Adviser pursuant to this paragraph 7
(the "Advisory Fee") shall commence on the date on which this Agreement is
approved by a majority of the Fund's outstanding voting securities, as defined
in the 1940 Act (the "Stockholder Approval Date") and shall be accrued daily,
subject to adjustment as provided below in this paragraph 7 and subject to
further adjustment as provided in paragraph 8, and the fee for each month will
be paid to the Adviser during the succeeding month.
(b) The amount of compensation payable to the Adviser with respect
to each day during a fiscal year of the Fund shall be adjusted as follows:
(i) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the
close of business on such day exceeds the Applicable Pro
Rata Portion of the Restricted Expense Cap (as defined
below) through such day, the compensation payable to the
Adviser with respect to such day shall be reduced by the
amount of such excess.
<PAGE>
(ii) If the total amount of Restricted Expenses accrued by the
Fund from the beginning of the fiscal year through the
close of business on such day is less than the Applicable
Pro Rata Portion of the Restricted Expense Cap through such
day, the compensation payable to the Adviser with respect
to such day shall be increased by the amount of such
excess, except to the extent such increase would cause the
aggregate compensation payable to the Adviser with respect
to the period from the beginning of such fiscal year
through such date to exceed the Applicable Pro Rata Portion
of the Advisory Fee (as defined below).
In the event any reduction of the Advisory Fee provided for in this paragraph
7(b) would result in an aggregate Advisory Fee of less than zero for any month
in a fiscal year, the Adviser shall make a refund payment to the Fund in such
amount; provided, however, the Adviser shall not be obligated to refund an
amount greater than the aggregate amount of the Advisory Fee previously paid to
the Adviser with respect to such fiscal year.
(c) For purposes of this paragraph 7:
(i) "Applicable Pro Rata Portion of the Restricted Expense Cap"
as of any day shall mean the dollar amount computed by
multiplying 1.10% by (A) the ratio computed by dividing the
number of days elapsed since the beginning of the relevant
fiscal year by the number of days in such year and (B) the
average daily net asset value of the Fund from the
beginning of the relevant fiscal year through such day.
(ii) "Applicable Pro Rata Portion of the Advisory Fee" as of any
day shall mean the dollar amount of the Advisory Fee that
would be payable to the Adviser with respect to the period
from the beginning of the relevant fiscal year through such
day, if such amount were computed without regard to the
limitations set forth in paragraph 7(b) and paragraph 8,
multiplied by the ratio computed by dividing the number of
days elapsed since the beginning of the relevant fiscal
year by the number of days in such fiscal year.
<PAGE>
(d) In the event this Agreement becomes effective on a date other
than the first day of any fiscal year, solely for the purpose of computing the
amount of the Advisory Fee for such fiscal year, such first fiscal year shall
be deemed to begin on the Stockholder Approval Date and to end on December 31
of such year. In the event this Agreement terminates on a date other than the
last day of any fiscal year, solely for the purpose of computing the amount of
the Advisory Fee for such fiscal year, such fiscal year shall be deemed to
begin on January 1 of such year and to end on the date of the termination of
this Agreement. In either of such events, the Applicable Pro Rata Portion of
the Restricted Expense Cap and the Applicable Pro Rata Portion of the Advisory
Fee shall be reduced by multiplying such amount by the ratio computed by
dividing the number of days deemed to occur in such fiscal year by 365.
(e) As used herein, the term "Restricted Expenses" means all
expenses of the Fund, including without limitation (i) the general expenses of
the Fund, (ii) the fees payable to the Adviser, the Fund's administrator, if
any, the Fund's transfer agent and dividend paying agent, if any, and the
Fund's custodian and (iii) registration fees and the costs and expenses of
qualifying the Fund's shares for offer and sale under the Blue Sky laws of any
jurisdiction where such shares may be qualified from time to time; but the
Restricted Expenses shall exclude (A) the fees and expenses of the Fund's
outside counsel (other than registration and filing fees disbursed by such
counsel on behalf of the Fund), (B) the fees and expenses of the Fund's
independent accountants, (C) Directors' fees and the expenses incurred by
Directors and reimbursed by the Fund and (D) fees and expenses paid under a
plan of distribution, if any, adopted pursuant to Rule 12b-1 under the 1940
Act.
7A. Compensation during the Interim Period.
Notwithstanding any other provision of this Agreement, in order to
comply with Rule 15a-4 under the 1940 Act: (i) the compensation payable to the
Adviser with respect to the period from the date hereof until the Stockholder
Approval Date (the "Interim Period") shall be equal to the amount that would
have been payable with respect to the Interim Period to Nationar as the Fund's
prior investment adviser, administrator, transfer agent, registrar and
custodian pursuant to the Amended and Restated Agreement between the Fund and
Nationar dated as of April 1, 1991 filed as an exhibit to the Fund's
registration statement on Form N-1A and (ii) the Adviser shall bear the fees
and other compensation of the Fund's administrator, transfer agent, registrar
and custodian with respect to the Interim Period.
<PAGE>
8. Blue Sky Limitation on Expenses.
(a) In the event the Expenses (as defined in paragraph 8(b) below)
of the Fund for any fiscal year exceed the lowest applicable annual expense
limitations, if any, established pursuant to the statutes or regulations of any
jurisdictions in which Fund Shares are then qualified for offer and sale (such
excess hereinafter called the "Blue Sky Excess Expense"), the compensation due
to the Adviser under paragraph 7 for the fiscal year in question shall be
reduced by an amount equal to the Blue Sky Excess Expense of the Fund, and if
the Blue Sky Excess Expense of the Fund exceeds the fees of the Fund payable to
the Adviser with respect to the Fund for the fiscal year in question, the
Adviser shall, to the extent required by such statute or regulations, reimburse
the Fund for the amount of such excess. If for any month the Expenses shall
exceed 1/12th of the percentage of average daily net assets allowable as
Expenses, the payment to the Adviser for that month shall be reduced, and, if
necessary, the Adviser shall make a refund payment to the Fund so that the
Expenses will not exceed such percentage. As of the end of the fiscal year,
however, the foregoing computations shall be readjusted so that the aggregate
compensation payable to the Adviser for the year is equal to the amount
provided for in paragraph 7 hereof, reduced by an amount equal to the Blue Sky
Excess Expense of the Fund. The aggregate of the repayments, if any, by the
Adviser to the Fund for the year shall be the amount necessary to reimburse the
Fund for the amount of such excess.
(b) For purposes of paragraph 8(a) of this Agreement, the term
"Expenses" means the general expenses of the Fund, including without limitation
fees payable to the Adviser, the Fund's administrator, if any, the Fund's
transfer agent, if any, and to the Fund's custodian; but the Expenses shall
exclude any interest, taxes, brokerage commissions and litigation and
indemnification expenses and other extraordinary expenses not incurred in the
ordinary course of the Fund's business.
9. Limitation of Liability. The Adviser shall not be liable 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 Agreement relates, except a loss
resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services (in which case any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act) or
a loss resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement.
<PAGE>
10. Effective Date and Term. This Agreement shall become effective
on the date hereof. This Agreement shall remain in effect for a period of
twelve (12) months from the date of such effectiveness and shall continue in
effect for successive twelve-month periods (or for such shorter periods as may
be specified by the Fund's Board of Directors) subject to termination as
hereinafter provided, if such continuance is approved at least annually (a) by
vote of the Fund's Board of Directors, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by vote of a majority of the
Directors of the Fund who are not parties to this Agreement or "interested
persons" (as defined in the 1940 Act) of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval;
provided, however, that this Agreement shall not continue and shall terminate
on the 120th day after the date hereof unless, on or prior to such date, this
Agreement is approved by a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund. The annual approvals provided for herein
shall be effective to continue this Agreement from year to year (or for such
shorter period referred to above) if given within a period beginning not more
than ninety (90) days prior to (and including) the anniversary of the date upon
which the most recent previous continuance of this Agreement became effective,
notwithstanding the fact that more than three hundred sixty-five (365) days may
have elapsed since the date on which such approval was last given. This
Agreement may be terminated (i) by the Fund at any time, without the payment of
any penalty, by the Board of Directors of the Fund or by vote of a majority of
the outstanding voting securities (as defined in the 1940 Act) of the Fund, on
30 (thirty) days' written notice to the Adviser, or (ii) after the third
anniversary of the date of this Agreement, by the Adviser at any time, without
the payment of any penalty, on 90 (ninety) days' written notice to the Fund.
This Agreement will automatically and immediately terminate in the event of its
assignment (as defined in the 1940 Act).
11. Amendment of Agreement. This Agreement may be amended by mutual
consent, provided that the amendment is approved (a) by vote of a majority of
those Directors of the Fund who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such amendment, and
(b), if required by the 1940 Act, by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act) of the Fund.
<PAGE>
12. Notices. Notices of any kind to be given to the Adviser by the
Fund shall be in writing and shall be duly given if mailed or delivered to the
Adviser at 111 East Wacker Dr., Chicago, IL 60601, Attention: Executive Vice
President, or at such other address or to such other individual as shall be
specified by the Adviser to the Fund in accordance with this paragraph 12.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be duly given if mailed or delivered to the Fund at 330 Madison
Avenue, New York, NY 10017, Attention: President, or at such other address or
to such other individual as shall be specified by the Fund to the Adviser in
accordance with this paragraph 12, with copies to each of the Fund's Directors
at their respective addresses set forth in the Fund's Registration Statement
and to the legal counsel to the Fund.
13. Authority. The Directors have authorized the execution of this
Agreement in their capacity as Directors and not individually. The Adviser
agrees that neither the stockholders nor the Directors nor any officer,
employee, representative or agent of the Fund shall be personally liable upon,
nor shall resort be had to their private property for the satisfaction of,
obligations given, executed or delivered on behalf of or by the Fund, that the
stockholders, Directors, officers, employees, representatives and agents of the
Fund shall not be personally liable hereunder, and that the Adviser shall look
solely to the property of the Fund for the satisfaction of any claim hereunder.
14. Controlling Law. This Agreement shall be governed by the
construed in accordance with the laws of the state of New York.
15. Multiple Counterparts. This Agreement may be executed
simultaneously in several counterparts, each of which shall be deemed to be an
original, but which together shall constitute one and the same instrument.
16. Captions. The captions of the paragraphs are for descriptive
purposes only and they are not intended to limit or otherwise affect the
content of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
INSTITUTIONAL INVESTORS
CAPITAL APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
---------------------------------------
Harry P. Doherty
President
SHAY ASSETS MANAGEMENT CO.
By: /s/ EDWARD E. SAMMONS, JR.
--------------------------------------
Edward E. Sammons, Jr.
Executive Vice President,
Shay Assets Management, Inc.,
Managing Partner
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of May 19, 1995 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC., a New York corporation
(the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PNC Bank to provide custodian services,
and PNC Bank wishes to furnish custodian services, either directly or though an
affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, In consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral and
Written Instructions on behalf of the Fund and listed on the Authorized Persons
Appendix attached hereto and made a part hereof or any amendment thereto as may
be received by PNC Bank. An Authorized Person's scope of authority may be
limited by the Fund by setting forth such limitation in the Authorized Persons
Appendix.
(d) "Book-Entry System" means Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor or
successors, and its nominee or nominees and any book-entry system maintained by
an exchange registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "Oral Instructions" mean oral instructions received by PNC Bank
from an Authorized Person or from a person reasonably believed by PNC Bank to
be an Authorized Person.
<PAGE>
(g) "PNC Bank" means PNC Bank, National Association or a subsidiary
or affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(j) "Shares" mean the shares of stock of any series or class of the
Fund.
(k) "Property" means:
(i) any and all securities and other investment items which
the Fund may from time to time deposit, or cause to be
deposited, with PNC Bank or which PNC Bank may from time
to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities
or investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC Bank from time to time,
from or on behalf of the Fund.
(k) "Written Instructions" mean written instructions signed by two
Authorized Persons and received by PNC Bank. The instructions may be delivered
by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund and PNC Bank accepts such appointment and agrees to
furnish such services, subject to the direction and control of the Board of
Directors of the Fund.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of PNC Bank
or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
<PAGE>
(c) a copy of the Fund's advisory agreement;
(d) a copy of the distribution agreement, if any, with respect to
each class of Shares;
(e) a copy of the Fund's administration agreement if PNC Bank is not
providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
In performing its duties hereunder, PNC Bank will comply with all
applicable requirements of the Securities Laws and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PNC Bank hereunder and will act in conformity with
the instructions and directions of the Board of Directors of the Fund which are
timely delivered to PNC Bank. Except as specifically set forth herein, PNC Bank
assumes no responsibility for such compliance by the Fund.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank shall act
only upon Oral and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PNC Bank to be an Authorized Person) pursuant to this Agreement.
PNC Bank may assume that any Oral or Written Instructions received hereunder
are not in any way inconsistent with the provisions of organizational documents
of the Fund or of any vote, resolution or proceeding of the Fund's Board of
Directors or of the Fund's shareholders, unless and until PNC Bank receives
Written Instructions to the contrary.
(c) The Fund agrees to forward to PNC Bank Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given by
an affiliate of PNC Bank) so that PNC Bank receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PNC Bank
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral or Written
Instructions reasonably appear to have been received from an Authorized Person,
PNC Bank shall incur no liability to the Fund in acting upon such Oral or
Written Instructions provided that PNC Bank's actions comply with the other
provisions of this Agreement.
<PAGE>
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it
should or should not take, PNC Bank may request directions or advice, including
Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
question of law pertaining to any action it should or should not take, PNC Bank
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's investment adviser or PNC Bank, at the
option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC Bank receives from the
Fund, and the advice it receives from counsel, PNC Bank shall be entitled to
rely upon and follow the advice of counsel. In the event PNC Bank so relies on
the advice of counsel, PNC Bank remains liable for any action or omission on
the part of PNC Bank which constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PNC Bank of any duties, obligations or
responsibilities set forth in this Agreement.
(d) Protection of PNC Bank. PNC Bank shall be protected in any
action it takes or does not take in reliance upon directions, advice or Oral or
Written Instructions it receives from the Fund or from counsel and which PNC
Bank believes, in good faith, to be consistent with those directions, advice or
Oral or Written Instructions. Nothing in this section shall be construed so as
to impose an obligation upon PNC Bank (i) to seek such directions, advice or
Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions unless, under the terms of
other provisions of this Agreement, the same is a condition of PNC Bank's
properly taking or not taking such action. Nothing in this subsection shall
excuse PNC Bank when an action or omission on the part of PNC Bank constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PNC
Bank of any duties, obligations or responsibilities set forth in this
Agreement.
7. RECORDS. The books and records pertaining to the Fund, which relate
to the custody services provided hereby and are in the possession or under the
control of PNC Bank, shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund and Authorized
Persons shall have access to such books and records at all times during PNC
Bank's normal business hours. Upon the reasonable request of the Fund, copies
of any such books and records shall be provided by PNC Bank to the Fund or to
an authorized representative of the Fund, at the Fund's expense.
<PAGE>
8. CONFIDENTIALITY. PNC Bank agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records or information is otherwise consented to, in writing, by the
Fund. The Fund agrees that such consent shall not be unreasonably withheld and
may not be withheld where PNC Bank may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect
to the loss of data or service interruptions caused by equipment failure
provided such loss or interruption is not caused by PNC Bank's own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties or
obligations under, or other material noncompliance with, this Agreement.
11. COMPENSATION. As compensation for custody services rendered by PNC
Bank during the term of this Agreement, the Fund will pay to PNC Bank a fee or
fees as may be agreed to in writing from time to time by the Fund and PNC Bank.
12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PNC
Bank and its affiliates from all taxes, charges, expenses, assessments, claims
and liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto, and expenses, including (without limitation) reasonable
attorneys' fees and disbursements (collectively, "Losses") arising directly or
indirectly from any action or omission to act which PNC Bank takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PNC Bank, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PNC Bank's or its affiliates' own willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
under this Agreement.
<PAGE>
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on behalf of
the Fund except as specifically set forth herein or as may be specifically
agreed to by PNC Bank in writing. PNC Bank shall be obligated to exercise care
and diligence in the performance of its duties hereunder, to act in good faith
and to use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. PNC Bank shall be liable for any damages
arising out of PNC Bank's failure to perform its duties under this agreement to
the extent such damages arise out of PNC Bank's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties under this Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, and which PNC Bank reasonably believes to be genuine; or (B)
subject to section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PNC Bank's control, including acts of civil or military
authority, national emergencies, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, PNC
Bank shall have no liability to the Fund for any consequential, special or
indirect losses or damages which the Fund may incur or suffer by or as a
consequence of PNC Bank's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by PNC Bank.
14. DESCRIPTION OF SERVICES.
(a) Delivery of the Property. The Fund will deliver or arrange for
delivery to PNC Bank, all the Property owned by the Fund, including cash
received as a result of the distribution of Shares, during the term of this
Agreement. PNC Bank will not be responsible for such property until actual
receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate accounts in the Fund's name
using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank shall
open separate custodial accounts for each separate series of the Fund
(collectively, the "Accounts") and shall hold in the Accounts all cash received
from or for the Accounts of the Fund specifically designated to each separate
series.
<PAGE>
PNC Bank shall make cash payments from or for the Accounts of the Fund
only for:
(i) purchases of securities in the name of the Fund or PNC
Bank or PNC Bank's nominee as provided in sub-section (j)
and for which PNC Bank has received a copy of the broker's
or dealer's confirmation or payee's invoice, as
appropriate;
(ii) purchase or redemption of Shares of the Fund delivered
to PNC Bank;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution,
advisory, management fees or similar expenses which are
to be borne by the Fund;
(iv) payment to, subject to receipt of Written Instructions,
the Fund's transfer agent, as agent for the shareholders,
an amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu of paying
may arrange for the direct payment of cash dividends and
distributions to shareholders in accordance with procedures
mutually agreed upon from time to time by and among the
Fund, PNC Bank and the Fund's transfer agent;
(v) payments, upon receipt of Written Instructions, in
connection with the conversion, exchange or surrender of
securities owned or subscribed to by the Fund and held by
or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with
respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to
provisions in sub-section (c) of this Section; and
(viii) payments, upon Written Instructions, made for
other proper Fund purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian for the Accounts.
<PAGE>
(c) Receipt of Securities; Subcustodians.
(i) PNC Bank shall hold all securities received by it for
the Accounts in a separate account that physically
segregates such securities from those of any other persons,
firms or corporations, except for securities held in a Book-
Entry System. All such securities shall be held or disposed
of only upon Written Instructions of the Fund pursuant to
the terms of this Agreement. PNC Bank shall have no power
or authority to assign, hypothecate, pledge or otherwise
dispose of any such securities or investment, except upon
the express terms of this Agreement and upon Written
Instructions, accompanied by a certified resolution of the
Fund's Board of Directors, authorizing the transaction. In
no case may any member of the Fund's Board of Directors, or
any officer, employee or agent of the Fund withdraw any
securities.
At PNC Bank's own expense and for its own convenience,
PNC Bank may enter into sub-custodian agreements with other
United States banks or trust companies to perform duties
described in this sub-section (c). Such bank or trust
company shall have an aggregate capital, surplus and
undivided profits, according to its last published report,
of at least one million dollars ($1,000,000), if it is a
subsidiary or affiliate of PNC Bank, or at least twenty
million dollars ($20,000,000) if such bank or trust company
is not a subsidiary or affiliate of PNC Bank. In addition,
such bank or trust company must be qualified to act as a
custodian and agree to comply with the relevant provisions
of the 1940 Act and other applicable rules and regulations.
Any such arrangement will not be entered into without prior
written notice to the Fund.
PNC Bank shall remain responsible for the performance
of all of its duties as described in this Agreement and
shall hold the Fund harmless from its own acts or
omissions, under the standards of care provided for herein,
or the acts and omissions of any sub-custodian chosen by
PNC Bank under the terms of this sub-section (c).
(d) Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, PNC Bank, directly or through the use
of the Book-Entry System, shall:
<PAGE>
(i) deliver any securities held for the Fund against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated
in such Oral or Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the
authority of the Fund as owner of any securities may be
exercised;
(iii) deliver any securities to the issuer thereof, or its
agent, when such securities are called, redeemed,
retired or otherwise become payable; provided that, in
any such case, the cash or other consideration is to be
delivered to PNC Bank;
(iv) deliver any securities held for the Fund against
receipt of other securities or cash issued or paid in
connection with the liquidation, reorganization,
refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of
any conversion privilege;
(v) deliver any securities held for the Fund to any
protective committee, reorganization committee or other
person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets
of any corporation, and receive and hold under the terms of
this Agreement such certificates of deposit, interim
receipts or other instruments or documents as may be issued
to it to evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Fund and take such other steps as shall be stated in said
Oral or Written Instructions to be for the purpose of
effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization
of the Fund;
(vii) release securities belonging to the Fund to any
bank or trust company for the purpose of a pledge or
hypothecation to secure any loan incurred by the Fund;
provided, however, that securities shall be released only
upon payment to PNC Bank of the monies borrowed, except
that in cases where additional collateral is required to
secure a borrowing already made subject to proper prior
authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
<PAGE>
(viii) release and deliver securities owned by the Fund in
connection with any repurchase agreement entered into on
behalf of the Fund, but only on receipt of payment
therefor; and pay out moneys of the Fund in connection with
such repurchase agreements, but only upon the delivery of
the securities;
(ix) release and deliver or exchange securities owned by
the Fund in connection with any conversion of such
securities, pursuant to their terms, into other securities;
(x) release and deliver securities owned by the fund for
the purpose of redeeming in kind shares of the Fund upon
delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by
the Fund for other corporate purposes.
PNC Bank must also receive a certified resolution
describing the nature of the corporate purpose and the name
and address of the person(s) to whom delivery shall be made
when such action is pursuant to sub-paragraph (xi).
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank
certified resolutions of the Fund's Board of Directors approving, authorizing
and instructing PNC Bank on a continuous basis, to deposit in the Book-Entry
System all securities belonging to the Fund eligible for deposit therein and to
utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Fund, and deliveries
and returns of securities loaned, subject to repurchase agreements or used as
collateral in connection with borrowings. PNC Bank shall continue to perform
such duties until it receives Written or Oral Instructions authorizing contrary
actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of the Fund which are
maintained in the Book-Entry System, the records of PNC
Bank shall identify by Book-Entry or otherwise those
securities belonging to the Fund. PNC Bank shall furnish to
the Fund a detailed statement of the Property held for the
Fund under this Agreement at least monthly and from time to
time and upon written request.
<PAGE>
(ii) Securities and any cash of the Fund deposited in the
Book-Entry System will at all times be segregated from any
assets and cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon receipt
of securities and will deliver securities only upon the
receipt of money.
(iii) All books and records maintained by PNC Bank
which relate to the Fund's participation in the Book-Entry
System will at all times during PNC Bank's regular business
hours be open to the inspection of Authorized Persons, and
PNC Bank will furnish to the Fund all information in
respect of the services rendered as it may require.
PNC Bank will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for the Fund
which are issued or issuable only in bearer form, except such securities held
in the Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for the Fund may be registered in the name of the Fund, PNC
Bank, the Book-Entry System, a sub-custodian, or any duly appointed nominees of
the Fund, PNC Bank, Book-Entry System or sub-custodian. The Fund reserves the
right to instruct PNC Bank as to the method of registration and safekeeping of
the securities of the Fund. The Fund agrees to furnish to PNC Bank appropriate
instruments to enable PNC Bank to hold or deliver in proper form for transfer,
or to register in the name of its nominee or in the name of the Book-Entry
System, any securities which it may hold for the Accounts and which may from
time to time be registered in the name of the Fund.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for the
account of the Fund, except in accordance with Written Instructions. PNC Bank,
directly or through the use of the Book-Entry System, shall execute in blank
and promptly deliver all notices, proxies and proxy soliciting materials to the
registered holder of such securities. If the registered holder is not the Fund,
then Written or Oral Instructions must designate the person who owns such
securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to and shall take the
following actions:
<PAGE>
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of the Fund, all
income, dividends, distributions, coupons, option
premiums, other payments and similar items, included
or to be included in the Property, and, in addition,
promptly advise the Fund of such receipt and credit
such income, as collected, to the Fund's custodian
account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment
of money;
(C) receive and hold for the account of the Fund all
securities received as a distribution on the Fund's
securities as a result of a stock dividend, share
split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to
any securities belonging to the Fund and held by PNC
Bank hereunder;
(D) present for payment and collect the amount payable
upon all securities which may mature or be called,
redeemed, or retired, or otherwise become payable on
the date such securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(ii) Miscellaneous Transactions.
(A) deliver or cause to be delivered Property against
payment or other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer selling for
the account of the Fund in accordance with street
delivery custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
<PAGE>
(3) for transfer of securities into the name of the
Fund or PNC Bank or nominee of either, or for
exchange of securities for a different number of
bonds, certificates, or other evidence,
representing the same aggregate face amount or
number of units bearing the same interest rate,
maturity date and call provisions, if any;
provided that, in any such case, the new
securities are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral or Written
Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account
of the Fund;
(2) collect interest and cash dividends received,
with notice to the Fund;
(3) hold for the account of the Fund all stock
dividends, rights and similar securities issued
with respect to any securities held by PNC Bank;
and
(4) execute as agent on behalf of the Fund all
necessary ownership certificates required by the
Internal Revenue Code or the Income Tax
Regulations of the United States Treasury
Department or under the laws of any state now or
hereafter in effect, inserting the Fund's name on
such certificate as the owner of the securities
covered thereby, to the extent it may lawfully do
so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or Oral
Instructions establish and maintain a segregated accounts
on its records for and on behalf of the Fund. Such accounts
may be used to transfer cash and securities, including
securities in the Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option
exchange, providing such procedures comply with the
1940 Act and any releases of the SEC relating to the
maintenance of segregated accounts by registered
investment companies; and
<PAGE>
(B) Upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA
custodian accounts for such shareholders holding Shares
through IRA accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of 1986, as amended
(including regulations promulgated thereunder), and with
such other procedures as are mutually agreed upon from time
to time by and among the Fund, PNC Bank and the Fund's
transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral or Written Instructions from the Fund or its
investment advisers that specify:
(i) the name of the issuer and the title of the
securities, including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased
and accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase; and
(vi) the name of the person from whom or the broker through
whom the purchase was made. PNC Bank shall upon receipt of
securities purchased by or for the Fund pay out of the
moneys held for the account of the Fund the total amount
payable to the person from whom or the broker through whom
the purchase was made, provided that the same conforms to
the total amount payable as set forth in such Oral or
Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities upon
receipt of Oral or Written Instructions from the Fund that specify:
<PAGE>
(i) the name of the issuer and the title of the security,
including CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and
accrued interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to
whom the sale was made; and
(vii) the location to which the security must be
delivered and delivery deadline, if any.
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Fund upon such sale, provided that the total amount payable is
the same as was set forth in the Oral or Written Instructions. Subject to the
foregoing, PNC Bank may accept payment in such form as shall be satisfactory to
it, and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
(l) Reports; Proxy Materials.
(i) PNC Bank shall furnish to the Fund the following
reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries, listing securities belonging to the Fund with
the adjusted average cost of each issue and the market
value at the end of such month and stating the cash
account of the Fund including disbursements;
(C) the reports required to be furnished to the Fund
pursuant to Rule 17f-4; and
(D) such other information as may be agreed upon from time
to time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion
or similar communication received by it as custodian of the
Property. PNC Bank shall be under no other obligation to
inform the Fund as to such actions or events.
<PAGE>
(iii) PNC Bank shall furnish to the Fund's Investment
Adviser and Administrator and other persons providing
services to the Fund such information as they may
reasonably request in connection with the performance of
their respective duties and obligations to the Fund.
(m) Collections. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by PNC Bank) shall be at the sole risk of the Fund. If
payment is not received by PNC Bank within a reasonable time after proper
demands have been made, PNC Bank shall notify the Fund in writing, including
copies of all demand letters, any written responses, memoranda of all oral
responses and shall await instructions from the Fund. PNC Bank shall not be
obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. PNC Bank shall also notify the Fund as soon as
reasonably practicable whenever income due on securities is not collected in
due course and shall provide the Fund with periodic status reports of such
income collected after a reasonable time.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Fund to the Fund. It may deliver them to a bank or trust company of PNC Bank's
choice, having an aggregate capital, surplus and undivided profits, as shown by
its last published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under terms similar to
those of this Agreement. PNC Bank shall not be required to make any such
delivery or payment until full payment shall have been made to PNC Bank of all
of its fees, compensation, costs and expenses. PNC Bank shall have a security
interest in and shall have a right of setoff against the Property as security
for the payment of such fees, compensation, costs and expenses.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by messenger,
it shall be deemed to have been given on the day it is delivered. Notices shall
be addressed (a) if to PNC Bank at Airport Business Center, International Court
2, 200 Stevens Drive, Lester, Pennsylvania 19113, marked for the attention of
the Custodian Services Department (or its successor); (b) if to the Fund, c/o
Shay Asset Management Co., 111 East Wacker Drive, Chicago, Illinois 60601, with
a copy to Hughes Hubbard & Reed, One Battery Park Plaza, New York, N.Y., 10004,
Attn: James H. Bluck, Esq.; or (c) at such other address as shall have been
provided by like notice to the sender of any such notice or other communication
by the other party. Any notice given by PNC Bank pursuant to Section 15 hereof
also shall be given to each member of the Board of Directors of the Fund at the
address set forth in the Registration Statement of the Fund as then in effect
and to the legal counsel to the Fund.
<PAGE>
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PNC Bank may assign its rights and delegate
its duties hereunder to any wholly-owned direct or indirect subsidiary of PNC
Bank, National Association or PNC Bank Corp., provided that (i) PNC Bank gives
the Fund thirty (30) days' prior written notice; (ii) the delegate (or
assignee) agrees with PNC Bank and the Fund to comply with all relevant
provisions of the 1940 Act; and (iii) PNC Bank and such delegate (or assignee)
promptly provide such information as the Fund may request, and respond to such
questions as the Fund may ask, relative to the delegation (or assignment),
including (without limitation) the capabilities of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Pennsylvania and governed by Pennsylvania law, without regard to
principles of conflicts of law.
<PAGE>
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
-------------------------------------
John Foster
Vice President
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
-------------------------------------
Harry P. Doherty
President
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ----------- ---------
__________________________ ______________________________________
__________________________ ______________________________________
__________________________ ______________________________________
__________________________ ______________________________________
__________________________ ______________________________________
__________________________ ______________________________________
May 19, 1995
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
Re: Custodian Services Fees
Dear Sir/Madam:
This letter constitutes our agreement with respect to compensation to be
paid to PNC Bank, National Association ("PNC Bank") under the terms of a
Custodian Services Agreement dated May 19, 1995 between you (the "Fund") and
PNC Bank (the "Agreement"). Pursuant to Paragraph 11 of that Agreement, and in
consideration of the services to be provided to the Fund, you will pay PNC Bank
the following:
1. An annual custody fee to be calculated daily and paid monthly based
upon the following: .02% of the first $100 million of average gross assets;
.015% of the next $400 million of average gross assets; .012% of the next $500
million of average gross assets; and .01% of average gross assets over $1
billion; exclusive of out-of-pocket expenses and transaction charges.
2. A transaction charge of $29.00 for each purchase or sale of a
physical security or delivery of a physical security upon its maturity date or
delivery of a physical security for reissuance; $10.00 for each purchase, sale,
free receive or free deliver, or maturity or other book-entry transaction with
respect to a depository eligible security, Federal book-entry security, DTC
eligible security, other book-entry security (other than a GNMA security) or a
direct commercial paper issue; $18.00 for each purchase, sale, free receive or
free delivery, or maturity or other book-entry transaction with respect to a
GNMA security; $30.00 for each purchase, sale, exercise or expiration of an
option contract position (round trip); $50.00 for each purchase, sale, exercise
or expiration of a futures contract position (round trip); $7.50 for each
repurchase trade collateral tranche received from PNC Bank (round trip); and
$15.00 for each repurchase trade collateral tranche received from an
institution other than PNC Bank (round trip).
3. PNC Bank's out-of-pocket expenses including, but not limited to,
overnight express charges, Federal Reserve wire fees and foreign sub-custody
services.
<PAGE>
4. With respect to the per portfolio daily net overdrawn cash balances,
a monthly charge shall be assessed based on the average federal funds rate for
that month.
5. The minimum monthly fee shall be $500, exclusive of out-of-pocket
expenses and transaction charges.
If during the three years following the commencement of the Agreement, PNC
Bank is removed from the Agreement for any reason other than cause related to a
significant decline in service levels, the Fund shall pay any costs of time and
material associated with deconversion, subject to a ceiling of $15,000, and PNC
Bank shall recoup 50% of the fees waived during the first two years.
The fee for the period from the day of the year this fee letter is entered
into until the end of that year shall be prorated according to the proportion
which such period bears to the full annual period.
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
---------------------------------
John Foster
Vice President
Accepted:
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
-----------------------------
Harry P. Doherty
President
May 19, 1995
INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
Re: Administration and Accounting, Transfer Agency,
and Custodian Services Fee Waivers
Dear Sir/Madam:
PNC Bank, National Association ("PNC Bank") agrees to waive certain fees
under a Custodian Services Agreement dated May 19, 1995 between PNC Bank and
you (the "Fund") and PFPC Inc. ("PFPC") agrees to waive certain fees under an
Administration and Accounting Services Agreement and under a Transfer Agency
Agreement, each dated May 19, 1995, between PFPC and the Fund (collectively the
"Agreements") as listed below.
For the first twelve months following the commencement of each Agreement,
PNC Bank and PFPC shall waive 25% of the monthly minimum Administration and
Accounting, Custody, and Transfer Agency fees.
If the foregoing accurately sets forth our agreement and you intend to be
legally bound thereby, please execute a copy of this letter and return it to
us.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
---------------------------------
John Foster
Vice President
PFPC INC.
By: /s/ STEPHEN M. WYNNE
---------------------------------
Stephen M. Wynne
Executive Vice President
Acknowledged:
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
----------------------------
Harry P. Doherty
President
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of May 19, 1995 by and between INSTITUTIONAL
INVESTORS CAPITAL APPRECIATION FUND, INC., a New York corporation (the "Fund"),
and PFPC INC., a Delaware corporation ("PFPC"), which is an indirect wholly
owned subsidiary of PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC as its administrator to provide
administration and accounting services, and PFPC wishes to furnish such
services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral and
Written Instructions on behalf of the Fund and listed on the Authorized Persons
Appendix attached hereto and made a part hereof or any amendment thereto as may
be received by PFPC. An Authorized Person's scope of authority may be limited
by the Fund by setting forth such limitation in the Authorized Persons
Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(h) "Shares" mean the shares of stock of any series or class of the
Fund.
<PAGE>
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT.
(a) The Fund hereby appoints PFPC to provide administration and
accounting services in accordance with the terms set forth in this Agreement.
PFPC accepts such appointment and agrees that, subject to the direction and
control of the Board of Directors of the Fund, it shall, at its expense,
provide administrative services, including without limitation the services
described in this Section and in Sections 9, 10, 14 and 15 hereof, including
such other administrative services as are reasonably requested by the Fund.
PFPC shall make periodic reports to the Fund's Board of Directors concerning
the performance of its obligations hereunder. PFPC shall provide on a timely
basis to the Fund's Investment Adviser, Transfer Agent and Custodian and other
persons providing services to the Fund with such information as such persons
may reasonably request in connection with the performance of their respective
duties and obligations with respect to the Fund. PFPC will report to the Board
of Directors of the Fund at each meeting thereof and will keep the Board of
Directors informed of material developments affecting the Fund.
(b) PFPC will furnish the Fund upon request a Secretary, Treasurer,
Assistant Secretary and/or Assistant Treasurer. PFPC shall authorize and
permit any of its directors, officers and employees who may be elected as
directors or officers of the Fund to serve, without compensation from the Fund,
in the capacities in which they are elected.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of PFPC or
its affiliates to provide services to the Fund and approving
this Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the distribution agreement, if any, with respect to
each class of Shares representing an interest in the Fund;
(e) a copy of any additional administration agreement with respect
to the Fund;
<PAGE>
(f) a copy of any shareholder servicing agreement made in respect of
the Fund; and
(g) copies (certified or authenticated, where applicable) of any and
all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
In performing its duties hereunder, PFPC will comply with all applicable
requirements of the Securities Laws, and any laws, rules and regulations of
governmental authorities having jurisdiction with respect to the duties to be
performed by PFPC hereunder and will act in conformity with the instructions
and directions of the Board of Directors of the Fund which are timely delivered
to PFPC. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC
may assume that any Oral or Written Instruction received hereunder is not in
any way inconsistent with the provisions of organizational documents or this
Agreement or of any vote, resolution or proceeding of the Fund's Board of
Directors or of the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given by
an affiliate of PFPC) so that PFPC receives the Written Instructions by the
close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral or Written
Instructions reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Fund in acting upon such Oral or Written
Instructions provided that PFPC's actions comply with the other provisions of
this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including
Oral or Written Instructions, from the Fund.
<PAGE>
(b) Advice of Counsel. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PFPC receives from the Fund
and the advice PFPC receives from counsel, PFPC may rely upon and follow the
advice of counsel. In the event PFPC so relies on the advice of counsel, PFPC
remains liable for any action or omission on the part of PFPC which constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PFPC believes,
in good faith, to be consistent with those directions, advice and Oral or
Written Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PFPC (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not taking
such action. Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
7. RECORDS.
(a) The books and records pertaining to the Fund which are in the
possession or under the control of PFPC shall be the property of the Fund. The
Fund and Authorized Persons shall have access to such books and records at all
times during PFPC's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PFPC to the
Fund or to an Authorized Person, at the Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to the Fund's books
of account;
(ii) records of the Fund's securities transactions;
(iii) all other books and records as the Fund is
required to maintain pursuant to Rule 31a-1 or any other
rules of the SEC under the 1940 Act in connection with
PFPC's services provided hereunder; and
<PAGE>
(iv) all other books and records of the Fund relating to
its operations prior to the date of this Agreement, to the
extent such books and records are delivered to PFPC.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records or information is otherwise consented to in writing by the
Fund. The Fund agrees that such consent shall not be unreasonably withheld and
may not be withheld where PFPC may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to the Fund. PFPC
shall take all reasonable action in the performance of its duties under this
Agreement to assure that the necessary information is made available to such
accountants for the expression of their unqualified opinion, as required by the
Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure, provided
such loss or interruption is not caused by PFPC's own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties or obligations
under, or other material noncompliance with, this Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state or foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements (collectively, "Losses") arising directly or
indirectly from any action or omission to act which PFPC takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PFPC, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement.
<PAGE>
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed
to by PFPC in writing. PFPC shall be obligated to exercise care and diligence
in the performance of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC shall be liable for any damages arising out of
PFPC's failure to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross negligence or
reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, and which PFPC reasonably believes to be genuine; or (B)
subject to Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur
or suffer by or as a consequence of PFPC's or any affiliate's performance of
the services provided hereunder, whether or not the likelihood of such losses
or damages was known by PFPC or its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
Unless PFPC receives Written Instructions to the contrary, PFPC is
authorized to take, and shall take, the following actions without Oral or
Written Instructions:
(i) Maintain the Fund's accounting records;
(ii) Record and journalize investment, capital share and
income and expense activities;
<PAGE>
(iii) Verify investment buy/sell trade tickets when
received from the investment adviser for the Fund (the
"Adviser") and transmit trades to the Fund's custodian (the
"Custodian") for proper settlement;
(iv) Maintain individual ledgers for investment securities;
(v) Maintain historical tax lots for each security;
(vi) Reconcile cash and investment balances of the Fund
with the Custodian, and provide the Adviser with the
beginning cash balance available for investment purposes;
(vii) Update the cash availability throughout the day
as required by the Adviser;
(viii) Post to and prepare the Statement of Assets and
Liabilities and the Statement of Operations;
(ix) Calculate various contractual expenses (e.g., advisory
and custody fees);
(x) Monitor the expense accruals and notify an officer of
the Fund of any proposed adjustments;
(xi) Control all disbursements and authorize such
disbursements upon Written Instructions;
(xii) Calculate capital gains and losses and foreign
exchange gains and losses;
(xiii) Determine net income;
(xiv) Obtain security market quotes from independent pricing
services approved by the Adviser, or if such quotes
are unavailable, then obtain such prices from the Adviser,
and in either case calculate the market value of the Fund's
investments;
(xv) Transmit or mail a copy of the daily portfolio
valuation to the Adviser;
(xvi) Compute net asset value with the frequency
prescribed in the Fund's then-current Prospectus;
<PAGE>
(xvii) Calculate dividends and capital gains
distributions, if any, as required by the Fund and
recommend the required amount of distributions from
ordinary income and capital gains to avoid Federal income
tax and Federal excise tax;
(xviii) Prepare such quarterly, annual and semi-annual
financial statements as may be required under the 1940 Act
or as may otherwise be requested by the Fund;
(xix) Prepare and provide to the Fund and the Adviser daily
(A) a current security position report, (B) a summary
report of transactions and pending maturities (including
the principal, cost and accrued interest on each portfolio
security in maturity date order) and (C) a current cash
position and cash projection report;
(xx) As appropriate, compute yields, total return, expense
ratios, portfolio turnover rate, and, if required,
portfolio average dollar-weighted maturity and such other
measures of performance and statistics as may be requested
by the Fund; and
(xxi) Prepare a monthly financial statement, which will
include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
15. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services with respect
to the Fund:
(i) Prepare quarterly broker security transactions
summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Fund
statistical data as requested on an ongoing basis;
(iv) Prepare for execution and file the Fund's Federal and
state tax returns and other required tax filings and tax
reports, including without limitation reports with respect
to the payment of dividends and capital gains distributions
to stockholders of the Fund;
<PAGE>
(v) Prepare and file the Fund's Semi-Annual Reports with
the SEC on Form N-SAR;
(vi) Prepare and file with the SEC the Fund's annual, semi-
annual, and quarterly stockholder reports;
(vii) Assist in the preparation of registration statements
and other filings relating to the registration
of Shares;
(viii) Monitor the Fund's status as a regulated investment
company under Sub-chapter M of the Internal
Revenue Code of 1986, as amended;
(ix) Coordinate contractual relationships and
communications between the Fund and its contractual service
providers;
(x) Monitor the Fund's compliance with the amounts and
conditions of each state securities qualification;
(xi) Upon the approval of the Fund, assist any regulatory
body in any requested review of the Fund's books and
records maintained by PFPC;
(xii) With the approval of the Fund, provide information
typically supplied in the investment company
industry to companies that publish, track or report the
price, performance or other information with respect to
investment companies;
(xiii) Prepare and provide to the Board of Directors of
the Fund such reports and other written materials and
documents as may be reasonably requested by the Board of
Directors;
(xiv) Prepare and file on a timely basis so as to incur the
minimum filing fee Notices to the SEC required pursuant
to Rule 24f-2 under the 1940 Act;
(xv) Prepare and file all necessary registrations and
qualifications and all necessary compliance filings under
the state securities and Blue Sky laws; and
(xvi) Perform such other duties as the Fund's Board of
Directors may reasonably request from time to time.
<PAGE>
16. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either party on sixty (60) days' prior written notice to the
other party.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered.
Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington,
Delaware 19809, Attn: Jay Nusblatt; (b) if to the Fund, c/o Shay Asset
Management Co., 111 East Wacker Drive, Chicago, Illinois 60601, with a copy to
Hughes Hubbard & Reed, One Battery Park Plaza, New York, N.Y. 10004, Attn:
James H. Bluck, Esq.; or (c) at such other address as shall have been provided
by like notice to the sender of any such notice or other communication by the
other party. Any notice given by PFPC pursuant to Section 16 hereof also shall
be given to each member of the Board of Directors of the Fund at the address
set forth in the Registration Statement of the Fund as then in effect and to
the legal counsel to the Fund.
18. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act
and the rules and regulations of the SEC thereunder and with this Agreement;
and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). Except as provided
above, this Agreement and the rights and duties of PFPC hereunder may not be
assigned without the prior written consent of the Fund.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ STEPHEN M. WYNNE
-----------------------------------
Stephen M. Wynne
Executive Vice President
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
-----------------------------------
Harry P. Doherty
President
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ----------- ---------
- --------------------------- ---------------------------------------
- --------------------------- ---------------------------------------
- --------------------------- ---------------------------------------
- --------------------------- ---------------------------------------
- --------------------------- ---------------------------------------
- --------------------------- ---------------------------------------
TRANSFER AGENCY SERVICES AGREEMENT
THIS AGREEMENT is made as of May 19, 1995 by and between PFPC INC., a
Delaware corporation ("PFPC"), and INSTITUTIONAL INVESTORS CAPITAL APPRECIATION
FUND, INC., a New York corporation (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to serve as transfer agent,
registrar, dividend disbursing agent and shareholder servicing agent and PFPC
wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Directors to give Oral and
Written Instructions on behalf of the Fund and listed on the Authorized Persons
Appendix attached hereto and made a part hereof or any amendment thereto as may
be received by PFPC. An Authorized Person's scope of authority may be limited
by the Fund by setting forth such limitation in the Authorized Persons
Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(h) "Shares" mean the shares of stock of any series or class of the
Fund.
<PAGE>
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to serve as transfer
agent, registrar, dividend disbursing agent and shareholder servicing agent to
the Fund in accordance with the terms set forth in this Agreement. PFPC
accepts such appointment and agrees to furnish such services, subject to the
direction and control of the Board of Directors of the Fund.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable,
will provide PFPC with the following:
(a) Certified or authenticated copies of the resolutions of the
Fund's Board of Directors, approving the appointment of
PFPC or its affiliates to provide services to the Fund and
approving this Agreement;
(b) A copy of the Fund's most recent effective registration
statement;
(c) A copy of the advisory agreement with respect to the Fund;
(d) A copy of the distribution agreement, if any, with respect
to each class of Shares of the Fund;
(e) A copy of the Fund's administration agreements if PFPC is
not providing the Fund with such services;
(f) Copies of any shareholder servicing agreements made in
respect of the Fund; and
(g) Copies (certified or authenticated where applicable) of any
and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. In performing its duties
hereunder, PFPC will comply with all applicable requirements of the Securities
Laws and any laws, rules and regulations of governmental authorities having
jurisdiction with respect to the duties to be performed by PFPC hereunder and
will act in conformity with the instructions and directions of the Board of
Directors of the Fund which are timely delivered to PFPC. Except as
specifically set forth herein, PFPC assumes no responsibility for such
compliance by the Fund or any of its investment portfolios.
<PAGE>
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PFPC to be an Authorized Person) pursuant to this Agreement. PFPC
may assume that any Oral or Written Instruction received hereunder is not in
any way inconsistent with the provisions of organizational documents or this
Agreement or of any vote, resolution or proceeding of the Fund's Board of
Directors or of the Fund's shareholders, unless and until PFPC receives Written
Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions so that PFPC receives the Written Instructions by
the close of business on the same day that such Oral Instructions are received.
The fact that such confirming Written Instructions are not received by PFPC
shall in no way invalidate the transactions or enforceability of the
transactions authorized by the Oral Instructions. Where Oral or Written
Instructions reasonably appear to have been received from an Authorized Person,
PFPC shall incur no liability to the Fund in acting upon such Oral or Written
Instructions provided that PFPC's actions comply with the other provisions of
this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including
Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question
of law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PFPC receives from the Fund,
and the advice it receives from counsel, PFPC may rely upon and follow the
advice of counsel. In the event PFPC so relies on the advice of counsel, PFPC
remains liable for any action or omission on the part of PFPC which constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by PFPC
of any duties, obligations or responsibilities set forth in this Agreement.
<PAGE>
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PFPC believes,
in good faith, to be consistent with those directions, advice or Oral or
Written Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PFPC (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not taking
such action. Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
7. RECORDS. PFPC shall prepare and keep records relating to its
services to be provided hereunder as and to the extent required by Section 31
of the 1940 Act and the rules and regulations thereunder. The books and
records pertaining to the Fund, which are in the possession or under the
control of PFPC, shall be the property of the Fund. The Fund and Authorized
Persons shall have access to such books and records at all times during PFPC's
normal business hours. Upon the reasonable request of the Fund, copies of any
such books and records shall be provided by PFPC to the Fund or to an
Authorized Person, at the Fund's expense.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records or information is otherwise consented to in writing by the
Fund. The Fund agrees that such consent shall not be unreasonably withheld and
may not be withheld where PFPC may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PFPC shall cooperate with the Fund's
independent public accountants and shall take all reasonable actions in the
performance of its obligations under this Agreement to ensure that the
necessary information is made available to such accountants for the expression
of their unqualified opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PFPC shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PFPC shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure, provided
such loss or interruption is not caused by PFPC's own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties or obligations
under, or other material noncompliance with, this Agreement.
<PAGE>
11. COMPENSATION. As compensation for services rendered by PFPC during
the term of this Agreement, the Fund will pay to PFPC a fee or fees as may be
agreed to from time to time in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state and foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) reasonable
attorneys' fees and disbursements (collectively, "Losses") arising directly or
indirectly from any action or omission to act which PFPC takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PFPC, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund except as specifically set forth herein or as may be specifically agreed
to by PFPC in writing. PFPC shall be obligated to exercise care and diligence
in the performance of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC shall be liable for any damages arising out of
PFPC's failure to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross negligence or
reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC, shall not be liable for losses beyond
its control, provided that PFPC has acted in accordance with the standard of
care set forth above; and (ii) PFPC shall not be under any duty or obligation
to inquire into and shall not be liable for (A) the validity or invalidity or
authority or lack thereof of any Oral or Written Instruction, notice or other
instrument which conforms to the applicable requirements of this Agreement, and
which PFPC reasonably believes to be genuine; or (B) subject to Section 10,
delays or errors or loss of data occurring by reason of circumstances beyond
PFPC's control, including acts of civil or military authority, national
emergencies, labor difficulties, fire, flood, catastrophe, acts of God,
insurrection, war, riots or failure of the mails, transportation, communication
or power supply.
<PAGE>
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund for any
consequential, special or indirect losses or damages which the Fund may incur
or suffer by or as a consequence of PFPC's or its affiliates' performance of
the services provided hereunder, whether or not the likelihood of such losses
or damages was known by PFPC or its affiliates.
14. DESCRIPTION OF SERVICES.
Unless PFPC receives Written Instructions to the contrary, PFPC is
authorized to take, and shall take, the following actions without Oral or
Written Instructions.
(a) Services Provided on an Ongoing Basis, If Applicable.
(i) Calculate 12b-1 payments;
(ii) Maintain proper stockholder registrations;
(iii) Review new applications and correspond with
stockholders to complete or correct information;
(iv) Direct payment processing of checks or wires;
(v) Prepare and certify stockholder lists in conjunction
with proxy solicitations;
(vi) Countersign share certificates;
(vii) Prepare and mail to stockholders confirmation of
activity and periodic statements;
(viii) Provide toll-free lines for direct stockholder
use, plus customer liaison staff for on-line inquiry
response;
(ix) Mail duplicate confirmations to broker-dealers of
their Funds' activity, whether executed through the
broker-dealer or directly with PFPC;
(x) Provide periodic stockholder lists and statistics to
the Fund;
(xi) Provide detailed data for underwriter/broker
confirmations;
(xii) Prepare periodic mailing of year-end tax and
statement information;
<PAGE>
(xiii) Notify on a timely basis the investment adviser,
accounting agent, and custodian of Fund activity; and
(xiv) Perform other participating broker-dealer
stockholder services as may be agreed upon from time to
time.
(b) Services Provided by PFPC Under Oral or Written Instructions
(which may be standing Instructions or operating procedures).
(i) Accept and post daily Fund purchases and redemptions;
(ii) Accept, post and perform stockholder transfers and
exchanges;
(iii) Pay dividends and other distributions;
(iv) Solicit and tabulate proxies;
(v) Issue (when requested in writing by the stockholder)
and cancel certificates; and
(vi) Perform such other duties as the Fund may reasonably
request from time to time.
(c) Purchase of Shares. PFPC shall issue and credit an account of
an investor with the appropriate number of Shares, in the manner described in
the Fund's prospectus, once it receives:
(i) A purchase order;
(ii) Proper information to establish a stockholder account;
and
(iii) Confirmation of receipt or crediting of funds for
such order to the Fund's custodian.
(d) Redemption of Shares. PFPC shall redeem Shares only if that
function is properly authorized by the certificate of incorporation or
resolution of the Fund's Board of Directors. Shares shall be redeemed and
payment therefor shall be made in accordance with the Fund's prospectus when
the record holder tenders Shares in proper form and directs the method of
redemption. If Shares are received in proper form, Shares shall be redeemed
before the funds are provided to PFPC from the Fund's custodian (the
"Custodian"). If the record holder has not directed that redemption proceeds
be wired, when the Custodian provides PFPC with funds, the redemption check
shall be sent to and made payable to the record holder, unless:
<PAGE>
(i) the surrendered certificate is drawn to the order of
an assignee or holder and the transfer authorization is
signed by the record holder; or
(ii) Transfer authorizations are signed by the record
holder when Shares are held in book- entry form.
When a broker-dealer notifies PFPC of a redemption desired by a customer, and
the Custodian provides PFPC with funds, PFPC shall prepare and send the
redemption check to the broker-dealer and made payable to the broker-dealer on
behalf of its customer.
(e) Dividends and Distributions. Upon receipt of a resolution of
the Fund's Board of Directors authorizing the declaration and payment of
dividends and distributions, PFPC shall issue dividends and distributions
declared by the Fund in Shares, or, upon shareholder election, pay such
dividends and distributions in cash, if provided for in the Fund's prospectus.
Such issuance or payment of dividends or distributions, as well as payments
upon redemption as described above, shall be made after deduction and payment
of the required amount of funds to be withheld to designated authorities in
accordance with any applicable tax laws or other laws, rules or regulations.
PFPC shall prepare and mail to the Fund's shareholders such tax forms and other
information, or permissible substitute notice, relating to dividends and
distributions paid by the Fund as are required to be filed and mailed by
applicable law, rule or regulation. PFPC shall prepare, maintain and file with
the IRS and other appropriate taxing authorities reports relating to all
dividends above a stipulated amount paid by the Fund to its shareholders as
required by tax or other law, rule or regulation.
(f) Shareholder Account Services.
(i) PFPC shall offer to arrange, in accordance with the
prospectus, for issuance of Shares obtained through:
- Any pre-authorized check plan; and
- Direct purchases through broker wire orders, checks
and applications.
(ii) PFPC shall offer to arrange, in accordance with the
prospectus, for a shareholder's:
- Exchange of Shares for shares of another fund with
which the Fund has exchange privileges;
- Automatic redemption from an account where that
shareholder participates in a automatic redemption
plan; and/or
<PAGE>
- Redemption of Shares from an account with a
checkwriting privilege.
(g) Communications to Shareholders. Upon timely Written
Instructions, PFPC shall address and mail all communications by the Fund to its
shareholders, including:
(i) Reports to shareholders;
(ii) Confirmations of purchases and sales of Fund shares;
(iii) Monthly or quarterly statements;
(iv) Dividend and distribution notices;
(v) Prospectus and Proxy material; and
(vi) Tax form information.
In addition, PFPC will receive and tabulate the proxy cards for the
meetings of the Fund's shareholders.
(h) Records. PFPC shall maintain records of the accounts for each
shareholder showing the following information:
(i) Name, address and United States Tax Identification or
Social Security number;
(ii) Number and class of Shares held and number and class
of Shares for which certificates, if any, have been issued,
including certificate numbers and denominations;
(iii) Historical information regarding the account of
each shareholder, including dividends and distributions
paid and the date and price for all transactions on a
shareholder's account;
(iv) Any stop or restraining order placed against a
shareholder's account;
(v) Any correspondence relating to the current maintenance
of a shareholder's account;
(vi) Information with respect to withholdings; and
(vii) Any information required in order for the
transfer agent to perform any calculations contemplated or
required by this Agreement.
<PAGE>
(i) Lost or Stolen Certificates. PFPC shall place a stop notice
against any certificate reported to be lost or stolen and comply with all
applicable federal regulatory requirements for reporting such loss or alleged
misappropriation. A new certificate shall be registered and issued only upon:
(i) The shareholder's pledge of a lost instrument bond or
such other appropriate indemnity bond issued by a surety
company approved by PFPC; and
(ii) Completion of a release and indemnification agreement
signed by the shareholder to protect PFPC and its
affiliates.
(j) Shareholder Inspection of Stock Records. Upon a request from
any Fund shareholder to inspect stock records, PFPC will notify the Fund and
the Fund will issue instructions granting or denying each such request. Unless
PFPC has acted contrary to the Fund's instructions, the Fund agrees and does
hereby, release PFPC from any liability for refusal of permission for a
particular shareholder to inspect the Fund's stock records.
(k) Withdrawal of Shares and Cancellation of Certificates.
PFPC is hereby instructed to cancel outstanding certificates
surrendered by the Fund to reduce the total amount of outstanding shares by the
number of shares surrendered by the Fund.
(l) Reports and Information. PFPC shall furnish the Fund with the
following reports:
(i) reports as to the number of Shares sold in each state
or other jurisdiction; and
(ii) such periodic and special reports and such other
information, including statistical information concerning
stockholder accounts as the Fund may reasonably request.
PFPC shall furnish to the Fund's Investment Adviser, Administrator
and Custodian and other persons providing services to the Fund with such
information as they may reasonably request in connection with the performance
of their respective duties and obligations with respect to the Fund.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PFPC on sixty (60) days' prior written notice to
the other party.
<PAGE>
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to have
been given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered.
Notices shall be addressed (a) if to PFPC, at 400 Bellevue Parkway, Wilmington,
Delaware 19809, Attn: Jay Nusblatt; (b) if to the Fund, c/o Shay Asset
Management Co., 111 East Wacker Drive, Chicago, Illinois 60601, with a copy to
Hughes Hubbard & Reed, One Battery Park Plaza, New York, N.Y. 10004, Attn:
James H. Bluck, Esq.; or (c) at such other address as shall have been provided
by like notice to the sender of any such notice or other communication by the
other party. Any notice given by PFPC pursuant to Section 15 hereof also shall
be given to each member of the Board of Directors of the Fund at the address
set forth in the Registration Statement of the Fund as then in effect and to
the legal counsel to the Fund.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom
enforcement of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act
and the rules and regulations of the SEC thereunder and with this Agreement;
and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee). Except as provided
above, this Agreement and the rights and duties of PFPC hereunder may not be
assigned without the prior written consent of the Fund.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
<PAGE>
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles of
conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to
this Agreement shall constitute the valid and binding execution hereof by such
party.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ ROBERT J. PERLSWEIG
------------------------------------
Robert J. Perlsweig
Executive Vice President
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
-----------------------------------
Harry P. Doherty
President
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
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DISTRIBUTION AGREEMENT
This Distribution Agreement is made as of the 20th day of September,
1995 between INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC. , a New
York corporation (herein called the "Fund"), and SHAY FINANCIAL SERVICES CO.,
an Illinois general partnership (herein called the "Distributor");
WHEREAS, the Fund is an open-end management investment company and is
so registered under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain the Distributor as the
distributor for the Fund to provide for the distribution of shares of common
stock of the Fund, each such share having a par value of $1.00 per share
(herein collectively called "Shares"), and is willing to render such services;
NOW THEREFORE, in consideration of the premises and mutual covenants
set forth herein the parties hereto agree as follows:
I. DELIVERY OF DOCUMENTS
The Fund has delivered to Distributor copies of each of the following
documents and will deliver to it all future amendments and supplements thereto,
if any:
(a) The Fund's Certificate of Incorporation and all amendments
thereto (such Certificate of Incorporation, as currently in effect and as it
shall from time to time be amended, herein called the "Fund's Articles");
(b) The By-Laws of the Fund (such By-Laws, as currently in effect
and as it shall from time to time be amended, herein called the "By-Laws");
(c) Resolutions of the Board of Directors of the Fund authorizing
the execution and delivery of this Agreement;
(d) The Fund's Registration Statement under the Investment Company
Act of 1940, as amended (the "1940 Act"), on Form N-1A as filed with the
Securities and Exchange Commission (the "Commission") on April 28, 1995 and all
subsequent amendments thereto (said Registration Statement, as presently in
effect and as amended or supplemented from time to time, is herein called the
"Registration Statement"); and
(e) Notification of Registration of the Fund under the 1940 Act on
Form N-8A as filed with the Commission.
<PAGE>
(f) The Prospectus and Statement of Additional Information, if any,
of the Fund (such prospectus and statement of additional information, as filed
with the Securities and Exchange Commission and as they shall from time to time
be amended and supplemented, herein called the "Prospectus").
II. DISTRIBUTION
1. Appointment of Distributor. The Fund hereby appoints
Distributor to serve as the distributor of the Fund's Shares and Distributor
hereby accepts such appointment and agrees to render the services and duties
set forth in this Section II.
2. Services and Duties.
(a) Except as provided below, the Fund agrees to offer for sale
exclusively through Distributor as agent, from time to time during the term of
this Agreement, Shares of the Fund (whether authorized but unissued or treasury
shares, in the Fund's sole discretion) upon the terms and at the net asset
value as described in the Registration Statement or Prospectus, if any.
Distributor will act only in its own behalf as principal in making agreements
with selected dealers or others for the sale of Shares, and shall offer Shares
only at the net asset value thereof as set forth in the Registration Statement
or Prospectus, if any. Distributor shall devote its best efforts to effect
sales of Shares of the Fund, but shall not be obligated to sell any certain
number of Shares. All subscriptions for Shares solicited by the Distributor
shall be directed to the Fund for acceptance and shall not be binding on the
Fund until accepted by it. The Distributor shall have no authority to make
binding subscriptions on behalf of the Fund. The Fund reserves the right to
offer Shares directly to investors, including offers in connection with (i) the
merger or consolidation of the Fund or its series or classes with any other
investment company or series or class thereof, (ii) the Fund's acquisition by
purchase or otherwise of all or substantially all of the assets or stock of any
other investment company or (iii) reinvestment in Shares by the Fund's
stockholders of dividends or other distributions or any other offering by the
Fund of securities to its stockholders.
(b) In all matters relating to the sale of Shares, Distributor will
act in conformity with the Fund's Articles, By-Laws, Registration Statement or
Prospectus, if any, and with the instructions and directions of the Board of
Directors of the Fund and will conform to and comply with the requirements of
the 1933 Act, and the 1940 Act, the regulations of the National Association of
Securities Dealers, Inc. and all other applicable federal or state laws and
regulations. In connection with such sales, Distributor acknowledges and
agrees that it is not authorized to provide any information or make any
representations other than as contained in the Fund's Registration Statement
and Prospectus and any sales literature specifically approved by the Fund.
<PAGE>
(c) Distributor will bear the cost of (i) printing and distributing
the Prospectus, if any, and Statement of Additional Information, if any,
(including any supplement thereto) to persons who are not either shareholders
or counsel, independent accountants or other persons providing similar services
to the Fund, and (ii) preparing, printing and distributing any literature,
advertisement or material which is primarily intended to result in the sale of
the Shares; provided, however, that Distributor shall not be obligated to bear
the expenses incurred by the Fund in connection with the preparation and
printing of any amendment to the Registration Statement.
(d) All Shares of the Fund offered for sale by Distributor shall be
offered for sale at the net asset value (determined in the manner set forth in
the Fund's Articles and then effective Registration Statement and Prospectus,
if any). No broker-dealer or other person who enters into a selling agreement
with Distributor shall be authorized to act as agent for the Fund in connection
with the offering or sale of its Shares or otherwise.
3. Sales of Shares.
(a) The Fund shall pay all costs and expenses in connection with the
registration of the Shares under the 1940 Act, and all expenses in connection
with maintaining facilities for the issue and transfer of the Shares and for
supplying information, prices and other data to be furnished by the Fund
hereunder.
(b) Distributor shall pay all expenses connected with its
qualification as a dealer under state or federal laws and, except as otherwise
specifically provided in this Agreement, all other expenses incurred by
Distributor in connection with the sale of the Shares as contemplated in this
Agreement.
(c) The Fund shall have the right to suspend the offering and sale
of Shares of the Fund at any time in the absolute discretion of the Fund in
response to conditions in the securities markets or otherwise, and to suspend
the redemption of Shares of the Fund at any time permitted by the 1940 Act or
the rules of the commission ("Rules"). Upon notice of any such suspension of
the offering and sale of Shares, the Distributor shall cease to offer Shares.
The Distributor shall not make or cause to be made any offers of Shares in any
state or other jurisdiction where such Shares are not then qualified for offer
or sale or exempt from such qualification.
(d) All orders for the Fund's Shares shall be transmitted promptly
to the transfer agent of the Fund.
(e) The Fund reserves the right to reject any order for Shares.
<PAGE>
4. Restrictions and Limitations. The Distributor acknowledges that
the offer and sale of the Shares have not been registered under the 1933 Act
and that such offers and sales are to be made pursuant to the exemption from
such registration set forth in Section 3(a)(11) of the 1933 Act. In furtherance
thereof, the Distributor agrees that it shall offer Shares only to investors
that (i) are "Eligible Investors" as defined in the Fund's certificate of
incorporation and the Registration Statement and (ii) have their principal
office in the State of New York and have not been formed for the specific
purpose of acquiring Shares. In performing its obligations under the
immediately preceding sentence, the Distributor shall be entitled to rely on a
certification by each investor as to the specific facts necessary to establish
the status of such investor as an "Eligible Investor". The Distributor shall
cause each broker-dealer or other person that enters into a selling agreement
with the Distributor to comply with the requirements of this Section.
Notwithstanding any language herein to the contrary, the Fund and the
Distributor acknowledge and agree that until such time as registration under
the 1933 Act is authorized and approved by the Fund, no action has been or will
be taken to qualify the Shares under the securities or blue sky laws of any
state or jurisdiction, but if deemed necessary and appropriate by the parties,
steps will be taken to qualify the shares under the blue sky laws of the State
of New York.
IIA. COMPENSATION
The Distributor shall be entitled to no compensation or reimbursement
of expenses for the distribution and service activities provided by the
Distributor pursuant to this Agreement. Notwithstanding anything in this
Agreement to the contrary, affiliated persons of the Distributor may receive
compensation or reimbursement from the Fund with respect to the provision of
management services or service as a director or officer of the Fund.
III. LIMITATION OF LIABILITY
Distributor shall not be liable 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 Agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
<PAGE>
IV. CONFIDENTIALITY
Distributor will treat confidentially and as proprietary information
of the Fund all records and other information relative to the Fund, to the
Fund's prior or present shareholders and to those persons or entities who
respond to Distributor inquiries concerning investment in the Fund, and, except
as provided below, will not use such records and information for any purpose
other than the performance of its responsibilities and duties hereunder or the
performance of its responsibilities and duties with regard to sales of the
shares of any portfolio which may be added to the Fund in the future. Any
other use by Distributor of the information and records referred to above may
be made only after prior notification to and approval in writing by the Fund.
Such approval shall not be unreasonably withheld and may not be withheld where
(i) Distributor may be exposed to civil or criminal contempt proceedings for
failure to divulge such information; (ii) Distributor is requested to divulge
such information by duly constituted authorities; or (iii) Distributor is so
requested by the Fund.
V. INDEMNIFICATION
1. Fund Representations. The Fund represents and warrants to
Distributor that at all times the Registration Statement and Prospectus, if
any, will, in all material respects, conform to the applicable requirements of
the 1940 Act and the rules thereunder, that the Registration Statement did not
contain at the time it became effective and will not contain at the time any
subsequent amendment thereto becomes effective any untrue statement of material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements contained therein not misleading and that the
Prospectus, if any, will not contain at any time when it is authorized for use
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
that no representation or warranty in this subsection shall apply to statements
or omissions made in reliance upon and in conformity with written information
furnished to the Fund by or on behalf of or otherwise approved by and with
respect to Distributor expressly for use in the Registration Statement or
Prospectus.
2. Distributor Representations. Distributor represents and
warrants to the Fund that it is duly formed as an Illinois general partnership
and is and at all times will remain duly authorized and licensed to carry out
its services as contemplated herein.
<PAGE>
3. Fund Indemnification. The Fund will indemnify, defend and hold
harmless Distributor, its several officers and general partners, and any person
who controls Distributor within the meaning of Section 15 of the 1933 Act, from
and against any losses, claims, damages or liabilities, joint or several, to
which any of them may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the Prospectus, if any is authorized by the Fund, or in any
application or other document executed by or on behalf of the Fund, or arise
out of, or are based upon, information furnished by or on behalf of the Fund
filed in any state in order to qualify the Shares under the securities or blue
sky laws thereof ("Blue Sky Application"), or arise out of, or are based upon,
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse Distributor, its several officers and general partners, and
any person who controls Distributor within the meaning of Section 15 of the
1933 Act, for any legal or other expenses reasonably incurred by any of them in
investigating, defending or preparing to defend any such action, proceeding or
claim; provided, however, that the Fund shall not be liable in any case to the
extent that such loss, claim, damage or liability arises out of, or is based
upon, any untrue statement, alleged untrue statement, or omission or alleged
omission made in the Registration Statement, the Prospectus, any Blue Sky
Application or any application or other document executed by or on behalf of
the Fund in reliance upon and in conformity with written information furnished
to the Fund by or on behalf of or otherwise approved by and with respect to
Distributor specifically for inclusion therein.
The Fund shall not indemnify any person pursuant to this subsection 3
unless the court or other body before which the proceeding was brought has
rendered a final decision on the merits that such person was not liable by
reason of his willful misfeasance, bad faith or gross negligence in the
performance of his duties, or his reckless disregard of obligations and duties,
under this Agreement ("disabling conduct") or, in the absence of such a
decision, a reasonable determination (based upon a review of the facts) that
such person was not liable by reason of disabling conduct has been made by the
vote of a majority of a quorum of directors of the Fund who are neither
"interested persons" of the Fund (as defined in the 1940 Act) nor parties to
the proceeding, or by an independent legal counsel in a written opinion.
The Fund shall advance attorneys' fees and other expenses incurred by
any person in defending any claim, demand, action or suit which is the subject
of a claim for indemnification pursuant to this subsection 3, so long as: (i)
such person shall undertake to repay all such advances unless it is ultimately
determined that he is entitled to indemnification hereunder; and (ii) such
person shall provide security for such undertaking, or the Fund shall be
insured against losses arising by reason of any lawful advances, or a majority
of a quorum of the disinterested, non-party directors of the Fund (or an
independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry)
that there is a reasonable likelihood that such person ultimately will be found
entitled to indemnification hereunder.
<PAGE>
4. Distributor Indemnification. Distributor will indemnify, defend
and hold harmless the Fund, the Fund's several officers and directors and any
person who controls the Fund within the meaning of Section 15 of the 1933 Act,
from and against any losses, claims, damages or liabilities joint or several,
to which any of them may become subject under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect hereof) arise out of, or are based upon, any breach of
its representations and warranties in subsection 2 of this Section V or its
agreements in subsection 2 or 3 of Section II hereof, or which arise out of, or
are based upon, any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, the Prospectus, if any is
authorized by the Fund, any Blue Sky Application or any application or other
document executed by or on behalf of the Fund, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which statement or
omission was made in reliance upon or in conformity with information furnished
in writing to the Fund or any of its several officers and directors by or on
behalf of or otherwise approved by and with respect to Distributor specifically
for inclusion therein, and will reimburse the Fund, the Fund's several officers
and directors, and any person who controls the Fund or any Fund within the
meaning of Section 15 of the 1933 Act, for any legal or other expenses
reasonably incurred by any of them in investigating, defending or preparing to
defend any such action, proceeding or claim.
The Distributor shall advance attorneys' fees and other expenses
incurred by any person in defending any claim, demand, action or suit which is
the subject of a claim for indemnification pursuant to this subsection 4, so
long as: (i) such person shall undertake to repay all such advances unless it
is ultimately determined that he is entitled to indemnification hereunder; and
(ii) such person shall provide security for such undertaking, or the Fund shall
be insured against losses arising by reason of any lawful advances, or a
majority of a quorum of the disinterested, non-party directors of the Fund (or
an independent legal counsel in a written opinion) shall determine based on a
review of readily available facts (as opposed to a full trial-type inquiry)
that there is a reasonable likelihood that such person ultimately will be found
entitled to indemnification hereunder.
<PAGE>
5. General Indemnity Provisions. No indemnifying party shall be
liable under its indemnity agreement contained in subsection 3 or 4 hereof with
respect to any claim made against such indemnifying party unless the
indemnified party shall have notified the indemnifying party in writing within
twenty (20) days after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
indemnified party (or after the indemnified party shall have received notice of
such service on any designated agent), but failure to notify the indemnifying
party of any such claim shall not relieve it from any liability which it may
otherwise have to the indemnified party. The indemnifying party will be
entitled to participate at its own expense in the defense or, if it so elects,
to assume the defense of any suit brought to enforce any such liability, and if
the indemnifying party elects to assume the defense, such defense shall be
conducted by counsel chosen by it and reasonably satisfactory to the
indemnified party. In the event the indemnifying party elects to assume the
defense of any such suit and retain such counsel, the indemnified party shall
bear the fees and expenses of any additional counsel retained by the
indemnified party.
VI. DURATION AND TERMINATION
This Agreement shall become effective as of the date first above
written, and, unless sooner terminated as provided herein, shall remain in
effect for a period of twelve (12) months from the date of such effectiveness.
Thereafter, if not terminated, this Agreement shall continue automatically for
successive terms of one year, provided that such continuance is specifically
approved at least annually (a) by a majority of those members of the Board of
Directors of the Fund who are not "interested persons" of the Fund and who have
no direct or indirect financial interest in the operation of this Distribution
Agreement (the "Disinterested Directors"), pursuant to a vote cast in person at
a meeting called for the purpose of voting on such approval, and (b) by the
Board of Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Fund; provided, however, that this Agreement shall
automatically terminate in the event of its assignment and may be terminated by
the Fund at any time, without the payment of any penalty, by vote of a majority
of the Disinterested Directors or by a vote of a majority of the outstanding
voting securities on 60 days' written notice to, or by the Distributor at any
time, without the payment of any penalty, on 60 days' written notice to the
Fund. The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
VII. AMENDMENT OF THIS AGREEMENT
No provision of this Agreement may be changed, waived, discharged or
terminated except by an instrument in writing signed by the party against which
an enforcement of the change, waiver, discharge or termination is sought.
<PAGE>
VIII. NOTICES
Notice of any kind to be given to the Distributor by the Fund shall
be in writing and shall be duly given if mailed or delivered to the Distributor
at 111 East Wacker Dr., Chicago, IL 60601, Attention: Executive Vice President,
or at such other address or to such other individual as shall be specified by
the Distributor to the Fund in accordance with this Section VIII. Notices of
any kind to be given to the Fund by the Distributor shall be in writing and
shall be duly given if mailed or delivered to the Fund at its address set forth
in the then effective Registration Statement, Attention: President, or at such
other address or to such other individual as shall be specified by the Fund to
the Distributor in accordance with this Section, with copies to each of the
Fund's Directors at their respective addresses set forth in the Fund's
Registration Statement and to the legal counsel to the Fund.
IX. CONSTRUCTION; GOVERNING LAW
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section VI hereof, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by New York law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the 1940 Act or
any rule or regulation of the Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
INSTITUTIONAL INVESTORS CAPITAL
APPRECIATION FUND, INC.
By: /s/ HARRY P. DOHERTY
---------------------------------
Harry P. Doherty
Attest: /s/ PATRICIA J. VILLANI President
--------------------------
SHAY FINANCIAL SERVICES CO.
By: /s/ EDWARD E. SAMMONS, JR.
---------------------------------
Edward E. Sammons, Jr.
Attest: /s/ JOYCE TAKEFMAN Executive Vice President, Shay
-------------------------- Financial Services, Inc., Managing
Partner
<PAGE>
CERTIFICATION OF ELIGIBILITY
The undersigned hereby certifies to Institutional Investors Capital
Appreciation Fund, Inc. and Institutional Investors Tax-Advantaged Income Fund,
Inc. (the "Funds") and Shay Financial Services Co., an Illinois general
partnership which acts as the Distributor of shares of the Funds, for the
benefit of Shay Financial Services Co. and each of the Funds as follows:
1. The undersigned is:
(A) a savings bank or savings and loan association which is
organized under the laws of the State of New York; or
(B) a savings bank organized under the laws of the United States
which has been converted from a savings bank organized under the
laws of the State of New York or results from the merger of such
a converted institution; or
(C) a savings and loan association organized under the laws of the
State of New York or of the United States which has been
converted from a savings bank organized under the laws of the
State of New York or results from the merger of such a converted
institution; or
(D) a pension trust, fund, plan or agreement participated in by one
or more such savings banks or savings and loan association to
provide retirement benefits, death benefits or disability
benefits and any or all of such benefits for any or all of its
or their active officers and employees.
2. The undersigned's principal office is located in the State of New
York.
3. The undersigned has not been formed for the specific purpose of
acquiring interests in either of the Funds.
Dated:
[Print name of institution]
By:-------------------------------------
Name:
Title:
CONSENT OF INDEPENDENT PUBLIC ACOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 15, 1996 on the financial statements of Institutional Investors
Capital Appreciation Fund, Inc. for the period ended December 31, 1995 and to
all references to our Firm included in or made a part of the registration
statement of Institutional Investors Capital Appreciation Fund, Inc. filed on
Form N-1A (Amendment No. 8), Investment Company Act File No. 811-620 with the
Securities and Exchange Commission.
ARTHUR ANDERSEN LLP
New York, New York
April 26, 1996
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<NAME> INSTITUTIONAL INVESTORS CAPITAL APPRECIATION FUND, INC.
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 48385613
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